law of that state." And on January 15, 1917, the White Slave Act was construed to forbid the interstate transportation of a woman for an immoral purpose, even though no commercial intent be involved. So construed, the act was considered constitutional, although in result it amounts to a federal regulation of private morals. Within recent years there have been a number of other acts dealing with various subjects, which have not yet been passed upon by the courts; one of the most seriously discussed of these was the Child Labor Law 10 passed on September 1, 1916. It forbids the shipment in interstate or foreign commerce of any article produced in a mine or factory employing child labor. Until recently the typical regulation under the commerce clause has been designed to protect, encourage, or expedite in some manner the conduct of commerce itself. Witness the regulation of rates and the Safety Appliance Act. The common feature of the measures described above, however, is that the power of regulation, often assuming the form of a flat prohibition, is being used to effect an end which is not only ulterior to commerce itself, but one the control of which would normally rest with the police power of the state. The causes of this recent development of the latent commerce power are rather for the historian and the economist to elucidate than for the lawyer. The whole post bellum trend toward governmental centralization is involved; a complete analysis of this would require a critical examination of nearly the whole of American life and activity during the period. Economically the development of the railroad, the telegraph, and the telephone have reduced state lines to a geographical fiction. And as a result of the concentration of capital business has become more and more interstate and even nation wide. 11 The results which this extended use of the commerce power are calculated to produce are to the lawyer of more immediate importance. These show at least two distinct tendencies. If the prohibition is absolute, and concerns a business that cannot survive without the use of interstate commerce, Congress by enacting the prohibition undertakes to impose an affirmative policy upon the whole country. If, however, the business can be conducted purely intrastate, or if the prohibition is quali 7 James Clark Distilling Co. v. Western, etc. Ry. Co., Oct. Term, 1916, Nos. 75, 76. 8 Caminetti v. United States, Oct. Term, 1916, Nos. 139, 163, 464. • Obscene literature and articles designed for immoral use, 29 U. S. STAT. at L. 512, c. 172. Meat Inspection Act, 34 Stat. at L. 674; Nursery Stock Act, 37 Stat. AT L. 315; Prohibition of shipment of certain virus, serum, and toxin for the treatment of animals, 37 STAT. AT L. 832. 10 Act of September 1, 1916, c. 432, § 1. "No producer, manufacturer, or dealer shall ship or deliver for shipment in interstate or foreign commerce any article or commodity the product of any mine or quarry, situated in the United States, in which within thirty days prior to the time of removal of such product therefrom children under the age of sixteen years have been employed or permitted to work, or any article or commodity the product of any mill, cannery, workshop, factory, or manufacturing establishment, situated in the United States, in which within thirty days prior to the removal of such product therefrom children under the age of fourteen years have been employed or permitted to work, or children between the ages of fourteen years and sixteen years have been employed or permitted to work more than eight hours in any day, or more than six days in any week, or after the hour of seven o'clock P. M. or before the hour of six o'clock A. M." 11 See JUDSON, INTERSTATE COMMERCE, 3 ed., 135. fied, as in the Webb-Kenyon Act, Congress appears merely as an impartial referee aiding each state to work out its own social progress unhampered by the competition of more backward states. Thus the exclusion from interstate commerce of cotton goods manufactured by the aid of child labor would prevent such employment of children on any considerable scale; for, since there are only a few localities in the country in which that business can economically be conducted, the use of interstate commerce is essential to it in order that it may market its goods. Where, however, a given business can be carried on in any kind of a locality and with only a limited area for a market, exclusion from interstate commerce will not cause even a substantial suppression of that business. Thus the complete prohibition of interstate shipments of liquor would leave the liquor business largely untouched, for distilleries and breweries can suffice with local trade and thrive in almost any part of the country. But were Congress not to possess and exercise the power of excluding liquor from interstate commerce, the original package doctrine would render a dry state powerless to prevent the importation of liquor from a wet state and even its direct sale. This produces a situation in which the commercial interest of other states, however slight, would always prevail over the dry state's interest in its own welfare, however urgent, and Congress would be powerless to ameliorate the evil.12 In other words, so long as one state continued to allow the manufacture of liquor, it could ship that liquor into every other state, to be sold in the original package, but by closing the channels of interstate commerce to liquor, each state is enabled to work out its own social salvation according to its own lights.18 The Webb-Kenyon Act illustrates particularly well the prevention of this sort of outside interference with the police regulations of a state, in that it does not prohibit all interstate shipments of the article, but only those into a state in violation of any law of that state." The two sorts of results, while distinct in nature, are not to be thought of as mutually exclusive; on the contrary, in regulations of such objects as child-labor products the two effects may be present side by side in nearly equal degree. The authorities would seem to do away with the need of arguing the technical question of the constitutionality of so employing the commerce power for police purposes.15 The legal justice and propriety of such a use, however, have often been seriously doubted.16 But that Congress may properly deny the use of the mails to a person seeking to use them for an 12 See W. T. Denison, "States' Rights and the Webb-Kenyon Law," 14 COL. L. REV. 321, 324. 13 The commercial interest of local manufacturers and sellers is also protected. Thus, if state A. forbids the manufacture and sale of certain impure food articles, persons within its borders cannot make nor sell such goods. Yet by means of interstate commerce the market of state A. is open to sellers from state B. This of course gives the outside dealer an entirely unfair advantage. A federal prohibition puts the local and the outside sellers on terms of equality. 14 For a discussion of the constitutional basis of the Webb-Kenyon Act, see 17 COL. L. REV. 144. 15 See T. I. Parkinson, "The Federal Child Labor Law," 31 POL. SCI. QUART. 531. 16 See 38 Aм. L. REV. 194. William R. Howland, "The Police Power and Interstate Commerce," 4 HARV. L. REV. 221. William Draper Lewis, "The Commodity Clause of the Hepburn Act," 21 HARV. L. REV. 595. immoral, fraudulent, or otherwise improper purpose,17 is now uncontested. The reasoning is that the post office, as an agency created by Congress, and under its sole control, may with entire propriety be closed to anyone seeking to use it for an improper purpose; otherwise Congress, through furnishing this agency, would be rendering affirmative aid in the perpetration of the scheme. Now it is quite true that the agencies of interstate commerce, unlike the post office, are not the direct creatures of Congress.18 But over interstate commerce Congress has exclusive jurisdiction. Except in matters of local interest not requiring uniformity, the states may not act even in the absence of any legislation by Congress.19 Thus a state has no power of itself to exclude liquor from interstate commerce within its borders.20 Must Congress, then, possessing sole control over interstate commerce, allow that commerce to be used for the furthering of all sorts of injurious schemes? There is a certain rough analogy to the reasoning pursued by equity in refusing its aid to a plaintiff coming into court with unclean hands. The underlying principle is that an instrumentality created or controlled by the state ought not to be allowed to be used by any person to attain for his own benefit an end injurious to the community. Not only is it constitutional, then, to look beyond the intrinsic qualities of the commodity offered for shipment, but to do otherwise would be to lose sight of the fact that commerce is but a means whereby various human ends are achieved. Any regulation that is completely intelligent should scrutinize not only the immediate subjects and agencies of commerce, but also the changes which are being wrought in the community through the use of this commerce. If this be kept in mind such regulations will not appear as perverted uses of the commerce power. 21 THE TERMINATION BY A SURETY OF HIS LIABILITY ON A FIDELITY BOND. In the law of suretyship or guaranty the question frequently arises as to the effect to be given to a notice by the surety that he will no longer remain liable. The problem is squarely presented in cases where the surety or guarantor is bound for the faithful performance by an 17 Ex parte Jackson, 96 U. S. 727; In re Rapier, 143 U. S. 110. 18 As to whether the right to engage in interstate commerce is conferred by the state or the federal government, see E. P. Prentice, "The Origin of the Right to Engage in Interstate Commerce," 17 HARV. L. REV. 20. 19 Cooley v. Board of Wardens, etc., 12 How. (U. S.) 299. 20 Leisy v. Hardin, 135 U. S. 100. 21 It has been attempted to draw a distinction between the child labor product on the one hand and the lottery ticket, pure foods, and "movie" films on the other. In the latter, it is argued, the injury is not done until the goods reach the consumer, therefore interstate commerce participated in causing the injury. But in the former, since the injury is done to the producer, transportation causes no further injur, and therefore a prohibition is improper. See 2 WILLOUGHBY, CONSTITUTIONAL LAW, 739. Henry Hull, "The Federal Child Labor Law," 31 POL. SCI. QUART. 519, 524. The fallacy of this view, however, is its failure to recognize that unless the child-labor product were able to reach its market through interstate commerce, its production could not be continuous. The power to regulate should not turn on the temporal accident of transportation succeeding the injury instead of preceding it. employee or agent of his contract to his employer or principal. If one wishes to generalize at the expense of discrimination, one may state the general law to be that notice of withdrawal given by the surety to the employer ends the surety's liability, if, and only if, there has been dishonesty on the part of the employee. A recent Vermont case decides that, even if there has been no dishonesty or even no misconduct on the part of the employee, yet notice will end the surety's liability after a reasonable time. Ricketson v. Nizolte, 98 Atl. 801.2 The reasons given in this and other cases lack uniformity, and therefore frequently soundness. For example, courts sometimes say that notice will end the liability of a guarantor but not that of a surety. This distinction is often merely arbitrary and at the most represents an idea which can be more clearly expressed in other words. In view of this unsettled state of the law the problem invites analysis. 4 If the surety has made merely a continuing offer to the employer to be accepted by the continuance of the employment, the surety could, of course, at any time withdraw his offer as to future employment. But, if there is independent consideration given to the surety or if his promise is under seal, the surety may not escape liability on this ground. If, however, there is a contract, the application of another elementary principle, that of reasonable construction, will also help to decide many cases. It often happens that no definite time is expressed for the duration of the suretyship contract. If there is a definite term for the employment, this may fix the term of the suretyship. Or it may be fixed by the amount of consideration given the surety. On the other hand, there may be no such circumstances. In that case it seems hardly probable that the surety intended to bind himself for the life of the employee. It may be very reasonable to construe the contract as intended to last until the surety revokes it, or to be ended by the most serious of defaults by the employee, to wit, his dishonesty.8 However, where it is established that there is a contract and that it extends for a definite time, if the surety has the right to end his liability, Notice given by the surety after the dishonesty of the employee was held to give a defense in the following cases: Phillips v. Foxall, L. R. 7 Q. B. 666; Emery v. Baltz, 94 N. Y. 408; Roberts v. Donovan, 70 Cal. 108, 9 Pac. 180. See Conn. Mutual Life Ins. Co. v. Scott, 81 Ky. 540, 544; La Rose v. Logansport Nat. Bank, 102 Ind. 332, 343, I N. E. 805, 811. Where there had been no dishonesty, death of the surety or express revocation by him, notice was held in the following cases not to end his liability: Lloyd's v. Harper, 16 Ch. D. 290; Shackamaxon Bank v. Yard, 150 Pa. 351, 24 Atl. 635. See Saint v. Wheeler & Wilson Mfg. Co., 95 Ala. 362, 371, 10 So. 539, 541. Cf. Rapp v. Phoenix Ins. Co., 113 Ill. 390. See contra, La Rose v. Logansport Nat. Bank, 102 Ind. 332. 2 For a fuller statement of the facts, see RECENT Cases, p. 526. Thus in Saint v. Wheeler & Wilson Mfg. Co., supra, "guaranty" as used means an offer to a contract which can be revoked, while "surety contract" means a completed contract which cannot be revoked. In this discussion "surety" will be used in place of "guarantor" or "surety” or "prospective surety." This distinction was expressly recognized in Saint v. Wheeler & Wilson Mfg. Co., supra. See Lloyd's v. Harper, 16 Ch. D. 290. Phillips v. Foxall, supra, seems to have been decided on this ground. he must get it on some equitable ground. "Equity abhors a forfeiture. " 10 Equity's most direct way of enforcing this principle is by frankly varying the terms on which parties have contracted. Thus it declares a penalty good only for actual damages, and it gives the mortgagor an equity of redemption. In the suretyship contract the liability which the surety may incur is always greatly in excess of any consideration which the surety may receive. Yet, in view of the business sanction for this form of insurance, such a contract, in itself, certainly does not fall within the rule against forfeitures. Furthermore, in case the employer were bound by contract with the employee, it would be unjust to deprive him of his suretyship. Where, however, there has been dishonesty by the employee, there is so much chance of such a large liability falling on the surety that denying him relief against the strict terms of the contract may indeed be the enforcement of a "forfeiture." There is the additional consideration that to require the employer to discharge the dishonest employee is only to require him to exercise a right which he has and which it is natural to exercise. Consequently, there would seem little reason why equity should not read into the suretyship contract the condition that, on the dishonesty of the employee, the surety should be able to terminate the contract. It might well be that the surety, as a condition to his right, should be required to pay the employer the value of a suretyship contract for an ordinary employee during the remainder of the term. This is the most honest method by which equity could relieve the surety. It is, however, perhaps less likely to find favor with courts than the extension of two better recognized equitable principles. One such principle is found in the rule that after a repudiation by one party to a contract the other may recover only the damages which he could not reasonably have avoided. In the suretyship case, where the employee has been dishonest and the surety has given notice that he will not go on, it may be urged that the employer can recover no damages which he could have avoided by discharging the employee. But, in order not to deprive himself of a secured employee, which he is certainly under no duty to do, he must get a new employee and a surety for him. The rule of damages probably does not require a party to take this much trouble to reduce damages. 12 Consequently, if this rule is to solve the suretyship problem it must be by an extension of it beyond its normal scope. Another equitable principle, applicable only to suretyship law, is that a surety is released when there has been certain inequitable conduct on the part of the principal. It may be contended that in the case under consideration it is inequitable for the employer to refuse to discharge the dishonest employee, and therefore the surety should be released.1 In the first place this may be objectionable because it would allow the In this discussion “equitable” will be used to include those principles equitable in their origin or nature as well as those administered in a court of equity. 10 For a discussion of this well-known principle, see I POMEROY, EQUITY JUR., §§ 434, 450. For a discussion of this well-known principle, see I SEDGWICK, DAMAGES, 9 ed., 205. 12 The limits of the rule are set forth in general in 1 SEDGWICK, DAMAGES, 9 ed., § 221, 221 a. 13 A release was given on this ground in Emery v. Baltz, supra. See Rapp v. Phoenix Ins. Co., supra. |