There is no doubt that the foregoing diagram can be improved upon both in form and in substance. It is submitted only tentatively and as a basis for clarifying discussion. The sole justification for it and for this whole classification article is that a correct classification will be an aid to correct decision. No court of law would to-day give a greater effect to a breach of an implied-in-fact contract than it gives to a breach of an express contract for the same thing, and surely no court of equity that understood clearly that a resulting trust is an implied-in-fact trust enforced to prevent fraudulent retention would give fraudulent retention less weight when it follows an express oral trust than when it follows an implied-in-fact unwritten trust. The fact that the Statute of Frauds forbids the enforcement of the express oral trust while it expressly permits the enforcement of the implied-in-fact resulting trust is no justification for the attitude of chancery in those jurisdictions where the retention of the trust res in violation of the express oral trust is not deemed a constructive trust, for those courts ought to deem such action to raise a constructive trust, and if they did, its enforcement would be expressly authorized by the Statute of Frauds.

Correct judicial decisions do not always follow correct legal theory even when that theory is accepted, for correct theory may be misapplied, but the best hope of correct decision lies in the adoption of the best legal theory of rights and remedies. That is the sole excuse for an attempt to correct certain erroneous notions of the nature of resulting and of constructive trusts; but, since those erroneous notions are at times the reason for chancery's failure to furnish the appropriate remedy for fraudulent enrichment, it would seem to be a sufficient excuse for the attempt.

NORTHWESTERN UNIVERSITY LAW SCHOOL.

George P. Costigan, Jr.

168 Mass. 488, 47 N. E. 431 (1897); Curry v. Dorr, 210 Mass. 430, 97 N. E. 87 (1912)); but the grantor can recover a money judgment for the value of the lands. See Basford v. Pearson, 9 Allen (Mass.) 387 (1864); O'Grady v. O'Grady, 162 Mass. 290, 38 N. E. 796 (1894); Cromwell v. Norton, 193 Mass. 291, 79 N. E. 433 (1906). Compare Dix v. Marcy, 116 Mass. 416 (1875). While that view is not as satisfactory as is the English doctrine, it is not as unsatisfactory as is the general American doctrine. See Ames, Lectures on Legal History, 428; 20 HARV. L. Rev. 549, 552.

HARVARD LAW REVIEW.

Published monthly, during the Academic Year, by Harvard Law Students.

CITIZENSHIP AS a Ground for Personal JURISDICTION. The New York Court of Appeals has recently refused to recognize a judgment of a foreign court whose jurisdiction was based solely upon citizenship. Grubel v. Nassauer, 210 N. Y. 149. The defendant was a Bavarian subject domiciled in New York. He had filed notice of his intention of becoming a United States citizen, but before naturalization the judgment was secured against him on valid service by publication in Bavaria. Admitting the defendant's allegiance continued Bavarian, the court disregards that fact without giving a reason for doing so, and bases its decision on a case involving no question of citizenship or allegiance. The precise point has apparently been presented only once for decision, but in denying allegiance as a ground for jurisdiction in personam the court departs from the reasoned opinions of eminent judges and text-writers.2

1 Pennoyer v. Neff, 95 U. S. 714 (1877). The court quotes a passage from this case (p. 727) to the effect that the process of one state has no force beyond its own boundaries, and then says, "It seems to us unreasonable that we should give greater respect to the judgments recovered in a foreign country than to a judgment recovered in one of our sister states." This reasoning involves an obvious non sequitur, since in the case quoted from the attempt was to get jurisdiction over a defendant who had no residence or domicile in the state and owed no allegiance thereto.

The court also cites a case in which a Canadian judgment against a Canadian residing in Wisconsin was refused recognition by a Wisconsin court. Smith v. Grady, 68 Wis. 215, 31 N. W. 477 (1887). The case is directly in point, but the Wisconsin court disregarded the question of allegiance altogether, relying on a previous Wisconsin case where no question of allegiance was involved.

* See Douglas v. Forrest (1828), 4 Bing. 686; Cowan v. Braidwood, 9 Dow. P. C.

It is to be regretted also that the court takes the view that foreign judgments are enforced solely by virtue of comity. This misleading word suggests that it is out of courtesy to the foreign sovereign that the judgment is enforced, a view which, "if really held by any serious thinker, affords a singular specimen of confusion of thought produced by laxity of language." It is not a question of whether comity should induce us to respect a foreign judgment, or whether we should enforce foreign laws, but whether our law requires us to enforce the right acquired under the foreign law. It is not a question of courtesy, but of the obligation of our own law.

The common-law principle is that courts are bound to enforce the right arising out of a foreign judgment rendered by a court having competent jurisdiction over the defendant, unless the defendant can show special facts making it unfair to do so.5 Granting jurisdiction, the judgment raises a right in the plaintiff and a correlative duty in the defendant. The question is therefore whether our law considers the bond of allegiance a sufficient ground for conferring upon the sovereign's courts personal jurisdiction over an absent subject, and then, if competent jurisdiction, are there any special facts which negative the court's duty of enforcement.

6

The duty of obedience to the court's command is the common-law basis for jurisdiction in personam. Thus service of process within the state gives competent jurisdiction, since every one within the state's boundaries must obey." The duty assumed by contract by a non-resi26, 35 (1840); General Steam Navigation Co. v. Guillou (1843), 11 M. & W. 877, 894; Schibsby v. Westenholz (1870), L. R. 6 Q. B. 155, 161; Rousillon v. Rousillon (1880), 14 Ch. D. 351, 371; Emanuel v. Symon (1908), 1 K. B. 302, 309; Hall v. Williams, 23 Mass. 232, 240 (1828); Henderson v. Staniford, 105 Mass. 504 (1870); Hunt v. Hunt, 72 N. Y. 217, 238, 239 (1878); Huntley v. Baker, 33 Hun 578 (1884); Re Denick, 92 Hun 161, 36 N. Y. Supp. 518 (1895); Hamill v. Talbott, 72 Mo. App. 22 (1897); Ouseley v. Lehigh Valley Trust & Safe Dep. Co., 84 Fed. 602 (1897). Also DICEY, CONFLICT OF LAWS, 2 ed., 361; WESTLAKE, PRIVATE INTERNATIONAL LAW, 5 ed., 401; PIGGOTT, FOREIGN JUDGMENTS AND JURISDICTION, Part I, 243 et seq.; NELSON, PRIVATE INTERNATIONAL LAW, 360; FOOTE, PRIVATE INTERNATIONAL LAW, 3 ed., 551, 552; WHARTON, CONFLICT OF LAWS, § 649, n. 3; 2 FREEMAN, JUDGMENTS, § 589; 6 HALSBURY'S LAWS OF ENGLAND, 284; note in 50 L. R. A. 577, 586. Cf. STORY, CONFLICT OF LAWS, §§ 540, 546, 548.

3 See DICEY, CONFLICT OF LAWS, 2 ed., 10; FOOTE, PRIVATE INTERNATIONAL LAW, 547, 548; I WHARTON, CONFLICT OF LAWS, 3 ed., 2, n. 1, 5. The court in the principal case calls attention to a decision by the Supreme Court of the United States to support the proposition that foreign judgments are enforced by virtue of comity; but it is to be noticed that after an elaborate review of the subject of comity the court in that case comes to a conclusion consistent only with the view expressed above, though it continues to use the word "comity." Hilton v. Guyot, 159 U. S. 113, 202 (1894). See DICEY, CONFLICT OF LAWS, 2 ed., 10, 11; 1 WHARTON, CONFLICT Of Laws, 3 ed., §§ 1, 12.

Russell v. Smyth (1842), 9 M. & W. 810, 819 (Eng.); Williams v. Jones (1845), 13 M. & W. 628, 633 (Eng.); Schibsby v. Westenholz (1870), 6 Q. B. 155, 159 (Eng.); WESTLAKE, PRIVATE INTERNATIONAL LAW, 5 ed., 396, 397; WHARTON, CONFLICT OF LAWS, 3 ed., §§ 1, 12. In the United States this proposition is of course strengthened as between states by the constitutional provision as to full faith and credit. U. S. CONSTITUTION, Art. IV, § 1.

• Russell v. Smyth (1842), 9 M. & W. 810, 819 (Eng.); Williams v. Jones (1845), 13 M. & W. 628, 633 (Eng.); Schibsby v. Westenholz (1870), L. R. 6 Q. B. 155, 159 (Eng.); Hunt v. Hunt, 72 N. Y. 217, 239 (1878); Huntley v. Baker, 33 Hun 578, 580 (N. Y. 1884). 7 Darrah v. Watson, 36 Ia. 116 (1873).

dent foreigner to submit to a court's jurisdiction furnishes a valid ground for personal jurisdiction. Persons domiciled within a territory are bound to obey the sovereign, and are therefore personally subject to his courts. It would seem also that the duties arising out of citizenship ought to be enough to confer personal jurisdiction. Obedience to the sovereign is the first principle of all law. The obligations of allegiance are the foundations of government, and cannot be cast off without consent. Accepting a pension from, or enlisting in the service of, a foreign state without consent has been said to be criminal at common law, because inconsistent with allegiance to one's own sovereign.10 Allegiance is an essentially bilateral relationship; subject and sovereign are mutually bound." To hold it insufficient to give courts jurisdiction to render personal judgments is to disregard altogether its inherent nature and importance. In America, the ease with which allegiance to one state can be changed for that of another, our policy of free naturalization, and the usual coincidence of domicile and citizenship, have led to the thought of state citizenship as a matter more of convenience than of obligation. This popular tendency, however, can hardly justify the courts in disregarding the element of duty in allegiance. In contrast to this American tendency, English writers have consistently declared allegiance enough for the founding of personal jurisdiction.12 And the same is apparently true of the other European countries.13

However, assuming the jurisdiction, the common law might perhaps refuse to enforce the foreign right acquired while the subject was making a bona fide attempt to throw off the old allegiance. Furthermore, it does not appear in the reports of the case whether the defendant received notice of the Bavarian proceedings.14 This want of notice can be urged as a ground for not enforcing the foreign acquired right, since the doctrine of the common law has always been that "it is contrary to the first principles of reason and justice that . . . a man should be condemned before he is heard," 15 or had an opportunity of being heard.16 But in reaching the result on either of these grounds, the court would not be denying that allegiance is sufficient for personal jurisdiction.

Grover & Baker Sewing Mach. Co. v. Radcliffe, 137 U. S. 287 (1890); Copin v. Adamson (1875), 1 Ex. Div. 17 (Eng.). Cf. St. Clair v. Cox, 106 U. S. 350 (1882).

Douglas v. Forrest (1828), 4 Bing. 686 (Eng.); Glover v. Glover, 18 Ala. 367 (1850); Hunt v. Hunt, supra; Huntley v. Baker, 33 Hun 578 (1884); Martin v. Burns, 80 Tex. 676, 16 S. W. 1072 (1891); Re Denick, supra; BEALE, JURISDICTION OF COURTS OVER FOREIGNERS, II, 26 HARV. L. REV. 283, 296; PIGGOTT, FOREIGN JUDGMENTS AND JURISDICTION, Part I, 248 et seq.

10 See 3 COKE, INSTITUTES, 144; 1 EAST, PLEAS OF THE CROWN, 81; 4 BLACKSTONE'S COм. 122. The extra-territorial force of allegiance is further emphasized by statutory enactments to the same effect. Foreign Enlistment Act (Eng.), 1870 (33 & 34 Vict. c. 90). Cf. Dobree v. Napier (1836), 2 Bing. New Cases, 781.

United States v. Cruikshank, 92 U. S. 542, 549, 551; 1 BLACKSTONE, 366; I WHARTON, CONFLICT OF LAWS, 50. 12 See note 2, supra.

13 WESTLAKE, PRIVATE INTERNATIONAL LAW, 5 ed., 25 et seq.; BEALE, JURISDICTION of Courts over Foreigners, I, 26 HARV. L. REV. 193.

14 Grubel v. Nassauer, 210 N. Y. 149. See same case in lower court, 71 Misc. 585, affirmed in 148 App. Div. 891.

15 See Lord Ellenborough in Buchanan v. Rucker, 1 Camp. N. P. 63, 66 (1807). 16 See Fisher v. Lane, 3 Wils. 297, 302 (Eng., 1772); Rex v. Univ. of Cambridge, 8 Mod. 148, 164 (Eng.); Fracis, Times & Co. v. Carr, 82 L. T. R. 698, 703 (Eng., 1900); WHARTON, CONFLICT OF LAWS, 3 ed., § 649, n. 3; 6 HALSBURY'S LAWS OF ENG. 286.

THE EFFECT OF A SALE UNDER A CONSENT DECREE AS A STEP IN CORPORATE REORGANIZATION. Some hesitation has been felt by the courts in allowing stockholders to join in the reorganization of an insolvent corporation and the purchase of its assets at a foreclosure sale.1 When the assets are sold, the unsecured creditors lose the chance of realizing upon any future increase in value which might be enough to satisfy their claims. This is equally true when the assets at the time of the sale are worth less than the secured indebtedness. The secured creditors have a right to force a foreclosure by sale to third parties free from claims of unsecured creditors, and when made under a decree of court no objection can ordinarily be made collaterally except for fraud in the decree.2 But the stockholders, on account of their control over the assets, are looked upon as standing in a kind of fiduciary relation to the creditors, and it seemed a breach of this duty to allow them to purchase and to cut off the creditors' interest in a possible future value by their own private speculation. The situation is somewhat analogous to where one in a fiduciary capacity sells to himself as an individual. It has been even asserted that the assets of an insolvent corporation are held in trust for the creditors.3 Where there is an express fiduciary relation, as in the case of a trust or executorship, it is clear that the trustee may not buy in the trust res even under a decree of court.4

There are, however, material differences in the case of stockholders buying the assets. There probably is no actual trust, and clearly the stockholders are not trustees. Furthermore, in the case of foreclosures of corporate assets the amount of capital required to purchase is so large and the market so limited that it is difficult to realize fair value for the assets.5 This is most often accomplished by a reorganization. Upon grounds of policy to increase the market, stockholders have been allowed to join in such reorganizations, and to purchase at foreclosure sale when the sale is confirmed by judicial decree. It is clear, however, that good consideration must be paid for the assets to the old insolvent corporation by all who join in the purchase. A transfer to a new corporation which merely gives new stock to the old stockholders in exchange for the old stock would be fraudulent. No consideration is given which is subject to creditors of the corporation. This would be true even though the assets were worth less than the secured indebtedness, for the creditors thereby lose the possibility of sharing in an increase of value and nothing has been given to the debtor corporation in exchange. Thus, while stockholders may join in a bonâ fide purchase they should not be given a special benefit from the reorganization in order to induce them not to

8

1 See Northern Pacific Ry. v. Boyd, 228 U. S. 482, 503.

2 Robinson v. Iron Ry. Co., 135 Ú. S. 522; Kent v. Lake Superior Ship Canal, Ry. & Iron Co., 144 U. S. 75.

3 See 20 HARV. L. REV. 401, where this doctrine is criticized.

Michoud v. Girod, 4 How. (U. S.) 503; Obert v. Hammel, 18 N. J. L. 73.

5 See 3 Cook, CORPORATIONS, 6 ed., § 886.

6 Wood v. Dubuque R. Co., 28 Fed. 910; Thornton v. Wabash Ry. Co., 81 N. Y. 462. See 5 THOMPSON, CORPORATIONS, 2 ed., § 6007.

7 When an insolvent debtor conveys property, the consideration paid must be such that the creditors may reach it or the conveyance is fraudulent.

8 An insolvent may not give away property though it be encumbered to its full value. Garrison v. Monaghan, 33 Pa. 232.