in stock of corporations outside Pennsylvania. The trustee was a Pennsylvanian. The court, without deciding what law would govern the validity, held that it was not that of Pennsylvania.

So far we have considered merely the validity of the conveyance in trust; but it is still necessary to determine what law governs the administration of the trust. Since it becomes the duty of the trustees, if the trust is valid, to take the chattels to a certain place and administer them there, and there is nothing in the law of any state to prevent them from taking the chattels to that place, the chattels, if the provisions of the trust are carried out, will be submitted, as to all questions arising in the course of administration, to the law of the place where the trust is to be administered. This place is sometimes easy but often difficult to determine. In case of a trust created by will, the place of administration will ordinarily be the place of settling the estate, that is, the domicile of the testator, irrespective of the domicile of the trustee or of the beneficiaries.1

There is, however, a class of trusts created by will where the administration of the trust is clearly to be elsewhere than the domicile of the testator. A typical case of this class is a bequest to a charity permanently located in another state. In such a case, if the mere gift in trust is in itself valid, the validity of the administration of it is to be governed by the law of the place where the charity is to be located; and that law determines all questions concerning the administration, such as alienability, accumulation, etc.2 So where an Ontario testator bequeathed movables to the State of Vermont, on certain trusts, with provisions for accumulation, the law of Ontario determined whether such a direction invalidated the bequest; and the bequest being valid, it was for Vermont to determine whether the accumulation should be carried out, or the period of enjoyment accelerated.3

A question of interpretation is presented by the mortmain acts of several states. Do such acts forbid the administration of testamentary gifts by charities, or do they simply limit the right to pass. the property on the proposed trusts? It is now agreed that they do not limit the power to administer; and that if a gift is made to a charity by a testator domiciled in a state where there is no

1 Rosenbaum v. Garrett, 57 N. J. Eq. 186, 41 Atl. Rep. 252.

2 Ibid.

3 Parkhurst v. Roy, 7 Ont. App. 614.

mortmain act, the gift may be taken and administered in a state where the gift would have been illegal.1

In the case of a settlement inter vivos the place of administration of the trust is a more difficult question. In many cases the situs of the trust will be taken to be the place of creation, that being the settler's domicile; and all questions involving the administration of the trust will be determined by that law, though the trustee may be domiciled elsewhere or may subsequently remove to another state.2

The most important questions of this sort have arisen in England upon marriage settlements. If both parties to the marriage are domiciled in one country, the situs of the trust would naturally be in that country. So where upon a marriage of a Scotch man and woman a marriage settlement was made by virtue of which the husband had a right upon a certain contingency to have the property transferred to him absolutely, this transfer was ordered by an English court, though opposed to the English practice, which would have required a provision for the wife and children in such a case.3

4

On this principle the interesting case In re Fitzgerald may be supported. A marriage being had between an Englishman and a Scotchwoman, a settlement was entered into, by which several English trustees were constituted to hold and manage English chattels settled by the husband and Scotch chattels settled by the wife. The parties intended to live in England. The question was whether an alienation by the husband of all his interest under the

1 Canterbury v. Wyburn, [1895] A. C. 89 (Privy Council) (see however AttorneyGeneral v. Miller, 3 Russ. 328, 3 Dow & Cl. 393); Healy v. Reed, 153 Mass. 197, 26 N. E. Rep. 404; Fellows v. Miner, 119 Mass. 541; Dammert v. Osborn, 140 N. Y. 30, 35 N. E. Rep. 407. In the last case the chattels bequeathed were in the state where the charity was established; nevertheless, in spite of the mortmain act of that state, the bequest was held good. Conversely, the rule against perpetuities has to do with the administration of the trust. It was held that a direction in a will of a testator who was apparently English to invest money in Scotch land would be carried out, though the trusts on which the land was to be held were forbidden by the English law as violating the rule against perpetuities. Fordyce v. Bridges, 2 Phil. 497, 17 L. J. Ch. 185.

2 First Nat'l Bank v. Nat'l Broadway Bank, 156 N. Y. 459, 51 N. E. Rep. 398. So in Schluter v. Bowery Sav. Bank, 117 N. Y. 125, 22 N. E. Rep. 572, a married woman having constituted herself a trustee in New York, her subsequent removal to New Jersey, where a married woman could not take personal property, did not put an

end to the trust.

8 Anstruther v. Adair, 2 Myl. & K. 563.

4 [1903] 1 Ch. 933. The case was reversed on appeal because the corpus of the trust was found to be Scotch immovable property. [1904] 1 Ch. 573.

settlement was valid, as it would be by English law, or invalid according to the Scotch law. The court decided that the parties intended an English trust, and that the alienability should be determined by the English law. But in Heywood v. Heywood,1 where an Irishwoman married an Englishman, and each settled money in English trustees, Romilly, Master of the Rolls, seems to have inclined to the opinion that as to the sum contributed by the wife this was an Irish trust.

HARVARD LAW REVIEW.

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

STOCKHOLDERS' RIGHT OF PREEMPTION. For just a century authorities have steadily accumulated recognizing a right in stockholders of a corporation, under certain circumstances at least, to subscribe for and demand the same proportion of a new issue of capital stock that they respectively hold of stock previously issued. Through this right of preemption is sought the preservation to each stockholder of his relative vote and voice in the management of the corporation; 2 also the preservation of his proportionate interest in the corporation's capital or surplus or other property, for a diminution of this proportion causes him pecuniary loss unless full value paid for new stock offsets the decrease in proportionate interest by a corresponding increase in the corporation's property. A further subsidiary reason for the right is, perhaps, found in its furnishing a cumulative remedy in the nature of self-help to minority stockholders against issues of stock fraudulently made to particular persons. On the other hand, the corporation may need funds or other property to fulfill the objects of its incorporation; and public policy, as well as the interests of the stockholders as a body, demands that the corporation be allowed every facility to satisfy its needs. The equitable point of equilibrium between these conflicting interests of the corporation or the stockholders en masse and of individual stockholders seems found in allowing this right of preemption so far and only so far as it does not seriously hamper the corporation.5

In accordance with these principles stockholders are given first chance

1 See Gray v. Portland Bank, 3 Mass. 364 (1807); also, cases cited in Cook, Corp., 5 ed., § 286, and in 26 Am. & Eng. Encyc., 2 ed., 947. But cf. Ohio, etc., Co. v. Nunnemacher, 15 Ind. 294.

2 See Dousman v. Wisconsin, etc., Co., 40 Wis. 418, 421; Crosby v. Stratton, 68 Pac. Rep. 130, 132 (Col.). Cf. Humboldt, etc., Ass'n v. Stevens, 34 Neb. 528, 535. 8 See Jones v. Morrison, 31 Minn. 140, 153; Crosby v. Stratton, supra.

4 See Meredith v. New Jersey, etc., Co., 55 N. J. Eq. 211, 220; aff. 56 N. J. Eq.

See Stokes v. Continental, etc., Co., 91 N. Y. Supp. 239, 246.

to obtain new stock, and probably original stock remaining untaken,' when issued at a cash price. If, however, stock once issued returns to the possession of the corporation and is reissued, there is no right of preemption, for the old stockholders are not thereby deprived of the proportionate interests in the corporation which they have hitherto enjoyed. Likewise, when stock has been issued in payment for property, the right of preemption has been denied. In each of the adjudicated cases, however, the property was of a peculiar nature and readily to be furnished only by this particular vendor. Indeed, unless the property bought have these characteristics, it seems that the usual privilege of preemption should be allowed; for, if stockholders can provide the needed property as well as an outsider, the corporation cannot be seriously harmed by allowing them to preserve their proportionate stockholdings by furnishing other commodities as well as the particular commodity, money.

10

11

Granted that a right of preemption exists, the further question arises whether the corporation can fix the terms upon which the stockholders may obtain their proportionate shares of new issues of stock. According to text-writers, stockholders must be offered the stock at par; and while in most of the cases this particular question has not been material because the corporation has not attempted to sell the stock except at par,11 there are one or two decisions expressly to the same effect.12 For the denial of a right to subscribe at par, the measure of damages is, of course, the difference between the par and the market value.13 In a recent case in New York, however, where the corporation sold all the new stock to outsiders at a fixed price, a dissenting stockholder was allowed to recover the difference between the fixed price of sale and the market value. Stokes v. Continental, etc., Co., 36 N. Y. L. J. 589 (N. Y., Ct. App., Nov. 13, 1906). The case expressly represents the doctrine that the stockholders have a first chance to purchase the stock, not at par, but on any reasonable terms that the corporation may prescribe for its sale. The corporation would even be allowed to provide for a sale at public auction; for practically the stockholder might preserve his proportionate stockholdings by paying the same price for additional stock that others would pay, although strictly he must pay one unit more. But a sale to the highest bidder upon sealed proposals would probably be held improper. This doctrine seems firmly grounded in business sense and justice. The stockholders are given a fair opportunity to preserve their proportionate influence and interests in the corporation and its property by purchasing new stock; furthermore, if any be prevented from so doing by a sale at a price at or above actual value, as already noted, they suffer no pecuniary harm. On the other hand, this rule, unlike that of the text-writers, does not impede the corporation in most easily and effectively satisfying its needs and devel

6 See cases cited in 26 Am. & Eng. Encyc., supra.

7 See Crosby v. Stratton, supra; Morris v. Stevens, 17 Pa. Co. Ct. Rep. 209, 213. But of. Sims v. Street R. R. Co., 37 Oh. St. 556; Curry v. Scott, 54 Pa. St. 270.

8 Hartridge v. Rockwell, R. M. Charlt. (Ga.) 260; State v. Smith, 48 Vt. 266; Crosby v. Stratton, supra.

9 Meredith v. New Jersey, etc., Co., supra. See also Russell v. Rock, etc., Co., 184 Pa. St. 102; Bonnet v. First, etc., Bank, 24 Tex. Civ. App. 613.

10 See Cook, Corp., 5 ed., § 286; Beach, Priv. Corp., § 473.

11 See, e. g., Eidman v. Bowman, 58 Ill. 444; Jones v. Morrison, supra.

12 Cunningham's Appeal, 108 Pa. St. 546; Hammond v. Edison, etc., Co., 131 Mich. 79.

13 Gray v. Portland Bank, supra.