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Law Book ¥
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CORNELL UNIVERSITY LAW LIBRARY
The Moak Collection

PURCHASED FOR
| The School of Law of Cornell University
And Presented February 14, 1893

IN MEMORY OF
JUDGE DOUGLASS BOARDMAN

FIRST DEAN OF THE SCHOOL
By his Wife and Daughter
A. M. BOARDMAN and ELLEN D. WILLIAMS ‘
“ma

|
law
A

PRACTICAL TREATISE

on

INSOLVENT CORPORATIONS,

INCLUDING THE

LIQUIDATION, RE-ORGANIZATION, FORFEITURE, DISSOLUTION,
AND WINDING-UP OF CORPORATIONS ;

AND EMBRACING

THE RIGHTS, POWERS, AND DUTIES OF RECEIVERS, THE
REMEDIES OF CREDITORS, AND THE INDIVIDUAL
LIABILITY OF STOCKHOLDERS AND OFFICERS.

BY oe av
FREDERICK 8S. WAIT,

‘oF THE NEW YORK BAR,

AUTHOR OF FRAUDULENT CONVEYANCES, TRIAL OF TITLE TO LAND, ETC.

NEW YORK:
BAKER, VOORHIS & CO. LAW PUBLISHERS,
66 NASSAU STREET.
1888.
 

Ai

Coryricut, 1888, BY
FREDERICK 8. WAIT.

E. 0. JENKINS’ 6ONB, PRINTERS
NEW YORK,
PREFACE.

TueE following pages have been written amidst the anx-
ieties and distractions incident to active practice, and the
publication of the volume has been repeatedly delayed by
the intervention of urgent professional duties. The wri-
ter’s wishes would have been more completely satisfied had
it been possible to bestow undivided attention upon the im-
portant branch of the law here treated. Corporate associa-
tion, as shown in this work, has substantially absorbed the
important commercial schemes of the present generation.
The fact that such a number of corporate business enter-
prises enter unfruitful fields and fail of success, and that
so many perilous and speculative schemes are undertaken
by incorporated bodies, precipitates an unusual number of
insolvency, forfeiture and winding-up cases and proceed-
ings affecting these invisible entities. This is believed to
be the pioneer attempt to treat exclusively of principles,
remedies, and proceedings having in view the liquidation
and closing up of corporate organizations. The effort has
been made to review certain general elementary principles
affecting corporations; to point out the underlying causes
and the phases of corporate insolvency ; and to consider
the remedies affecting corporations, officers, and stockhold-
ers. Practical chapters relating to parties, complainants
and defendants, and to questions concerning pleading in
corporate litigations and proceedings, together with a con-
sideration of the subject of corporate assets, with allusions
to the creditors’ “trust fund,” follow. The methods by
which the affairs of corporations may be liquidated are con-
sidered, this portion of the work containing chapters on as-
iv PREFACE,

signments or transfers made by corporations for the benefit
of creditors ; receivers or liquidators of corporations, includ-
ing railroad companies; and the rights, powers and duties
of receivers, embracing a discussion of the authority ac-
corded these officers to issue certificates of debt and dis-
place prior liens. This is followed by a review of the
remedies of execution and sequestration proceedings as
affecting corporations. As each State regards the corpo-
rations created in sister States as foreign corporations, the
propriety of the treatment of the rights of such foreign or-
ganizations is manifest. Chapters upon the important sub-
jects of dissolution, winding up, forfeiture, consolidation,
and reorganization of corporate bodies are given, embody-
ing, it is believed, important principles and valuable collec-
tions of authorities. Practical discussions of the subjects
of evidence peculiar to corporate litigations and proceed-
ings, inspection of corporate books, and defenses incident
to corporation cases and proceedings, are added. Ass per-
sonal liability for debts of an association is usually an inci-
dent of corporate insolvency, this subject has been noticed,
and some observations ventured upon remedies affecting
unincorporated associations which creditors have attempted
to treat as copartnerships.

The preparation of the work .has entailed upon the wri-
ter an enormous amount of labor which it is hoped has not
been expended in vain. The statutes enacted in many
States regulating corporations, and especially covering
cases of insolvency and dissolution proceedings, have em-
barrassed the prosecution of the task. That the reader
may not be misled by authorities that are exceptional, or
limited to localities, the States from which citations are
taken have been indicated. Thanks are due to professional
friends for words of encouragement and for criticisms and
suggestions offered during the progress of the work.

1o WALL STREET, New York, September, 1888.
CONTENTS.

CHAPTER I.
PAGE
INTRODUCTORY DISCUSSION, . . . - ~. . #1
CHAPTER II.
REMEDIES AFFECTING CORPORATIONS, OFFICERS

AND STOCKHOLDERS, ‘i , ‘ . : er)

CHAPTER III.

COMPLAINANTS, . . . . . 1 eee OB
CHAPTER IV.

STATUS OF COMPLAINANTS,. . . . . . 9
CHAPTER V.

PARTIES DEFENDANT, » oe oe & ee 8
CHAPTER VI.

PLEADINGS,. . . «. «© 2. ye eee 07

CHAPTER VII.
ASSETS—TRUST FUND—CREDITORS RIGHTS, . . 117
vi CONTENTS.

CHAPTER VIII.
PAGE
ASSIGNMENTS BY CORPORATIONS, . . . «~~ 132

CHAPTER IX.

RECEIVERS OF CORPORATIONS — NATURE OF,
GROUNDS FOR, AND EFFECT OF APPOINT-

MENT, . 3 5 : ‘ ‘ 7 : : 7 . 145
CHAPTER X.
TITLE, POWERS, DUTIES, AND LIABILITIES OF RE-
CEIVERS, 3 ‘ * ‘ ‘ ‘ F 3 di 170

CHAPTER XI.
PROCEEDINGS BY AND AGAINST RECEIVERS, . . 186

CHAPTER XII.
RAILROAD RECEIVERS, .  . «wwe 2805

CHAPTER XIII. :
RECEIVERS’ CERTIFICATES, . . . .  .  . 223

CHAPTER XIV.

EXECUTIONS AFFECTING CORPORATIONS, . c 245

CHAPTER XV.

SEQUESTRATION PROCEEDINGS, . . Lo. 25s
CONTENTS,

CHAPTER XVI.
FOREIGN CORPORATIONS,

CHAPTER XVII.
DISSOLUTION AND WINDING UP, .

CHAPTER XVIII.
DISSOLUTION AND. WINDING UP,

CHAPTER XIX.

FORFEITURE, .

CHAPTER XX.
CONSOLIDATION,

CHAPTER XXI.
REORGANIZATION,

CHAPTER XXII.

DEFECTIVE INCORPORATIONS AS
SHIPS, . . eu “g

CHAPTER XXIII
EVIDENCEK, « « ¢ & @ «

CHAPTER XXIV.

CORPORATE BOOKS—INSPECTION—EVIDENCE,

COPARTNER-

vil

PAGE
262

+ 279

312

» 326

346

- 384

397

. 416

443
Vili CONTENTS.

CHAPTER XXV.
DEFENSES, oe » 2 & & mw & & gras

CHAPTER XXVI.

PERSONAL LIABILITY OF INCORPORATORS, STOCK-
HOLDERS, AND OFFICERS, 3 ci = 7 . 486

CHAPTER XXVII.
STOCKHOLDERS, . . . . . . ge 542

CHAPTER XXVIII

RELATION OF OFFICERS AND DIRECTORS TO THE
CORPORATION, . ; . : . B . é 578

CHAPTER XXIX.
PREFERENCES, . . 2... we 507

CHAPTER XXx.

SURPLUS ASSETS— PRESENTATION OF CLAIMS—
DIVIDENDS, . . . . . . 605

INDER oe ow & & & & & w & «oR
TABLE OF CASES.

(The figures refer to the pages.)

Abbot v. Amer. Hard Rubber Co.,
135, 301, 306.

Abbott vw. Aspinwall, 427.

vu. Cobb, 530.

v, Johnstown, G. & K.H. R.R.

Co., 348, 349, 351, 377.
v. Omaha S. & R. Co., 402,
403, 498.

Aberdeen Ry. Co. v. Blaikie, 507, 582.
Ackerman v. Halsey, 83, 527.
Ackerson v. Lodi Branch R.R. Co., 76.
Acome v. Amer. Mineral Co., 108.
Acres v. Moyne, 393, 394.
Adams wv. Goodrich, 504.

v. Mills, 491.
Adderly v. Storm, 516, 549.
Adee v, Bigler, 97.
Adkins v. Thornton, 59.
Adler vw. Fenton, 43, 63.

v. Milwaukee P. B. Mfg. Co.,
86, 546.

tna Nat. Bank v. Fourth Nat. Bank,

89.
Aikin ». Wasson, 602.
ale Steel & Wire Co. v. Martin,
509.
Alderman, etc. v. Finley, 420, 426. -
Alexander wv, Relfe, 61, 178, 190.

v. State, 17, 18.
Alexandria Canal Co. v. Swann, 49.
Alford uv. Miller, 509.
miko Co. Workhouse v. Moore,

430.
Allen v. Center Valley Co., 44.
uv. Curtis, 49, 60, 61, 62, 81, 581.
vu, Dallas & W. R.R. Co., 156,
166, 169, 202.
uv MeO R.R. Co., 129,

561.
vu. N. J. Southern R.R. Co., 302,
309, 327.
v. Walsh, 496.
Allibone v, Hager, 576.
All Saints’ Church v, Lovett, 327.
Amer, Bank v, Cooper, 173, 188,

 

Amer, Bible Society v. Marshall, 127.?

Amer, Cent. Ry. Co. v. Miles, 594.

AEN Colonization Soc. wv. Gartrell,
263.

Amer. Dock & Imp. Co. uv. Trustees of
Public Schools, 246, 248.,

Amer. Ice Machine Co. v. Paterson
Steam F, E., etc. Co., 137, 139.

Amer, Loan & T. Co, uv. Toledo, C. &
S. Ry. Co., 208.

Amer. Mut. L. I. Co. wv. Owen, 51,
263, 264, 273, 274.

Amer. Ry. Frog Co. v. Haven, 67, 453,

454.

Amer, Union Tel. Co. v. Western Un.
Tel. Co., 275.

Ames v. Trustees of Birkenhead Docks,
148, 168, 202.

Amherst Bank v, Conkey, 465.

Ammant v. New Alexandria & P.
Turnp. Co., 249, 250, 257.

Anderson v. Kerns Draining Co., 420.

uv. Phila, Warehouse Co.,
517, 518.
Anderson’s Case, 122.
Andover & M. Turnp. Co. v. Gould,

575-
Andover & M. Turnp. Co. v. Hay, 575.
Andrew uv, Vanderbilt, 43, 130.
Andrews wv. Mich. Cent. R.R. Co., 69.
v. Ohio & Miss. R.R. Co.,
560.
Angel v. Smith, 148.
Angell v. Silsbury, 261,
Angerhoefer v. Bradstreet Co., 265.
Ansonia Brass & C. Co. v. New Lamp
Chimney Co., 474.
Appleton Mut. F. I. Co. uv. Jesser, 469.
Apps, £% parte, 500.
Archer v. Terre Haute & I. R.R. Co.,
348, 349, 353.
Ardesco Oil Co. v. North Am. Oil, etc.
Co., 133, 136.
Arenz v. Weir, 497.
Arnold v. Ruggles, 252.
x TABLE OF CASES.

Arthur v. Commercial & R.R. Bank,
¥4I, 143, 598.
v. Montclair Ry. Co., 184.
Ash uv. Guie, 409.
Ashbury Ry., etc. Co. v. Riche, 37.
Ashhurst’s Appeal, 480.
Ashtabula & N. L. R.R. Co. v. Smith,

551.
Ashton uv. Atlantic Bank, 104.
v. Burbank, 349, 558, 570.
Ashuelot R.R. Co. v. Elliot, 293, 295,

317.
Ashville Div. No. 15 uv. Aston, 291.
Aspinwall v, Ohio & Miss. R.R. Co.,

. 269.
v. Sacchi, 469.
v. Torrance, 506,
Athol Nat. Bank v. Hingham Mfg. Co.,

44, 474.
Atkins v. Albree, 617.
v. Wabash, St. L. & P. Ry. Co.,
150, 151, 163, 194, 214, 222.
Atkinson v. Marietta & C. R.R. Co.,

25, 417.
Atlanta v. Gate City G, L. Co., 27.
v. Grant, 246, 250.
Atlantic Nat. Bank v. Tavener, 141,

597.
Atlantic & G, W. Ry. Co. v. Dunn, 14.
Atlantic & P. R.R. Co. vw. St. Louis,
426.
Atlas Bank v. Nahant Bank, 256.
Atty. Genl. v. Atlantic Mut. L. I. Co.,
181, 188.
v. Bank of Columbia, 116,

8

150.
. Bank of Niagara, 152,
258, 302, 330, 342.
v. Barstow, 63.
v. Bay State Min. Co., 271.
u, City of Salem, 74, 343.
v. Continental L. I, Co.,
600, 603.
v. Guardian Mut. L. I. Co.,
49, 95, 104, 148, 168,
171, 177, 186, 190,201,
315, 600.
vu. Jamaica Pond Aqueduct
Co., 338.
v. Life & Fire Ins, Co., 179,
607,
v. Mayor, etc. of Liverpool,

54.
v. North Amer. L, I. Co.,
100, IL0, 149, 183, 184,

196.
v. Reynolds, 65..
v. Simonton, 400, 423.

 

The figures refer
to the pages.

Atty. Genl. v. Tudor Ice Co., 65.
uv. Utica Ins. Co., 54, 65,
152, 258.
v. Vigor, 221.
v. Wilson, 497.
Atwool v. Merryweather, 510, 591.
Auburn & C. P.R. Co. v. Douglass, 421.
Aultman’s Appeal, 501, 511.
Austin v. Barrows, 63.
v. Daniels, 534, 582.

Babcock v. Beman, 494.
Bacon v, Robertson, 292, 317, 318, 319,
‘4 605, Eo.
Badger v. Badger, 590.
Hapty v. Adantin M. & O. R. Co.,
163, 608,
Bagshaw v. Eastern Un. Ry. Co., 52,
82, 99, 571.
Bailey v. Bancker, 58, 502.
v. Birkenhead, L. & C. J. Ry.
; Co., 440.
Bailey’s Appeal, 595.
Bane: Brown, 586
Baker v. Backus, 150, 155, 167, 284, 302.
uv. Cooper, 187, 188,
v. Louisiana Portable R.R, Co.,
43, 94, 96, 130, 152, 154,
417, 495.
Baldwin v. Canfield, 82, 594.
Bale v, Cleland, 529.
Balliet v. Brown, 480.
Ballou v, Farnum, 200.
Ballston Spa Bank v. Marine Bank, 56.
Balto. Retort & F. B. Co. v. Mali, 104,

562.
Balto. & H. Turnp. Co. v. Barnes, 575.
Balto. & O. R.R. Co. uv. City of Wheel-

ing, 569.
Balto. & O. R.R. Co. v. Gallahue, 48,

56.
Balto. & O. R.R. Co. v. Glenn, 269.
Balto. & O. R.R. Co. v. Supervisors,
etc. of Marshall Co., 344.
Balto. & P. R.R. Co. v. Fifth Bapt.
Church, 11,
Balto. & P. R.R. Co, v. Reaney, 28, 206.
Balto. & S, R.R. Co. v. Musselman, 382.
Bangor, O. & M. R.R. Co. v, Smith,
18, 48.
Bangs v. Duckinfield, 259.
v. Gray, 182,
v. McIntosh, 109, 152, 158, 259.
Bank wv. Charlotte, ei see
uv. Kennedy, 187, 310.
v. Lanier, 547.
uv. McLeod, 163.
Bank of America v. McNeil, 438.
The figures refer
to the pages.

Bank of Augusta v. Earle, 17, 21, 24,
50, 91, 163, 263, 264, 269.

Bank of Bethel v. Pahquioque Bank,
179, 308, 310, 323.

Bank of Columbia v. Patterson, 19.

Bank of England, £x parte, 48.

Bank of Galliopolis v. Trimble, 291.

Bank of Havana v. Magee, 32, 36.

Bank of Hindustan, /# re, 350, 351,

376.
Bank of London v. Tyrrell, 586.
Bank of Louisiana v. Green, 324,
v. Wilson, 317.
Bank of Mich. v. Williams, 50.
Bank of Middlebury v. Rutland
R.R. Co., 594.
Bank of Miss. v. Duncan, 318.
uv, Wrenn, 291.
Bank of Montreal v. Chicago, C. & W.
R.R. Co., 231, 241.
Bank of Mutual Redemption uv. Hill,
60, 61, 535.
Bank of North Amer. v. Wheeler, 203.
Bank of Ogdensburgh wv. Arnold, 225.
Bank of Pittsburgh v. Whitehead, 438.
Bank-of Poughkeepsie v. Ibbotson, 58,
59, 298, 495, 526.
Bank of St. Marys v. St. John, 487,
510, 581.
Bank of State of Mo. v. Merchants’
Bank, 331.
Bank of Switzerland v. Bank of Tur-
key, 299.
Bank of U.S. v. Dandridge, 17, 18, 30,
_ 430, 431, 435, 465.
vu. Davis, 437.
v. McLaughlin’s Admr., 316.
v. Planters’ Bank, 546.
Bank of Vincennes wv. State, 344.
Bank of Virginia v. Adams, 267.
Bank Comnrs. wv. Bank of Buffalo, 303,

& W.

342.

Banks, The, wv. Poitiaux, 127.

Baptist Church in Hartford v. With-
erell, 53.

Baptist Meeting House wv. Webb, 302,

310,
Barclay v. Quicksilver Min. Co., 166,

379.
v. Talman, 281, 285, 296.
v. Wainewright, 617.
Bard v. Poole, 263.
Barksdale v. Finney, 546.
_Barned’s Banking Co., /# re, 101.
Barnes v. Brown, 586.
v. Newcomb, 470.
Barney v. Griffin, 142.
Barnstead v. Empire Min. Co., 91.

‘TABLE OF CASES,

 

Xl

Barr v. Bartram & F. Mfg. Co., 53, 131.
uv. N.Y., LL E. & W. R.R. Co., 8%.
Barre Nat. Bank v, Hingham Mfg.
Co., 516.
Barry v. Merchants’ Exchange Co., 119.
uv. Nuckolls, §30.
Barter v. Wheeler, 200.
Bartlett v. Drew, 85, 86, 87, 88, 102,
11Q, 121, 143, 612.
v. Teah, 132.
v, Wilbur, 195.
Barton vw. Barbour, 110, 149, 196, 197,
231, 232, 236.
Barton’s Trust, /# re, 615, 617.
Bass v. Chicago, etc. Ry. Co., 13.
Bassett v. St. Albans Hotel Co., 492.
Basshor uv, Dressel, 344, 426.
Bates v. Mackinley, 615, 617.
Bates County v. Winters, 359, 375, 549.
Bath’s Case, 566.
Battaile v. Fisher, 183.
Battle v. Davis, 187, 189.
Bavington wv. Pittsburgh & S. R.R. Co.,
435, 462.
Bay v. Cook, 400.
Bayard’s Appeal, 253, 257, 261.
Bay City & E.S. R.R. Co. v. Austin,
540.
Bayless v. Orne, 284, 313.
Bayliss v, La Fayette, M. & B. Ry. Co.,

,

244, 603.
Bayly v. Schofield, 40.
Bay View Homestead Assoc. v. Will-
iams, 433.
Beach v. Smith, 524.
Beal v. N. Y. Cent. & H. R. R.R. Co.,
174.
Beardshaw, Ex parte, 499.
Beardsley v. Ontario Bank, 253.
v, Smith, 103, 489, 490.
Beaston v. Farmers’ Bank of Dela.,
133, 143.
Beaubien v. Beaubien, 111.
Beaumont wv. Meredith, 399.
Beckett v. Houston, 547.
Bedford. v. Bagshaw, 529.
Bedford R.R. Co. uv. Bowser, 474, 509,
534, 557, 582. .
Beers v. Bridgeport Spring Co., 611.
Beeson v. Lang, 200,
Belfast & M. L. R.R. Co. v. Cottrell, |
471.
Belknap vw. Davis, 534, 582.
v. North Am. L. I. Co., 96,
129, 287, 313.
Bell v. Francis, 401.
v. Indianapolis, etc, R.R. Co., 45.
uv. McElwain, 187.
Xi

Bell wv. Shibley, 172, 177.
Bell’s Estate, /# re, 175.
Bellona Co.’s Case, 307.
Bellows v. Hallowell & A. Bank, 361,
389, 390. ‘
Bell’s Gap R.R. Co. v. Christy, 77.
Belmont wv. Erie Ry. Co., 153, 157, 207,
284, 302.
Belmont Branch Bank v. Hoge, 482.
Bend v. Susquehanna B. & B. Co., 522.
Benedict vw. St. Joseph & W. R. Co.,
206, 212.
Bennett, Ex parte, 512.
v. Clough, 18.
v. St. Louis Car Roofing Co.,

594.
Benson, £x parte, 18,
uv. Heathorn, 507.
Bent v. Priest, 579, 586, 591.
Bentley v. Craven, 508, 591.
Bergman v. St. Paul Mut. Bldg. Assoc.,

545.
Berks & D. T. R. Co. v. Myers, 432.
Berry, Matter of, 173.
v. Brett, 479.
Besley, Ex parte, 499.
Besley’s Case, 499.
Bevans v. Dingman’s Choice Turnpike
Co., 1or.
Beverley v. Brooke, 149, 202.
Bewick v. Alpena Harbor Co., 335.
Bidlack v. Mason, 163, 277.
Bigelow v. Congregational Soc., 53%.
v. Gregory, 402, 498.
v. Whitehall Mfg. Co., 116.
Bill v. New Albany, etc. R.R. Co.,
212, 214.
Billings v. Robinson, 195, 561.
v. Trask, 497.
Bingham v. Weiderwax, 293.
Binney v. Russell, 465.
Bird v. Hayden, 487, 491, 492, 500, 501.
Birmingham Banking Co., Jz re, 447,

449.
Birmingham .& L. J. Ry. Co., lz re,
~ 210,
Birmingham, B. & T. J. Ry. Co. vw.
White, 453.
Bish uv. Johnson, 359, 375, 514.
Bishop v. Brainerd, 26, 27, 44, 351, 352,
354) 514.
Bissell v. Mich, Southern & N. I. R.R,
_ Co., 14, 339) 376, 427.
Bisson v, Curry, 155.
Black v. Delaware & R. Canal Co., 37,
250, 274, 299, 306, 348, 351,
352, 355, 358, 378.
v. Shreve, 463.

TABLE OF CASES.

 

The figures refer
to the pages.

Black River & U. R.R. Go. v. Barnard,
* 426.
Black River & U. R.R. Co, v. Clarke,

425, 524.
Blackwell v, State, 280, 307.
Blair v. Perpetual Ins. Co., 421.
v. St. Louis, H. & K. R.R. Co.,
216, 395, 603.
Blake v. Buffalo Creek R.R. Co., 507.
v. Hinkle, 93, 128.
v. Portsmouth & C. R.R. Co.,

317.
Blake’s Case, 566.
Blake Crusher Co, v. Town of New
Haven, 57, 180.
Blakey v. Blakey, 602,
Blanchard v. First Association, 89.
v. Kaull, 405.
Blatchford v. Ross, 153, 348, 355, 594-
Bliss v. Anderson, 571.
v. Matteson, 319, 392, 581.
Bliven vw. Peru Steel & Iron Co., 88,
285, 287, 313. :
Blodgett v. Morrill, 511.
Bloom v. Burdick, 158.
Blossom v. Milwaukee, etc. R.R. Co.,
204.
Bloxam v. Metropolitan Ry. Co., 573,
Blumenthal v. Brainerd, 193, 199, 200.
Blunt wv. Clitherow, 221.
Board of Public Works v. Gannt, 76.
Boardman v. Lake Shore & M.S. Ry.
Co., 268, 366, 371, 383, 610, 613.
Bodley wv. Goodrich, 140, 143.
Body wv. Jewsen, 42.
Boisgerard v. N. Y. Banking Co., 76,
312.
Boland ». Whitman, Io9, 110.
Bolen 2 San Gorgonio Fluming Co.,

106.
Bolton vw, Corporation of Liverpool, 448,
455,456.
Bonnardet v. Taylor, 448, 449.
Booe wv. Junction R.R. Co., 374.
Boogher wv. Life Assoc., 14.
Booker, Ex parte, 91.
Booth vw. Bunce, 128, 361, 370, 395.
v. Campbell, 491.
v. Clark, 147, 163, 195.
v. Robinson, 278, 538.
v. Wonderly, 400, 401, 402, 408.
Bordman wv. Osborn, 512.
Boston Glass Manuf. v. Langdon, 280,
281, 295, 300, 301, 309.
Boston & P. R.R. Co, v. New York &
N. E. R.R. Co., 37, 38, 307, 348.
Boston, B. & G. R.R. Co, v. Welling-
ton, 59, 472.
The Jigures refer
to the pages.

Boston, C. & M. R.R. Co. wv. Gilmore,
253, 254.

Boughton vz. Otis, 521.
Bow v. Allenstown, 30, 424.
Bowden w. Johnson, 511, 516, 517, 549.

v. McLeod, 53, 147.

v. Santos, 511, §12,
Bowen & Martin’s Case, 500.
Bowery Bank, Matter of, 167.

Case, 133.
Bowman z. Bell, 115.
Boyce v. Wabash Ry. Co., 274.
Boyd wv. Alabama, 29.
v. Chesapeake & O. Canal Co.,
56, 247.

Boynton wv. Andrews, 124.

v. Hatch, 124, 440, 553.

Braddock wv. Phila., M. & M. R.R. Co.,
563.
Bradford Nav, Co., J re, 291.
Bradley uv. Aldrich, 82.
v. Farwell, 507.
v. Fuller, 63.
Bradt v. Benedict, 298, 307, 525.
Brady v. Mayor, etc. of Brooklyn, 49.
Brainerd v. N. Y. & Harlem R.R. Co.,
130,
Branch wv. City of Charleston, 361.
v. Jesup, 249.
uv. Roberts, 61, 128,
Branch Bank vw, Collins, 61.
v. Steele, 438.
Brander v. Brander, 617.
Brandon Iron Co. v. Gleason, 325.
Brant v. Ehlen, 524.
Brashear v. West, 598.
Brassey v. New York & N. E. R.R.
Co., 213, 224.
Brauser v. New England F. I. Co., 270,
Bray v, Farwell, 471.
Breitung v. Lindauer, 540.
Brewer v. Boston Theatre, 78, 79, 80,
81, 95, 100, 110, 538.
Brewster v. Hatch, 507.

v. Stratman, 583.
Bridenbecker v. Mason, 315.
Bridgeport v. N. Y. & N. H. R.R. Co.,

22

Briggs ” Cape Cod Ship Canal Co., 77,

98, 313, 331.
v. Penniman, 58, 298, 303, 330,

479.
Brigham v. Luddington, 162.
v. Mead, 543.
v. Tillinghast, 142.
Bright v. Hutton, 499.
v. Lord, 613.
v. North, 237.

TABLE OF CASES,

 

Bright’s Case, 499.
Brinckerhoff v. Board of Education,
N. Y:, 70, 103, 248.
v. Bostwick, 49, 54, 79, 80, 82,
86, 95, 99, 111, 188, I91,
258, 530, 534, 535.
ee v. Wellersburg Coal Co., 129,
488,
Brisbane .v, Dela., L. & W. R.R. Co.,

613.
Bristol v. Sanford, 88, 194.
Bristol Milling, etc. Co. v. Probasco,
129.
British Amer. Land Co. v. Ames, 51.
British S, R. Co., J# re, 563.
Broadway Bank v. McElrath, 547.
Brockway v. Allen, 494.
v. Innes, 602,
Bronson v. La Crosse & M. R.R. Co.,
103, 206, 315, 475.
v. Railroad Co., 105.
Brooke v. Widdicombe, 66.
Brooklyn S. T. Co. v, City of Brooklyn,
280, 336. .
Brooklyn, W. & N. Ry. Co., Matter of,
281, 336, 345.
Brooks v. Gibbons, 609.
v. Mexican Nat. Const. Co., 268.
v. Stone, 43.
Brotherhood’s Case, 571.
Broughton v, Pensacola, 321, 390.
Brouwer v. Appleby, 177.
v. Harbeck, 39, 137, 138, 599.
v. Hill, 171, 186.
Brown, Ex parte, 202, 221, 222.
Petition of, 617.
v. Abington Sav. Bank, 466.
v. Adams, 52.
v. Eastern Slate Co., 495.
v. Lunt, 34.
uv. Montgomery, 40.
. Union Ins. Co., 154.
Broyles v. McCoy, 402.

a

‘Bruce wv. Driggs, 488.

w. Platt, 298, Sor, 525.
Bruff v. Mali, 526, 529.
Bruffett v. Great Western R.R. Co.,
296, 332.
Brum v. Merchants’ Mut. Ins. Co.,
128, 369, 391.

Brundage v. Brundage, 613.

ae v. Receiver of Middle Dist. Bank,
OT,
Buchanan v. Alexander, 55.
. v. Comstock, 167.
v. Marsh, 43.
v. Meisser, 406.
v. Smith, 39, 597.
xiv
Buck v. Piedmont & A. L. I. Co., 142,

157.
Buell v. Buckingham, 9, 23, 136, 435-
Buffalo & A. R.R. Co. v. Cary, 33, 328,
404, 411, 427, 469.
Buffalo & J. R.R. Co. v. Clark, 515. .
Buffalo & N. Y. City, etc. R.R. Co. v.
Dudley, 515.
Buffalo, C. & N. Y. R.R. Co. uw. Pottle,

551.
Buffalo, N. Y. & E. R.R. Co. v. Lamp-

son, 53.
Buford v. Keokuk N. L. Packet Co.,
301, 306, 476.
Building Assoc. v, Anderson, 91.
Bulkley v. Big Muddy Iron Co., 94.
Bunker v. Shed, 466.
Bunnell v. Collinsville Sav. Soc., 531.
Burger v. Grand Rapids & I. R.R. Co.,
354, 379.
Burke v. Smith, 119, 474, 509, 557, 566.
Burlington Lumber Co. v. Whitebreast
C. & M. Co., 457.-
Burlington & M. R. R.R. Co. v. Boest-
ler, 551.
Burlington & M. R. R.R. Co. v. Thomp-
son, 269
Burnham v. Bowen, 231, 242.
Burns v. Multnomah R, Co., 421, 422.
Burr wv. Wilcox, 517, 518, 543, 544.
Burrall v. Bushwick R.R. Co., 117, 546.
Burrill v. Dollar Sav. Bank, 531.
uv. Nahant Bank, 432.
Burritt v. City of New Haven, 420,
Burton wv. Schildbach, 91.
Burton and the Saddlers’ Co., Zz re,
‘448, 449, 459.
Busey v. Hooper, 429.
Bush v. Cartwright, 58, 93, 495.
Bushel v, Commonwealth Ins. Co., 264.
Butchers’ & D. Bank v. McDonald, 32,

469.

Butler v. Rahm, 210.
v. Sprague, 603.
Butterfield v. Beardsley, 324.
Butterworth v. Gould, 614,
v. O’Brien, 190.

Button v, Hoffman, 308,
Butts wv. Wood, 54, 86, 507, 508, 534,

581, 582, 583, 589, 594.
Byers vw, Franklin Coal Co., 539, 540.

Cabot v. Given, 17.

Cady v. Potter, 105, 114,

Cagger wv, Howard, 215.

Cahill v. Kalamazoo Mut. Ins. Co., 309.
Caillard v. Caillard, 155,

Caldwell v. Bower, 602,

TABLE OF CASES.

 

The figures refer
to the pages.

California Steam Nav. Co. v. Wright,
108, 114.

Calkins v. Atkinson, 195.

Callanan v. Shaw, 167.

Callender v. Painesville & H. R.R. Co.,

375.
Crencke The, 48.
Cambrian Ry. Co.’s Scheme, /” re, 386.
Camden v. Doremus, 96, 417.
Camden & A. R.R., etc. Co. v. Remer,
423.
Cameron’s Coalbrook, etc. Ry. Co.,
In re, 581.
Cammack v. Johnson, 175.
Camp v. Barney, 197, 200.
Campbell v. ee & C. RR. Co.,
393.
uv. Miss. Union Bank, 283.
v. Railroad Co., 104.
v. Talbot, 343, 344.
uv. Texas & N. O. R.R. Co.,

105.
Canada Southern Ry. Co. vw. Gebhard,
24, 25, 357) 359, 386, 387, 422, 556.
Cannon v. Trask, 55.
Capper, Ex parte, 499.
Cardot v. Bamey, 199, 200.
Carew v,. White, 450.
Carey uv. Cincinnati & C. R.R. Co., 375.
uv. Giles, 44, 153, 160.
Carleton v. People, 34, 35, 429.
Carling’s Case, 121. .
Carlisle v. Saginaw Val. & St. L. R.R.

Co., 545.
v. South Eastern Ry. Co., 55.
Carmichael’s Case, 500.
Carolina Nat. Bank, Ex parte, 240.
Carpenter v. Catlin, 387, 389, 391.
v. Longan, 475.
uv. N. Y. & N. H. R.R. Co.,
528.
Carpenters’ Co. v. Hayward, 462.
Carr v. Houser, 183.
v. Le Fevre, 130, 440, 553.
Carrick’s Case, 499.
Carrol uv. Green, 488.
Carter, Jz re, 184.
uv. Howe Machine Co., 14.
Cartwright’s Case, 175, 183.
Carver v, Braintree Mfg. Co., 503.
Case v. Beauregard, 43.
v. Terrell, 324.
Casey vw. Société de Credit Mobilier,
172, 324.
Cass v, Manchester Iron, ete. Co., 348.
Cassel, Ex parte, 538.
Castellan v, Hobson, 512.

‘Castleman v, Holmes, 519.
The figures refer
to the pages,

Catlin v. Eagle Bank, 10, 44, 133, 141,
159, 598, 599. ;
Cayuga Lake R.R. Co. uv. Kyle, 33.
Cazeaux v. Mali, 529.
Central Bridge Co. v. Lowell, 48.
Central City Sav. Bank v. Walker, 292,
319, 398, 404.
Central Crosstown R.R. Co. v. Twenty-
third St. R.R. Co., 331, 344, 453.
Central Nat. Bank v. White, 451.
Central R.R. Co. w. Collins, 306,
Central R.R. & B. Co. v. Georgia, 365,
368, 381, 421, 430.
u. Papot, 613.
vu. Pettus, 84.
Central Ry. Co. v. Kisch, 526, 566, 567.
Central Trust Co. v. Wabash, St. L. &
P. Ry. Co., 1§0, 151, 163, 194, 221,
222, 226.
Central Turnpike Co. vw. Valentine,

471.
Central & G. Road Co, vw, People, 34-.

421,
Chafee v. Fourth Nat. Bank, 269.
Chaffe v, Ludeling, 410.
Chaffee v. Rutland R.R. Co., 610, 611,
613, 618.
Chaffin v. Cummings, 544.
Chamberlain v. Bradley, 433.
uv. Rochester S. P. V. Co., 173,
286, 289,
Chamberlin v. Huguenot Mfg. Co., 423,
496, 503.
Chandler v. Brown, 179, 511.
Chapman v. Douglas, 171.
Chappel v. Chappel, 315.
Chapple’s Case, 470.
Charboneau wv, Henni, 99.
Charitable Assoc. v. Baldwin, 35.
Charitable Corpn. v. Sutton, 54, 508,

537-

Charles River Bridge Co. v. Warren
Bridge Co., 28, 74, 379, 421.
canulign wv. Newcastle & C. Ry. Co.,

349.
Chartiers Ry. Co. vw. Hodgens, 558.
Chase vw. Lord, 488, 490, 502, 550.
v. Merrimack Bank, 103, 489.
v. Sycamore & C, R.R. Co., 463,

551.
v. Vanderbilt, 105, 366, 371.
Chautauque Co, Bank v. Risley, 17.
Cheeney wv. Lafayette, B. & M. Ry. Co.,

592.
Cheever v. Gilbert El. Ry. Co., 17, 138,

431.
uv. Rutland & B, R.R. Co.,
218,

TABLE OF CASES.

 

XV

Cheltenham & G. W. Un. Ry. Co, v.
Daniel, 544.

Cheney w. Fisk, 109.

Cheraw & S. R.R. Co. v. Commrs. of
Anson, 362.

Cherokee Iron Co. v. Jones, 349, 570.

Chesapeake & O. Canal Co. v. Balto.
& O. R.R. Co., 307.

ee & O. Ry. Co. v, Miller, 21,

381
Chesapeake & O. Ry. Co. wu Paine,

252.
Chesapeake & O. Ry. Co. v. Virginia,

381.
Chesley v. Pierce, 523. ‘
Chester Glass Co. v. Dewey, 544.
Chetlain v. Republic L. I. Co., 473.
Chew w. Ellingwood, 133, 135.
Chicago L. oe Co. v. Auditor, etc., 41,

479.
uv. Needles, 326.

Chicago, etc. R.R. Co. v. Howard,

104.

Chicago & N. W. Ry. Co. v. Borough
of Fort Howard, 253.

Chicago & V. R.R. Co, uv. Fosdick, 92,
222.

Chicago & W. I. R.R. Co. uv. Dunbar,
20.

Chicago & W. I. R.R. Co. uv. Lake
Shore & M. S. Ry. Co., 383.

Chicago, B. & Q. R.R. Co. v. Lewis,

127.
Chicago, R. I. & P. R.R. Co. vw. Moffitt,
_ 363, 369.
Chickerming Lodge, etc. v. McDonald,

423.
Chilton v. London & C. Ry. Co., 13.
Chincleclamouche L. & B. Co. v. Com-
monwealth, 340. '
Chouquette v. Barada, 430.
Chouteau v, Dean, 124.
Chouteau Ins. Co, v. Floyd, 302, 509,

503.

one Spring Co. v. Harris, 512,
561.

Christensen v, Eno, 117, 119, 127, 555.

Christian Union uv, Yount, 24, 50, 127,
263, 264, 273.

Chubb vw. Upton, 90, 120, 427, 560.

Cincinnati G. L. & C. Co. v. Avondale,
13.

Cincinnati, H. & D. R.R. Co, v. Har-
ter, 430.

Cincinnati, S. & C. R.R. Co. v. Sloan,
149, 202, 210, 222,

Citizen Mut. F. I. Co. v. Sortwell, 18.

Citizens’ Loan Assoc. v. Lyon, 53, 54.
Xvi

Citizens’ Nat. Bank v. Elliott, 592.

City Bank of Buffalo, Matter of, 609,

City Bank of Columbus vw. Bruce, 135.

City Bank of Macon v. Bartlett, 560,

City F. I. Co. uv. Carrugi, 264.

City Hotel Co. v. Dickinson, 59.

City Ins. Co. v. Commercial Bank, 266,
272, 316.

City Pottery Co. v. Yates, 165.

Claflin v., Beach, 162.

Clancey v. Onondaga F. S. Mfg. Co.,

309.
Clapp v. Peterson, 125.
Claremont Bridge Co. v. Royce, 273.
Clark v. Anderson, 538. ‘
v. Bininger, 175.
v. Chapman, 50, 56, 68,
v. Chelsea Academy, 294.
v. Edgar, 526.
v. San Francisco, 594.
Clarke, Hx parte, 499.
v. Imperial G. L., etc. Co., 432.
v. Thomas, 195.
Clarkson v, Clarkson, 610.
Clearwater v. Meredith, 347, 352, 353,
354, 355, 364, 365, 374, 554.
Clegg v. Edmonson, 590.
Clem y. Newcastle & D. R.R. Co., 552.
Cleveland v, Porter, 315.
Cleveland & M. R.R. Co. uv. Robbins,

613,
Clifford v. Taylor, 450.
Clinch v. Financial Co., 351.
Close v. Glenwood Cemetery, 130.
Clyde v. Rogers, 455.
Coats v. Donnell, 133, 139, 140, 141,
597, 598, 599.
Coburn v. Boston P, M. Mfg. Co., 296,
302.
Cochran v. Arnold, 33, 201, 425.
Cockburn v. Union Bank, 449, 453.
Cockerell v. Aucompte, 530.
Codd vw, Rathbone, 32.
Coe vw. Columbus, P. & I. R.R Co., 76,
247, 249, 253.
v. Knox County Bank, 247.
v. N. J. Midland Ry. Co., 202, 241.
v. Peacock, 247.
Coffey v, National Bank of State of Mo.,
389, 394.
Coffin v, Chicago N. P. Const. Co., 51.
v. Collins, 460, 462, 548.
v. Reynolds, 602,
_v. Rich, 503.
Coggin v, Central R.R. Co., 369.
Cogswell v. Bull, 60, 78, 110.
Cohen wv. N. Y. Mut. Life Ins, Co., 568.
v. Wilkinson, 55.

TABLE OF CASES.

 

The figures vefer
tothe pages.

Coit v. Gold Amalgamating Co., 124,
439, 524, 553-
v. North Car. G. A. Co., 121, 123,
524.
Coite v, Society for Savings, 531.
Colby wv. Copp, 140.
Cole v. Dyer, 329.
v. Joliet Opera House Co., 551.
v. Knickerbocker L. I. Co., 96,
128, 287, 313.
uv, Ryan, 512.
Coleman wv. Chester, 14,
v. Coleman, 402, 497.
uv, Columbia Oil Co., 125.
v. Second Ave. R.R. Co., 589.
v. White, 495.
Colgate v. Compagnie Francaise du
Telegraphe, 116, 456.
Colglazier v. Louisville, N. A. & C. Ry.
Co., 354, 379+. 2
Colles v. Trow City Directory Co., 54,

55, 528.

Collingwood v. Berkeley, 4or.

Collins v. Chicago, St. P. & F. du L,

R.R. Co., 382.
v. Hammock, 49.
uv. Maule, 462.

Colman ¥. Eastern Counties Ry. Co.,
62, 572.

Colton v. Ross, 115.

Golumian Book Co. v. De Golyer, 56,
148.

Columbian Ins. Co. v Stevens, 192.

Colvin, Jz ve, 172.

Combs v. Smith, 199.

Comfort v. Patterson, 123.

Commercial Bank v. Kortright, 465.

v. Lockwood’s Admr., 318.
v. State of Miss., 342.

Commercial Bank of India, Jn re,
291.

Sommer etal Bank of Natchez v. State,
2096.

Commrs. of Douglas Co, v. Bolles, 32,
425, 469.

Commrs. of Inland Fisheries v. Hol-
yoke W. P. Co., 335

Commrs. of Public Schools, etc, wv.
County Comrs., 68.

Commrs. of Tippecanoe Co. v. Lafay-
ette, M. & B. R.R. Co., 348.

ae of Tippecanoe Co. uv. Lucas,
2

Commonwealth v, Allegheny Bridge
Co., 74, 313, 328. :
v. Athearn, 484.
v. Bakeman, 418.
v. Commercial Bank, 338.
The figures refer
to the pages.

Commonwealth vz. Cullen, 308, 309.
uv. Dennison, 65.
v, Eagle F. I.Co., 175.
v. Erie & N. R.R. Co.

421.
v. Erie & P. R.R. Co,
610.
v. Fitchburg R.R. Co., 342.
v. Franklin Canal Co., 338,

340.
v. Franklin Ins. Co., 176.
uv. German Soc., 67.
uv. Mass. Mut. F. I. Co.,
600.
uv. Nashua & L. R.R. Co.,,

13.
v. New Bedford Bridge Co.,

13.

v. Pheenix Iron Co., 445,

446, 452, 458.

v. Pittsburg & C. R.R. Co.,
283, 332, 341, 470.

wv. Reliance F, I. Co., 295.

uv. Runk, 197, 199.

v. St. Patrick Ben. Soc.,
67.

v. Smith, 249.

uv. Tenth Mass. Turnp. Co.,

249, 331, 475.
v. Union F, & M. I. Co.,,

344.
uv. Vermont & Mass. R.R.
Co., 13.
v. Woelper, 463.
Company of Carpenters v, Hayward,
62

462.
Comyn v. Smith, 150.
Conant v. Van Schaick, 492.
Conklin yw. Furman, 492.
Conkling v. Butler, 175.
Conn. Mut. L. I, Co. wv. Schwenk,

463.
Conn. z P. R. R.R. Co, v, Bailey, 328,
543, 552, 558. ;
Conn. River Sav. Bank v, Fiske, 94.
Conner v. Abbott, 402.
Conro v. Port Henry Iron Co., 13, 23,
2, 135, 435.
Conrsecodl Val. R.R. Co. v. Barker,
471.
Contract Co., Ex parte, 101.
Conway, Ex parte, 133.
v. Halsey, 83.
Cook v. Citizens’ Nat. Bank, 202,
v. Detroit, G. H. & M. Ry. Co.,
360, 390, 475
uv. Detroit & M.
207. +
B

RR. Co., 155,

TABLE OF CASES.

 

xvii

Cook v. Town of Peacham, 66,
Cooke v. Town of Orange, 57, 180,

194.
Cookson v, Ellison, 456.
Coope v, Bowles, 186.
Cooper wv. Corbin, 363.
v, Curtis, 327.
v. Gordon, 55. /
uv. Lampeter Township, 436.
Coquard v. Marshall, 549.
Corbett v. Woodward, 583.
Corcoran v. Chesapeake & O. Canal
Co., 104, 105,

| Corning: v, Greene, 400.

v. McCullough, 58, 406, 490,
500, 501, 502, 503.
Corwin v. Urbana & C. M. I. Ca.,,

342.
Costa Rica v. Erlanger, 456.
Cotheal v, Brouwer, 445, 451.
Cottle, Ex parte, 499.
Coulter v. Murray, 64.
Courtright v. Deeds, 547.
Covert v. Rogers, 142,
Covey vu. Pittsburg, etc. R.R. Co,

253.

Covington Drawbridge Co. v. Shep-
herd, 247, 248, 420.

Covington & C. Bridge Co. v. Mayer,
274, 286, 379.

Covington & L. R.R. Co. v. Bowler,

584.
Cowdrey v. Galveston, H. & H. R. Co.,
199, 221,
v. Railroad Co., 184, 220.
Cowell v, Colorado Springs Co., 426.
v. Springs Co., 91, 127, 273, 425.
Cowles v. Cromwell, 522, 561.
Cox v. Hickman, 201. i
Coxe vw. Hart, 99.
Coy wv. Lyons City, 66.
Coyote G, & S. M. Co. v. Ruble, 613,
Craddocks v. Insurance Co., 260,
Cragin uv. Lovell, 266.
Craig v. Gregg, 79, 82,
Cram v. Bangor House Proprietary,
433-
Crane wv. Ford, 225.
Craw wv, Easterly, gor.
Crawford v. Collins, 410,
v. Longstreet, 18, 431.
uv. Rohrer, 561.
Crease v, Babcock, 283, 294, 333.
Credit Co. of L. vw Arkansas Cent:
R.R. Co., 207, 240, 241.
Crocker v. Whitney, 15.
Croft v. Lumpkin Chestatee Min. Co.,

305... :
XViii
Cross v, Burlington & S. W. Ry. Co.,
6

360.

v. Pinckneyville Mill Co., 33.
Créton Ins. Co., Matter of, 179.
Crowder wv. Moone, 149, 155.
Cubbedge v. Adams, 43.

Cuddon wv. Eastwick, 321.
Culbertson v. Wabash Nav. Co., 91.
Culver vw. Third Nat. Bank, 435, 495.
‘ Cumberland Coal Co. v. Hoffman Coal
Co., 267.
Cumberland Coal & Iron Co, uv. Sher-
man, 507, 580, 583.
Cummer wv. Judge of Kent, 455.
Cunningham z. Pell, 99, 268.
Curd wv, Wallace, 399.
Curien wv. Santini, 299.
Curran wv. Craig, 198.
v. State, 119, 121, 126, 317, 607,
612.
Currie’s Case, 122.
Currier v. Lebanon Slate Co., 125.
v.N. Y., W. S. & B. Ry. Co.,
80, 81, 110, 585, 586.
Curry v. Woodward, 182, 563, 575.
Curtis uv. Leavitt, 175, 178, 260, 482,
540.
Curtiss v. Murry, 48, 79.
oa v. Thayer Mfg. Jewelry Co.,
562.
Cutten v. Sanger, 39.
Cutting v. Damerel, 195, 516, 522, 549.
uv. Marlor, 479.
Cuykendall v. Corning, 260.

Dabney v. Bank of State of S. C., 39,
40, 89, 122, I4I.
Dale v. Grant, 79.

84.
Dana v. Bank of U. S., 133, 136, 599.
Danbury Cornet Band wv. Bean, 402.
Dane v. Dane Mfg. Co., 503.
uv. Young, 178.

Danforth v. Phila, & C.M.S.L. Ry.

Co., 206.
Daniell’s Case, 512,
Daniels v. St. Louis, K. G. & N. R,R.
Co., 363.
Dannmeyer v. Coleman, 71.
Darlington v, Mayor of N. Y., 70, 103,
248.
Dart v. Farmers’ Bank, 269.
Dartmouth College v. Woodward, 9,
28, 294, 327.
Davenport v. Dows, 62, 99, 278.
uv. Peoria M. & F. I. Co.,
248. :

TABLE OF CASES.

 

The figures refer
to the pages.

Davenport v. Receivers of Ala. & C,
R.R, Co., 219.

Davidson v. Rankin, 504.

Davies v. Cracraft, 175.

Davis, The, 71.

. Alvord, 602.

. Duncan, 199.

. Essex Bapt. Soc., 519.

. Flagstaff S. M. Co., 152, 328.

Gray, 105, 148, 221, 344.

. New York & N. E. R.R. Co.,

274.
v. Old Colony R.R. Co., 15.
v. Smith, 89.
wv. Stevens, 511.
v. Associates of Jersey Co.,

aeseeeg

Davison
82.
Davoue v. Fanning, 580.
Davy v. Garrett, IIT.
Day wv. Essex Co, Bank, 265. :
uv. New Orleans Pac. Ry. Co., 377.
uv. Postal Tel. Co., 148, 149, 163,
168, 194, 276.
v. Savadge, 283.
Dayton v. Borst, 88, 90, 190, 543.
Dayton & C. R.R. Co. v. Hatch, 551,

552.
Deaderick vw. Wilson, 445, 448, 455.
Dean wv. Biggs, 195.

u. La Motte Lead Co., 36.
Dean & Son’s Appeal, 320,
De Bemer v. Drew, 161, 276,

. Debevoise v. New York, L. E. & W.

R.R. Co., 275.

‘De Camp wv. Alward, 133, 296, 308.

v, Eveland, 333.

' Deerfield v. Nims, 99.

' De Graffenreid v. Brunswick & A. R.R.
Dalton & M. R.R. Co. v. McDaniel, |

Co., 197.

De Groot v. Jay, 110, 197.
Delany v. Mansfield, 148.
‘Delaware R.R. Tax, 362, 381.

Delaware & S. Canal Co. v. Sansom,
522.

Delaware, L. & W. R.R. Co. v, Erie
Ry. Co., 165, 207, 218,

Demain wv. Cassidy, 175.

Den v, Vreelandt, 431.

Denike v. N. Y. & R. Lime, etc. Co.,
39, 40, 152, 156, 281, 285, 299, 300,
309, 313.

Dennick v. Railroad Co., sor.

Denning v. Roome, 460, 461.

Dennis v. Kennedy, 402.

Denniston v, Chicago, A. & St. L. R.R.
Co., 601, 602.

Dent v. North Amer. S. S, Co., 435.

Denton v. Denton, 315.
The figures refer
to the pages.

Denton wv, Jackson, 26.
v. Macneil, 560.
Denver & R. G. Ry. Co. v. Harris, 14.
De Beysier v. American Fire Ins. Co.,
00.
De Riesthal v, Walton, 36.
Derr v. Lubey, 56.
Derrickson v. Smith, 492, 500.
De Ruvigne’s Case, 122.
De Ruyter v. Trustees of St. Peter’s
Church, 133, 134.
Des Moines Gas Co, v. West, 211.
Detroit v. Dean, 71, 110.
Detroit Schuetzen Bund wv. Detroit
Agitations Verein, 9, 27, 399.
Devendorf v. Beardsley, 172.
v. Dickinson, 192.
Devereaux v, City of Brownsville, 147,
321,
Devoe v. Ithaca & O. R.R. Co., 259.
Devon & S. Ry. Co., J re, 386.
Dewey wv. Garvey, 55.
De Winton v. Mayor, etc. of Brecon,
210.
De ve v. Hastings, 400, 418, 429,

468,
De Wolf v. Sprague Mfg. Co., 187.
Dey v. Mayor, etc. of Jersey City, 595.
Dias v. Merle, 450.
Dickenson v. Chamber of Commerce,

595-
v. Grand Junction Canal

Co., 55.
Diligent Fire Co. v. Commonwealth, 10,
Dill v. Wabash Valley R.R. Co., 469.
Dillingham v. Snow, 30, 424.
Dimmock wv. Bixby, 113.
Dimpfel v. Ohio & M.Ry. Co., 352,

, 354.

Diven v. Duncan, 519.

uv. Lee, 503, 519.
Dobson v. Simonton, 91, 316, 317.
Dodge v. Mastin, 40, 42. .

uv. Woolsey, 50, 62, 71, 78, 80,

83, 284, 538, 572.
Dodgson w. Scott, 523.
Doe d. Grimsby v. Ball, 191.
Donahue wv. Coleman, 42.
Donaldson wv. Miss. & Mo. R.R. Co., 13.
Donnelly v. West, 255.
Donohoe wv. Mariposa L. & M. Co., 50,
130,

Donovan wv. Mayor, etc. of N. Y., 15.
Dooley v. Cheshire Glass Co., 430, 441.
Doolittle, J ve, 197.
Dorris v. French, 473.

vu. Sweeney, 559.
Dortic v. Dugas, 43.

TABLE OF CASES.

 

x1x

Douglas County v. Bolles, 33.
Douglass uv. Cline, 231, 232.
v. Ireland, 124, 406, 439, 524,

553+

Dow v. Sayward, 494.

Dowling v. Pontypool, etc. Ry. Co., 55.

Downie v. White, 511. ;

Doyle v. Continental Ins. Co., 51, 274.

vu. Mizner, 427.

Drever v. Maudesley, 183.

Drew’s Case, 351.

Drinkwater v. Portland Marine Ry.
Co., 568.

Dronfield Silkstone Coal Co.,/ re,122,

Drury v. Cross, 119, 580,

Dryden wv, Kellogg, 568,

Dubois, Matter of, 286, 289.

Duckett v. Gover, 100.

Duke vw. Cahawba Nav. Co., 331, 418.

v. Fuller, 607.

Poe v.Corpn. of Chippenham, tor,
116.

Duncan wv. Jaudon, 438.

v. Jones, 400,

Duncomb v. N. Y., H. & N. R.R. Co.,
92, 508, 579, 580, 583, 586.

Dunklin County wv. District County
Court, 65.

Dunlop w. Paterson F. I. Co., 194.

Dunn, Ex parte, 172.

Dunning v. New Albany & S. R.R.
Co., 33.

Dunston v. Imperial G. L. & C. Co.,

594.
Dupee uv. Boston Water Power Co., 125.
Dupont v. Northern Pac. R.R. Co., 574.
Dutcher v. Importers’ & T, Nat. Bank,

44, 138, 599.
v. Marine Nat. Bank, 505.

Dutchess Cotton Manuf’y v. Davis,

425, 427, 543.
Dwight wv. St. John, 454.
Dyer v. Walker, 331.

Eagle Chair Co. uv. Kelsey, 291.

Eames v. Doris, 59, 495.

Earp v. Lloyd, 450.

Earp’s Appeal, 615.

Easterly v. Barber, 541.

Haslet Archipelago Co. v. The Queen,
328.

Eastern Counties Ry. Co. v. Broom, 13.

Eastern P. R. Co. v. Vaughan, 423.

East Lincoln v. Davenport, 375.

Easton v. Lehigh Water Co., 66.

East Rome Town Co. wv. Nagle, 572.

East penn: & Ga, R.R. Co. v. Evans,
302.
XX

Eaton v. Aspinwall, 32, 33, 427, 469.
Eaton & H. R.R. Co. v. Hunt, 379.
Eaton, C. & B, Co. v. Avery, 526, 527.
Ebbinghousen v. Worth Club, 399.
Eddy v. Baldwin, 39.

v. Co-operative Dress Assoc., 603.
Edgerly v. Emerson, 433, 594.
Educational Society v. Varney, 277.
Egerton v. Third Municipality of N.O.,

103, 248.
Ehle v, Chittenango Bank, 613.
‘Eichbaum v. Irons, 201.
Einstein v.,Rosenfeld, 166.
Elkins v. Camden & A. R.R. Co., 80,
573, 612.
Ellis vy. Boston, H. & E. R.R. Co., 147,
149, 163, 172, 215, 219, 378,
608.

vu. Little, 176.
v. Proprs. of Essex Merrimack
Bridge, 547.
E. M. Boynton S. & F. Co., Matter of,
160, 173, 289, 320.
Embree v. Hanna, 483.
v. Shideler, 182.
Emma Silver Min. Co. v. Grant, 77,
498, 588.
Empire Assurance Co., J re, 355, 357,

554.

Empire City Bank, Matter of, 102, 150,
151, 477, 516, 548, 549.

Empire Mfg. Co. uv. Stuart, 393.

Enfield Toll Bridge Co. v. Conn. River
Co., 299, 325, 344.

England v. Dearborn, 308.

‘Eppright v. Nickerson, 134.

Era Ins. Soc., Ju re, 351.

Erickson v. Nesmith, 488, 491, 5or.

Ericsson v. Brown, 602.

‘Erie Ry. Co. v. State, 270, 271, 274.

Erie & N. E. R.R. Co. uv. Casey, 283,

332, 333.
Ernest v. Nicholls, 62, 572.
Ervin v, Oregon Ry. & Nav. Co., 82,
267, 268.
Eslava uv. Ames Plow Co., 50, 91.
Esmond v. Bullard, 491.
Esparto Trading Co., Ju re, 474, 557.
Estell v. University of the South, 128,
Estes v. Wilcox, 97.
Eureka Co. wv. Bailey Co., 431.
‘Eureka Marble Co. v. Windsor Mfg.
Co., 79.
European L, A. Society, /# re, 297.
European & N. A. Ry. Co. v. Poor,
498, 507, 580, 581, 585.
‘Evangelical L. St. J.O. Home wv. Buf-
falo Hydraulic Assoc., 246, 247.

TABLE OF CASES.

 

The figures refer
to the pages.

Evans v, Brandon, 79.
uv. Coventry, 90, 154.
uv. Lee, 430.
v. Philadelphia Club, 67, 595.
v. Smallcombe, 480, 571.
Evanston v, Gunn, 462.
Evansville, I. & C, S. L. R.R. Co. uv.
* Posey, 552.
Evansville, I. & C. S. L. R.R. Co. wv.
Shearer, 551.
Evarts v. Killingworth Mfg. Co., 301,
302, 309.
Evelyn uv. Lewis, 198.
Evening Journal Assoc. v. McDermott,

13, 14.
Eyeeel v. Sheboygan, etc. R.R. Co.,

56.
Eversfield v. Mid-Sussex Ry. Co., 55.
Exchange Banking Co., Jz re, 612.
Exeter & C. Ry. Co. uv. Buller, 53.
Exmouth Docks Co., Jz re, 291.
Express Co. v. Railroad Co., 207.

Factage Parisien, Ju re, 304.

Factors’ & T. Ins. Co. v. Marine Dry
Dock, etc. Co., 23, 136, 435, 437-

Fairbairn vw. Fisher, 167.

Fairchild v. Masonic Hall Assoc., 11.

Fairfield Co. Turnp. Co. vw. Thorp,
550.

Falconer v, Campbell, 27.

Fallon v, Railroad Co., 206.

Fall River Iron Works Co. vw. Old
Colony & F. R. R.R. Co., 329.
Fall ner Union Bank wv, Sturtevant,

430.
Fanning v. Osborne, 29.
Farley v, St. Paul, M. & M. Ry. Co.,

185.
Farmers’ L, & T. Co. v. Chicago & A.
Ry. Co., 159.
vu. Clowes, 17.
-v, Curtis, 17.
uv. Hendrickson, 254.
eam & M. Bank wv. Downey, 585,
586.
Farmers’ & M. Ins. Co. uv. Needles, 162.
ae & M. Nat. Bank wv. Dearing,
26.
ase ois v. Dela. & H. Canal Co., 74,
328.
Farnsworth v. Wood, 88, 193, 260,

497.
Farnum v. Blackstone Canal Co., 379.
Farrow v. Bivings, 506.
Faurie uv. Millaudon, 60.
Fay uv. Noble, 408, grr.

‘| Faymonville v, McCollough, 492.
The Tyres refer
to the pages.

Featherstone v, Cooke, 154, 159.

Fee v. New Orleans G. L. Co., 367.
Feeny v. People’s F. I. Co., 19, 108.
Fellows v. Commercial & R.R. Bank,

143.
Fenton v. Hughes, ror, 116, 456.
Ferguson v. Spear, 140, 597.
vu. Wilson, 581.
Ferrin v. Myrick, 200,
Ferris uv. Strong, 100.
v. Thaw, 530.
Ferry v. Bank of Central N. Y., 39, 40,
202.
Fertilizing Co. v. Hyde Park, 251.
Fidelity, The, 70, 103, 248.
Field v. Chapman, 44.
wu. Jones, 56.
v. Pierce, 546.
v. Ripley, 155.
Fifty-four First Mortgage Bonds, Jz re,
221,
Fine v. Hornsby, 547.
Firemen’s Ins. Co. v. Mayor, etc. of
Balto., 66, 67.
First Bapt. Church v. Schenectady & T.
R.R. Co., 13.
v. Witherell, 147.
First Nat. Bank v. Almy, 409, 498.
v. Christopher, 437.
v. Ocean Nat. Bank, 435,
538.
vu. Price, 500.
Fischer v. Raab, 321, 322.
Fiser v. Miss. & T. R.R. Co., 568.
Fisher v. Andrews, 95, 148, 149, 168,

IgI.
v. Board of Trade, 55.
'% Bush, 414.
,v. Concord R.R. Co., 211.
‘yw, Essex Bank, 548,
v. Keane, 55.
wv. Seligman, 517.
Fisk v. Chicago, R. I. & P. R.R. Co.,
55, 268, 302.

v. Union Pac, R.R. Co., 314, 318.
Fithian vw. N. Y. & Erie R.R. Co., 270,
Flagg v. Swift, 399.

Flash v, Conn, 406, 492, 500, 501.
Fletcher v. Peck, 294.

Flewellen v. Crane, 111.

Flinn v. Bagley, 120, 122.

Flint vw. Clinton Co., 133, 430, 432.
Flint & F. P. R. Co. v. Woodhull, 283,

332.

Fliteroft’s Case, 612.

Floyd Acceptances, The, 436.

Folger v. Columbian Ins. Co., 74, 281,
284, 318, 327.

TABLE OF CASES.

 

Follansbe wv. Kilbreth, 590.
Folsom v. Evans, 145.
Foote v. Cunard Min. Co., 71.
Forbes v. Whitlock, 79, 82.
Forrester v. Moore, 140, 597.
Fosdick vw. Schall, 148, 210, 220, 231,
241, 242.
Foss v. Harbottle, 80, 83, 538, 59I.
Foster v. Essex Bank, 317, 318.
uv. Ohio-Col. R. & M. Co., 22,
136, 435.
vu, Potter, 252.
vu. Shaw, 431.
v. Townshend, 255.
Fountain Ferry T. R. Co. v. Jewell, 284,

572.

Fourth Nat. Bank vw. Francklyn, 488,

496.

Foushee wv. Grigsby, 602.
Fowler v. Ludwig, 548.
Fowler’s Petition, 198.
Fox wv. Clifton, 398, 4or.

v. Horah, 318. ;
Francklyn v, Sprague, 389, 402, 603. |,
Frank v. Morrison, 190, 195.

Franklin Bank, Matter of, 601,
Franklin Glass Co. v. White, 575.
Franklin Tel. Co,, Matter of, 311.
Frazer v. Thatcher, 141, 597.
Fredendall v. Taylor, 530.
Fredericton v. The Queen, 422.
Freeholders of Middlesex Co. v. State
* Bank of N. B., 95, 150, 170, 186,

603.

Freeland v. Penna. Cent. Ins. Co., 36.
Freeman v, Winchester, 187, 192.
Freeman’s Bank v, Ruckman, 263. *
Fremont wv. Stone, 587.
French v, First Nat. Bank, ror, 116.
v. Gifford, 152, 155, 156.
French Bank Case, 149, 152, 284.
Hreach Manuf. Co., Matter of, 173,

289.

Fricker v. Peters & C. Co., 155, 156.
Fripp v. Chard Ry. Co., 150, 207.
Frost v. Walker, 403, 434, 494.
Frothingham v. Barney, 319, 320, 324,

554.
uv. Broadway & Seventh Ave.

R.R. Co., 459, 573, 574.
Fuller v. Ledden, 406,

v. Rowe, 38, 402, 405, 497.
Fulton Bank vw. N. Y. & S. Canal Co.,

437-
Fusz v. Spaunhorst, 60, 128, 489.

Gadsden vw. Woodward, 116.
Gaff uv. Flesher, 129, 195, 510, 511.
XXil

Gaines v. Chew, 113.

Galster v. Syracuse Sav. Bank, 175.

Galveston R.R. v. Cowdrey, 216.

Galwey v. U. S. Steam S. R. Co., 152,
285,

Gamewell F. A. Tel. Co. vw. Mayor,
etc., 72, 116,

Gardiner v. Pollard, 82, 106, 581.

Gardner, Matter of, 67.

v. London C. & D. Ry. Co.,
206, 209.
v. Ogden, 583.

Garnett v. Richardson, 403.

Garrett v. Dillsburg & M. R.R. Co.,
551.

Garrison v. Howe, 102, 479, 491, 495.

Garver uv. Kent, 187.

Gaskell v. Chambers, 506,

Gaskill v, Dudley, 490.

Gas Light & B. Co. v. Haynes, 195.

Gates v. Boston & N.Y. A. L. R.R.
Co., 357, 359, 387, 392, 556.

Gaul v. Brown, 540.

Gaylord v. Fort Wayne, M. & C. R.R.
Co., 131, 336.

Gelston v. Hoyt, 18.

Gent v. Manufacturers’ & M. Mut. Ins.
Co., 77, 498.

Georgia Ice Co. v. Porter, 32.

Gerard wv. Penswick, 450.

Gere v. Dibble, 172, 177.

Gerhard vw, Bates, 498.

German Min. Co., Jz re, 534, 582.

Germantown Pass. Ry. Co. uv. Fitler,
119, 144, 310, 563.

Gery v, Hopkins, 463.

Gibbes v. Greenville & C. R.R. Co.,
221.

Gibbons wv, Mahon, 613.

Gibbs v. Drew, 22.

v. Queen Ins. Co., 24, 270.
Gibert vy, Washington City, Va. M. &
G. S. R.R. Co.,. 219, 231, 373.

Gibson uv. Goldthwaite, 133.
vu. Jeyes, 507.
Giddings uv. Sears, 597.
Gifford v. Thompson, 615.
Gilbert v. Lewis, 111.
Gilbert Elevated Ry. Co., Z# ve, 206.
Gilfillan v. Union Canal Co., 576.
Gill uv. Balis, 190, 509.
Gillet v. Fairchild, 95, 109, 171, 186.
v. Moody, 41, 89, 90, 177, 178,

Ps, 90.
Gillett v. Campbell, 18.
v. Peppercorne, 508.
Gillette v. Bate, 554.

TABLE OF CASES.

 

The figures refer
to the pages.

Gilman w. Bassett, 66, 67.
v. Contra Costa Co., 248.
v. Greenpoint Sugar Co,, 152,

285.
v. Sheboygan & F. du L.R.R.

Co., 360, 361, 391.

Gilman, C. & S, R.R. Co. v. Kelly,
85, 586.

Gindrat v. Dane, 90.
Ginther v. Richmond, 133.
Girard v. Philadelphia, 36.
Glamorganshire Banking Co., Jz re,

453, 460. ;
Glasscott v. Copper Miners’ Co., Io1,

450.

Glen Iron Works, Jz re, 39, 120, 253.
Glenn vw. Clabaugh, 25.

v. Dorsheimer, 576,

v. Howard, 469.

v. Williams, 182, 561, 563, 575.
Glenville Woolen Co. v. Ripley, 482.
Godbold wv. Branch Bank at M., 532,

592.

Goddard w, Smithett, 64, 74.

Gold v. Housatonic R.R. Co., 269.

Goldsmith v. Swift, 615.

Gooch vw. McGee, 246.

Good w. Sherman, 315.

eo Cincinnati & W. Canal Co.,
126,

| Goodman w. Kine, 212.

Goodrich v. Reynolds, 511.
Goodspeed v. East Haddam Bank, 13,

14.
Goodwin wv. Hardy, 615.
v. U. - Annuity & L. I. Co.,

400,
Gorham wv. Guardian Say. Bank, 536.
Gorton Steamer Co. v. Spofford, 108.
Gott v. Adams, 423.
Gould v. Langdon, 362.
Goulding v. Clark, 282.
Goundie v7, Northampton Water Co.,
127.
Gowers’ Case, 556.
Graff v. Pittsburgh & S. R.R. Co., 462,
463, 510, 558.
Graham v, Boston, H. & E. R.R. Co.,
25, 274, 286, 379.
v. Railroad Co., 88, 126, 131.
v. Stark, 40,
Grand Rapids Sav. Bank v, Warren,

493.
Grangers’ Ins. Co, v, Turner, 573.
Grant v. City of Davenport, 148.
uv a Clay Coal 'Co., 460,
2

462.
Gravenstine’s Appeal, 99, 154.
The figures refer
to on iii

Gray v. ehaply, 169.
v, Coffin, 502, 503, 506.
vu. Lewis, 83, 591.
Great Eastern Ry. Co. v. Turner, 10,
Great Luxembourg Ry. Co. v. Magnay,
506, 507, 580, 585,
Great Western Ry. Co. v. Rushout, 26,
422, 570.
Greaves v. Gouge, 50, 54, 78, 79, 80,
99, 278, 538.
Greely v. Smith, 291, 316, 317.
Green v. Beckman, 488
v. Creighton, 72,
v. London Gen’l Omnibus Co.,

14.
vu. St. Albans Trust Co., 329.
v. Walkill Nat, Bank, ror, 323.
v. Winter, 189.
Green County uv. Conness, 360, 361, 368.
Greenlaw v. King, 507.
Greenwood v. Freight Co., 293, 294,
295, 317, 334.
Gregg v. Mass. Med. Soc., 55.
Gregory v. Brooks, 17.
v. German Bank, gor, 540.
uv. Gregory, 159.
v. New York, L. E. & W.R.R.
Co., 266, 267, 5
v. Patchett, 99.
Grew v. Breed, 256.
Gridley v. Lafayette, B. & M. Ry. Co.,

594.

Griffith v, Mangam, 84, 86, 102.

Griswold v. Seligman, 516, 543.

Grocers’ Nat. Bank v, Clark, 389, 394.

Grose wv. Hilt, 503.

Grosse Isle Hotel Co. vw. L’Anson’s
Exrs., 550, 563.

Gue v. Tide Water Canal Co., 248, 249,
250.

Guernsey vw. Cook, 588.

Gurney v, Atlantic & G. W. Ry. Co.,
602.

Gwin wv. Selby, 44.

Haas v. Fenlon, 588.

Hackley v. Draper, 63, 198.

Hafer v. N. Y., L. E. & W. R.R. Co.,
414.

Hagar v. Union Nat. Bank, 479, 611,

615.
Hager v. Cleveland, 462, 463, 464.
; uv. Stevens, 166, 169, 266.
Hager’s Town T. P. R. Co. uv. Creeger,
30, 424, 429.
Hale wv. Frost, 220.
v. Republican River Bridge Co.,
613.

TABLE OF CASES,

 

XXxiii

Hale vw. Walker, 516, 549.
Hall v. Selectmen of Somersworth, 66.
v. Siegel, 492, 530.
uv, Smith, 197.
v. Sullivan R.R. Co., 250.
vu. U.S. Ins. Co., 522, 565.
uv. Vermont & Mass. R.R. Co., 77,
498, 594.
Hall’s Case, 474, 499, 557-
Halleck v. Boylston, 462.
Hallett v, Harrower, 32.
Halsey v. Ackerman, 107, 534.
wv. McLean, 501.
Hamilton v. Grangers’ L. H. Ins. Co.,
473, 567.
Hamilton Mut. Ins. Co. v. Hobart, 355,

357-
Hamilton & D. P. R. Co. vw. Rice, 462:
Hammock v. Loan & Trust Co., 212.
Hammond wv, Hudson River Iron, etc.

Co., 57.
v. Port Royal & A. Ry. Co.,
360, 361.
Hancock vw. Holbrook, 299.
Hand v. Dexter, 157, 165, 208, 555.
Handy v. Dobbin, 245.
-v. Draper, 492, 495, 568.
Hanger uv, Abbott, 568.
Hanna v. Cincinnati & F. W. R.R. Co.,

375+
v. International Petroleum Co.,
418,
Hannon v. Williams, 531.
Hanover Junction & S. R.R. Co. wv.
Haldeman, 551.
Hanson v. Donkersley, 491, 493.
Hardesty v. Kenworthy, 41.
Hardon v. Newton, 115, 284, 302, 312.
Hardy vw. Chesapeake Bank, 89.
Hare v. London & N. W. Ry. Co., 106,

114.
Harger v. McCullough, 490, 493.
Harker v. Mayor, etc. of N. Y., 441.
Harman v. Forster, 184.
uv. Tappenden, 532.
Harmon v. Page, 576.
Harpending v. Munson, 476, 477.
Harrell v. Kent, 187. :
Harris v. First Parish in Dorchester, 58,
uv. McGregor, 403.
v. Miss. Valley & S. I. R.R.
Co., 109, 309, 327, 336,
337, 342.
uv. Nesbit, 302.
v. Somerset & K. R.R. Co., 50,
56, 68.
v. Thompson, 137, 273, 599.
Harrison v. Boydell, 184.
XXIV

Harrison v. Vines, 546.
v. Williams, 448, 449.

Harrod vw. Hamer, 504.

Harshman wv. Bates County, 374.

Hart v. Boston, H. & E. R.R. Co., 285,
286, 470.

Hartford & N.H. R.R. Co. v. Boorman,
522, 561.

Hartford & N.H.R.R. Co. v. Croswell,
515, 543, 559, 570, 572.

Hartford & N. H. R.R. Co. uv. Kennedy,

543.
Hartman v. Greenhow, 68.
Harwood v. Railroad Co., 590.
Hastie’s Case, 469.
Hastings v. Amherst & B. R.R. Co., 74.
wv. Drew, 119, 121, 612,
Hatch v. C.ty Bank of N. O., 445, 448,

449.
v. Coddington, 210,
uv. Dana, 84, 86, 87, 102, 119,
120, 143, 561.
Hatcher v. Toledo, W. & W. R.R. Co.,

353-
Hatheway v. Amer. Min. Stock Exch.,
400.
Havemeyer v, Havemeyer, 587.
Haven v. Adams, 431.
v. Grand Junction, etc. R.R.
Co., 130.
v. N.H. Asylum for Insane, 441.
Hawes v. Anglo-Saxon Petroleum Co.,
419, 423, 498, 544.
v. Oakland, 36, 71, 81, 83, 569,

574.
Hawkes v. Inhab. of Kennebeck Co.,
103, 489.
Hawley v. Brumagim, 547.
v. Upton, 120.

Haxtun vw, Bishop, 133, 134.
Hayes wv. Brotzman, 188, 190, 438.

v. Kenyon, 191.
Haynes v. Brown, 461, 462, 463.
Hays vw. Galion G. L. & C. Co., 76.

v. Northwestern Bank of Va.,

420,

_v. Pittsburgh & S. R.R. Co., 563.
Haywood v. Lincoln Lumber Co., 583.
Hazard v. Durant, 80, 95, 110, 162,

510, 591.

Heard v. Talbot, 327.
Heaston v, Cincinnati & Ft. W. R.R.

Co., 48, 49, 426.

Heath v, Barmore, 174, 293, 319.
v. Erie Ry. Co., 78, 80, 87, 99,
IIo.
Heathcote v. North Staffordshire Ry.
Co., 26.

TABLE OF CASES.

 

The figures refer
to the pages.

Hedges wv. Paquett, 152.
Helme v. Littlejohn, 187, 188, 438, 439.
Heman wv. Britton, 612.
Hendee v. Pinkerton, 210.
Henn vw, Walsh, 167. :
Henriques v, Dutch West India Co.,
gI, 265.
Henry v. Kaufman, 175.
v. Northern Bank of Ala., 436.
v. Stuart, 277. ~
v. Vermillion, etc. R.R. Co., 84.
Herrick v. Borst, 39, 41.
v. Minneapolis & St. L. Ry.

Co., 275.
Herring v. N. Y., L. E. & W. R.R. Co.,
74, 105, 172, 320.
Herron vw. Vance, 187.
Hersey uv. Veazie, 62, 83, 99.
Hess vw. Werts, 402.
Hester v. Memphis & C.R.R. Co., §15.
Hetherington v. Hayden, 247.
Hetzel v. Tannehill S. M. Co., 316.
Hibernia Ins. Co. wv. St. Louis & N. O.
Tr. Co., 128, 369.
Hibernia Nat. Bank v. Lacombe, 263.
Hichens v. Congreve, 87, 585.
Hickling v. Wilson, 86,
Hicks v. Hinde, 494.
Hide vw. Holmes, 451.
Higg’s Case, 351.
Higgins, /z re, 197.
Highland Turnpike Co. v. McKean,
461, 463.
Hight, Lx parte, 499.
Hightower v. Mustian, 129, 140.
v. Thornton, 95, 318.
Hill v. Beach, 402, 408.
v. Boston, 489.
v. Fogg, 302.
v. Great Western Ry. Co., 448,
449, 450.
uv. Reed, 133.
v. Supervisors of Livingston Co.,
103.
Hill’s Case, 402.
Hiller v. Burlington & M. R. R.R. Co.,
50, 68, 69.
Hilliard v. Goold, 17, 18.
Hills vw. Parker, 196.
Hillyer v, Overman Silver Min. Co., 594.
Hinckley wv. Gilman, C. & S. R.R. Co.,
204.
v. Railroad Co., 183.
Hinds uv. Canandaigua & N. F. R.R.
Co., 57.
Hirschel, Ex parte, 499.
Hoag v. Lamont, 18, 19, 431, 436.
Hoagland wv. Bell, 548.
The Jigures refer
to the pages.

Hoard v. Wilcox, 493.
Hoboken Bldg. Assoc. v. Martin, 301,

309.
Hodge w, First Nat. Bank, 436.
Hodges v. New England Screw Co.,
78, 284, 527, 532, 536,
537+ 592.
v. Silver Hill Min. Co., 96, 97.
Hodgkinson v. National L. S. Ins, Co.,

510.
Hodgson v. Earl of Powis, 55.
Hoey v. Henderson, 558.
Hoffman v. First Nat. Bank, 183.
Hoffman S. C. Co. v. Cumberland C.
& I. Co., 480, 580, 583.
Holbird vw. Anderson, 597.
Holbrook v. N. J. Zine Co., 517.
v. St. Paul F. & M. Ins. Co.,
402, 411.
Holcomb’s Ex’rs v. New Hope Del.
Bridge Co., 139.
Holcombe v. Johnson, 184.
Holden v. Hoyt, 462.
uv. N. Y. & Erie Bank, 437.
Holder v, Lafayette, B. & M. Ry. Co.,
592, 594.
Holladay wv. Frisbie, 248.
v. Patterson, 205.
Holland v. Heyman, 44, 130, 174.
Hollenbeck vw. Donnell, 225.
Hollingshead v. Woodward, 260, 261,

309.
Holmes wz. Gilliland, 49.
v, Holmes, etc. Mfg. Co., 36,
48, 126.
. McDowell, 156.
. Nuncaster, 247.
. Remsen, 483.
. Sherwood, 561.
Holsman v. Boiling Spring B. Co., 55.
Holt v. Blake, 494.
Holyoke Bank v, Burnham, 512, 516,

8

eee

549.
Home of the Friendless v. Rouse, 421.
Hoole v. Great Western, etc. Ry. Co.,

4.

Hooper wv. Rossiter, 617.

uv. Winston, 147, 148, 184.
Hoover v. Montclair & G. L. Ry. Co.,

214, 226, 231, 237, 241.

Hope Mut. L. I. Co. vw, Taylor, 162.
Hopkins v, Gallatin Turnpike Co., 133.

uv. Mehaffy, 494.

uv. Roseclare Lead Co., 308.

wv, Taylor, 177.

v. Worcester & B. Canal Co.,

210,
Hopkins & Johnsvn’s Appeal, 600, 601.

TABLE OF CASES.

 

XXV

Hoppin wv. Buffum, 548.

Hornaday wv. Ind. & Ill. Cent. Ry. Co.,
473.

Horner v. Coffey, 103.

Housatonic Bank vw. Martin, 438.

Houston v. Jefferson College, 299.

Houston & G. N. R.R. Co. wv. Kuech-
ler, 66.

Houston & T.C. R.R. Co. v, Shirley,

371.
Howard v. Milwaukee & St. P. Ry.
Co., 105.
Howheach Coal Co. v. Teague, 563.
Howe wv. Deuel, 55, 152, 284, 285, 313.
uv, Jones, 155.
v. Robinson, 317, 318.
v. Starkweather, 252.
Howell v. Chicago & N. W. Ry. Co.,
161, 267.
v. Ripley, 215.
uv. Ruggles, 418, 441.
Hoyle v. Plattsburgh & M. R.R. Co.,
205, 253, 254, 507, 580.
Hoyt v. Comrs. of Taxes, 483.
v. Thompson, 170, 186, 189, 190,
194, 271, 432.
Hubbard v. Hubbard, 43.
Hubbell v. Meigs, 463, 575.
Huddersfield Canal Co. wv Buckley,
522.
Hudson v. Carman, 460, 462.
Hugh wv. McRae, 158.
Hughes v. Antietam Mfg. Co., 423,
474, 560.
v. Bank of Somerset, 328.
v. Parker, 596.
v. Thorpe, 400.
v. Vermont-C, M. Co., 612.
ae Nat. Bank v. Studwell, 309,
526.

| Hull v. Burtis, 495.

Humane Fire Co.’s Appeal, 124.
Humbert v. Trinity Church, 127, 442,
Humphrey v. Peques, 381.
Humphreys v. Allen, 241.
uv. Mooney, 401, 404.
Hun wv. Cary, 89, 100, 531, 532, 533,
534, 535, 538, 582.
Hungerford Nat. Bank v. Van Nos-
trand, 114.
Hunt vw, City of San Francisco, 51, 107.
v. Columbian Ins. Co., 162, 163.
uv. Kansas & M. Bridge Co., 472.
Hunter v. Chandler, 484.
Huntington v. Savings Bank, 531.
Hurd v, City of Elizabeth, 163.
v. Farmers’ L. & T. Co., 614.
Hurlbut wv. Carter, 133, 144.
XXVi

Hurt v. Salisbury, 402, 404, 497.
Hutchins v. Byrnes, 431.
v. New Eng. Coal Min. Co.,

575-

Hutchinson wv, Lord, 142.
Hutton v. Thompson, 499.
Huylar v. Cragin Cattle Co., 446.
Hyatt v. McMahon, 108,
Hyde v. Doe, 393.

vu. Lynde, 177.

uv. Wabash, St. L. & P. Ry. Co.,

275.
Hyde Park Gas Co. vw. Kerber, 169.

Iglehart v. Bierce, 188,

Illinois T. & S. Bank w. First Nat.
Bank, 183.

Illinois T. & S. Bank v. Smith, 603.

Imperial M. C. Assoc. v, Coleman,
581, 586.

Importing & Exp. Co. of Ga. v. Locke,
263, 272, 281, 285, 327, 608.

Improvement Co. vw. Slack, 205.

Indianapolis Rolling Mill v. St. Louis,
F.S. & W. R.R. Co, 579.

Indianapolis, C. & L. F. R.R. Co., J
re, 222.

Indianapolis, C. & L. F. R.R. Co. wv.
Jones, 362, 368,

Indianola R.R. Co. v. Fryer, 308, 362,
363, 370.

Ingersoll v. Cooper, 187.

Inhabitants of Orono v. Wedgewood,
114, 426.

Innes v, Lansing, 122.

Insurance Oil Tank Co. v. Scott, 36, 126.

Iowa Lumber Co. v. Foster, 125.

Irons v. Manufacturers’ Nat. Bank, 53,
89, 140, 153, 160, 167, 323.

Irvin v. Oregon Steam Nav. Co., 298.

v. Turnpike Co., 515.

Irvine v. McKeon, 492, 501.

Irving v. Houstoun, 617.

Irwin v. Bidwell, 200.

Isham v. Buckingham, 561.

Jackson v. Campbell, 432.
uv. Leggett, 423.
v, Pratt, 431.
Jackson’s Admrs, v. Newark P. R. Co.,
609, 611, 613.
Jackson M. I. Co., Zz ve, 303, 338.
Jacobs v. Hogan, go.

v. Remsen, 140, 597, 599.
Jacobson v. Allen, 88, 193, 495, 497.
Jacobus v. Munn, 586.

James v. Pontiac & G, P. R. Co., 248,
252.

TABLE OF CASES.

 

The Ae refer
to the pages.

James v. Woodruff, 319.
Jameson v. People, 31, 424, 426.
Jay uv. De Groot, 202,
Jenks v. Dyer, 603.
Jermain v. Lake Shore & M. S. Ry.
Co., 613, 615.
Jerome v. McCarter, 212, 219, 237, 238.
Jessup v. Carnegie, 58, 114, 406, 424.
Jesup v. City Bank of Racine, 76.
Jewell v. Rock River Paper Co., 558.
Jewett v. Lawrenceburgh & U. M.R.R.
Co., 551.
v. Miller, 183.
Johns z. Johns, 252.
Johnson v. Hersey, 56.
v. Laflin, 511, 512, 561.
uv. Underhill, 512.
Johnston wv, Elizabeth Bldg. & Loan
Assoc., 331.
Joint Stock Discount Co. v. Brown, 508,
539.
Jones v. Arkansas Mech. & Agr. Co.,
128, 580.
Boston Mill Co., 256,
. Davis, 546.
Keen, 184.
Morrison, 613.
. Scudder, 587.
Sisson, 575.
. Terre Haute & R. R.R. Co.,
509, 609, 611, 613.
v. Trustees of Florence Wesley-
an Univ., 463.
Jordan wv, Ala, G. S. R.R. Co., 13.
v. Osgood, 466.
uv. Wells, 197, 199.
uv. White, 141.
Judah vw. Amer. L. S. Ins, Co., 33, 563.
ques v. Rossie Galena Co., 258, 506,
109.

gs

ggge8

Kain v. Smith, 148, 150, 174, 199, 200.
Kaiser v. Lawrence Sav. Bank, 402,
404, 405.
Kanawha Coal Co. v. Kanawha & O.
Coal Co., 344, 426.
Kane v. Bloodgood, 611.
v. City of Fond du Lac, 49.
Kansas & E. R.R., etc. Co. v, Topeka,
S. & W.R.R. Co., 266.
Kansas City Hotel Co. wv. Sauer, 296,
302, 309, 316.
Karnes wv. Rochester & G. V. R.R.
Co., 614.
Katama Land Co. wv. Jernegan, y
Kean v. Colt, 169. J ee
v, Johnson, 37, 62, 299, 301, 306,
348, 349, 356, 554,572. -
The igure vefeyr
to the pages.

Keen v. Breckenridge, 110, 197.
Keene uv. Gaehle, 184.
Keeney v. Home Ins. Co., 148, 172, 225.
Keep wv. Mich. L. S, R.R. Co., 98, 210,
2ul.
v. Sanderson, 142.
Keighler v. Ward, 256.
Kelley v. Newburyport & A. H. R.R.
Co., 580.
Kelly v. Crapo, 483.
v, Hutton, 181.
v. Mariposa Land & M. Co., 128,

379.
v. Trustees of Ala. & C. R.R.
Co., 206. ‘
Kelner v, Baxter, 400, 498.
Kelsey vw. Pfaudler P. F. Co., 458.
u, Sargent, 95, 110, 191, 593.
Kenicott v. Supervisors, 475.
Kennebec & P. R.R. Co. v, Palmer,
515, 543.
Kennedy wv. Gibson, 187, 188, 310, 323.
v, Indianapolis, C. & L. R.R.
Co., 110, 197, 199, 200.
v. St. Paul & P. R.R.Co., 207,
i 212, 218, 238.
Kenosha, R. & R. I. R.R. Co.v. Marsh,
514, 515.
Kent v. Jackson, 49.
v. Quicksilver Min. Co., 17, 480,
481, 482, 546, 571.
Keokuk vw. Merriam, 65, 67.
Keokuk N. L. P. Co. v. Davidson, 168,
201.
Kerchner v. Gettys, 24, 50.
Kernochen, Matter of, 618.
Kerr v. Trego, 65.
Kerrison v. Stewart, 104, 105.
Ketcham v. Madison, I. & P. R.R. Co.,
373» 377-
Ketchum v. Duncan, 395.
Key City, The, 372, 373.
Killmer v. Hobart, 194.
Kilpatrick v. Penrose Ferry Bridge Co.,

_ 593, 594.
Kimball v. Goodburn, 159, 166.
uv, Ives, 86, 171.

Kimber v. Barber, 508,

Kincaid v. Dwinelle, 174, 216, 260, 261,
296, 298, 299, 300, 308, 309, 310,
327, 331, 496, 568.

King v. Ohio & M. Ry. Co., 198.

v. Paterson & H. R. R.R. Co.,
479, 611.
v. Randlett, 35, 36.

King, The. See Rex.

Kingman vw. Rome, W. & O. R.R. Co.,
574.

TABLE OF CASES.

 

xxvii

Kings County Elevated Ry. Co., /# re,
206,

Kingsland v. Braisted, 402.
Kingsley wv. First Nat. Bank, 137.
Kinney uv. Crocker, 197, 199.
Kip v. N. Y. & Harlem R.R. Co., 370.
Kirk wv. Bell, 563.
Kirkland v. Aiken, 116.
Kisterbock’s Appeal, 615.
Kitchen v. Cape Girardeau & S. L.
RR. Co., 37) 435.
wv. St. Louis, K. C. & N. Ry.
Co., 395, 480.
Kittredge v. Claremont Bank, 116.
v. Kellogg Bridge Co., 76,
296

96.
Klein v. Alton & S. R.R. Co., 556.

v. Jewett, 193, 199, 200.

v. New Orleans, 70, 103, 248.
Klous v. Hennessey, 63.
Knapp v. McGowan, 132.
Knickerbocker Bank, /” re, 151, 168.
Knickerbocker L. I. Co. v. Ecclesine,

48.
| Knight vw. Earl of Plymouth, 532.

v. West Jersey R.R. Co., 275.
Kniskern v. Lutheran Churches, 53.
Knox v. Baldwin, 540, 541.

' wy, Protection Ins. Co., 56.
Knoxville v. Knoxville & O, R. Co.,

355-
‘Koehler wv. Black River Falls Iron Co.,

_ 430, 432, 507, 580, 581, 583.
Kritzer v. Woodson, 491.
Kruse v. Dusenbury, 408.
Krutz v, Paola Town Co., 291, 404, 411.
Kunkelman v. Rentchler, 471.
Kynaston v, East India Co., 455.

| Labouchere v. Earl of Wharncliffe, 55.

Lacey, Ex parte, 507.
Lacoste v. Duffy, 484.
Lafayette Ins. Co. v. French, 51, 264,
269, 270.
uv, Rogers, 115.
Laflin & Rand Powder Co. v. Sins-
heimer, 331.
Lafond vw. Deems, 321, 322.

' La Fountain v. Southern Underwriters’

Assoc., 56, 57.

La Grange & M. R.R. Co. v. Rainey,
291, 299, 301, 344.

Lake Ontario Nat, Bank v. Onondaga
Co. Bank, 299, 300, 310.

Lake Superior Iron Co. v. Drexel, 124,
439, 524, 553-

Lamb w. Cecil, 133, 136.

v. Laughlin, 44.
XXVil

Lamb zw. Stone, 63.

Lamphear v. Buckingham, 200.

Lanter v. Frank St. M. E. Church, 15.

Land Grant Ry. & T. Co. v. Commrs.
of Coffey County, 407.

Lane wv. Baughman, 247.

v. Harris, 568.

Lane’s Appeal, 120.

Langsdale v. Bonton, 433.

Larking, Ex parte, 618.

Larrabee v. Baldwin, 490, 523.

Latham wv. Boston, H. T. & W. Ry.
Co., 377.

Lathrop v. Union Pac. Ry. Co., 264,
268,

Latimer v. Eddy, 115, 153.

Lauferty v. Wheeler, 410.

Lauman zv. Lebanon Valley R.R. Co.,
295, 209, 347, 349, 351, 352, 355»
357, 358, 365.

Lawrence v. Nelson, 478, 554.

Lea v. Amer. A. & P. Canal Co., 285.

Leasure v. Union Mut. L. I. Co., 50,
91, 264, 274.

Leathers v. Shipbuilders’ Bank, 45.

Leavitt v. Blatchford, 90, 177.

Leazure v. Hillegas, 127, 431.

Labanon Sav. Bank v. Hollenbeck, 273.

Le Blanc, Matter of, 611, 614.

Leedom v. Plymouth R.R. Co., 257.

Le Forest v. Tolman, 275.

Legal Tender Case, 26.

Legg uv. Mayor, etc. of Annapolis, 65.

Leggett v. N. J. Mfg. & B. Co., 441.

Lehigh Bridge Co. v. Lehigh C. & N.

Co., 309.
Lehigh Coal & Nav. Co. v. Central
R.R. Co., 44, 45, 180, 182, 220, 238.
Lehigh Valley Coal Co. v. Hamblen, 36.
Leighton vw. Harwood, 196.
Leipold v. Marony, 123.
Leland v. Marsh, 523.
Lenox vw. Roberts, 133.
Leo wv. Union Pac. Ry. Co., 111.
Leonard v. City of Brooklyn, 71, 248.
uv. Columbia Steam Nav. Co.,

274.
Leonardsville Bank wv. Willard, 418.
Le Roy wv. Globe Ins, Co., 611, 614.
Leslie v. Lorillard, 79, 527.
Lewey’s Island R.R. Co. v. Bolton, 472.
Lewis v. Bank of Kentucky, 263,

v. Brainerd, 445, 458.

v. Oliver, 64.

v. St. Albans Iron & S. Works,

113.
en L., F. & M. Ins, Co. v, Page,
15. :

TABLE OF CASES. -

 

The figures refer.
to the pages.

Libbey v. Hodgdon, 264.

Libby v. Rosekrans, 63, 178, 182, 497.
Liberty Female Coll. Assoc. v. Wat-
kins, 88, 505, :

Liebke v. Knapp, 553.
Life Assoc. of Amer. v. Fassett, 272,
319.
v. Levy, 91, 164.
Lighte v. Everett F. I. Co., 108.
Lightner v. Boston & A. R.R. Co., 363,
365, 370. .
Limekiller v. Hannibal & St. J. R.R.
Co., 275:
Lincoln & K. Bank v. Richardson, 385.
Lindell v. Benton, 316.
Lindsley v. Simonds, 17, 568.
Lingle v. National Ins, Co., 130, 584.
Lionberger v. Broadway Sav. Bank,

143.
Litchfield v. White, 537, 538. -
Litchfield Bank vw. Church, 114, 426,

If.
Litchfield Iron Co. v. Bennett, 429.
Liverpool Ins. Co. v. Massachusetts, 9,
17, 488.

Livesey v. Omaha Hotel Co., 471.
Livingston v. Bank of N. Y., 116, 342.
v. Pettigrew, 176.

Loan Assoc. v. Stonemetz, 592.
uv. Topeka, 283.
Locke v. Lewis, 43.
Lockhart v. Van Alstyne, 610.
Loder v. New York, U. & O. R.R. Co.,
- 247, 260,
London wv. Lynn, 463.
v. Vanacker, 339.
uv. Wood, 283.
London Financial Assoc. v. Wrexham,
386.
London G. J. Ry. Co. v. Graham, 544.
London & C. L. & A. Co. v. Morphy,
257.
London & M. Discount Co., Jz re, 591.
London & P. L. A. Soc. uv. London,
etc. L. I. Co., 36, 126.
London, B. & M. Bank, Jz re, 351.
London, B. & S.C. Ry. Co. v. London,
etc. Ry. Co., 55.
Londonderry v. Andover, 30, 424.
Long Branch & S. 5S. R.R. Co., Matter
of, 211.
Long Dock Co. v. Mallery, 213.
Long Island R.R. Co., Matter of, 441.

‘Lord Auckland v. Westminster Local

Board of Works, 57.
Loring v. Frue, 548.
v. Salisbury Mills, 548.
Losee v. Bullard, 526.
The figures refer
to the pages,

Lothrop v. Stedman, 129, 160, 283,
294, 335, 607.

Lottimer v. Lord, 175.

Louisiana v. Jumel, 76.

Louisiana Sav. Bank & S. D. Co,
Matter of, 43, 94, 130,202, 313,

AI7, 495.
Louisville & N. R.R. Co. vw. Palmes,
364, 381.
. & C, R.R, Co. v. Letson,

Louisville,
277.
Loup vz. California S. R.R. Co., 108.
Lovett v. Steam Saw Mill Assoc., 432.
Low wv. Connecticut, etc. R.R. Co., 77.
Lowber v. Mayor, etc. of N. Y., 315.
Lowne vw. American Fire Ins. Co., 600.
‘Lowry v. Inman, 58, 406, 488, 490,
496, 503.
vee v. Mayor, etc. of Colchester,
256.
Lucas wv, City of San Francisco, 441.
Luling v. Atlantic Mut. Ins. Co., 613,
614,
Lum wv. Robertson, 317, 318, 605.
-Lumbard wv. Aldrich, 273.
Lund’s Case, 512.
Lycoming F. I. Co. v. Langley, 263.
v. Wright, 163, 182, 608.
Lyell v. Supervisors of 5t. Clair Co.,
103.
-Lyman v. Bonney, 99, 533, 581.
Lynch v. Metropolitan El. R.R. Co., 13.
Lytle uv. Beveridge, 581.

“Macauley v. Bromell & B. Printing Co.,
116,

-MacDougall v. Gardiner, 83.

MacGregor v. East. India Co., 456.

Mackall v. Chesapeake & O. Canal,

- Co, 331.

Macon & A. R.R. Co. v. Vason, 435.

Macon & W. R.R. Co. v. Parker, 253.

Maddick v. Marshall, 4o1.

‘Magdalena Steam Nav. Co., Zw re, 571.

Magill v. Kauffman, 442.

Magruder w. Colston, 516, 549.

Maguire’s Case, '544.

Maher v. Hibernia Ins. Co., 111.

‘Mahon v. San Rafael T. R. Co., 109.

Mahoney v. Spring Valley Water
Works Co., 38, 249.

Main v. North Eastern R.R. Co., 14.

-Maitland’s Case, 499.

Malloy uv. Mallett, 318.

-Manchester & M. Ry. Co., Z# re, 210.

Mandslay & Field’s Case, 499.

‘Manheim, P. & L..T. & P. R. Cou
Arndt, 514, 515. ‘

TABLE OF CASES.

 

Xxix

Manlove vw. Burger, 187, 188.
Mann w. Butler, 324.
uv. Cooke, 119, 511.
v. Pentz, 102, 187, 195, 261, 308,
309, 546.
Manning vw. San Antonio Club, 595.
vee Iron Works wv. Willcox, 493,
490. 4
Mansfield, C. & L. M. R.R. Co. w.
Brown, 375.
Manufacturers’ Nat. Bank, Jz ve, 322.
Manufacturing Co. uv. Bradley, 94, 103.
Many wv. Beekman Iron Co., Ior, 116,
March v. Eastern R.R. Co., 62, 80, gr,
92, 359, 572, 613, 616.
Marchand v. Loan & Pledge Assoc.,
77, 498.
Marcy v. Clark, 511, 512.
Maria Das Dorias, The, 462.
Marine Bank vw. Clements, 138, 599.
‘Marlborough Branch R.R. Co. uv. Ar-
nold, 435.
‘Marr vw. Bank of West Tenn., 122, 123,
140.
v. Union Bank, 304.

Marseilles Extension Ry. Co., [# re,

~ 594.
Marsh wv. Burroughs, 85, 102, 143.
-v, Dunckel, 39.
uv. Whitmore, 590.
Marshall.v. Western N. C. R.R. Co.,

309.
Marten v. Van Schaick, 181.
Martin v. Black, 177.
v. Fewell, 402, 403.
v. Junction R.R. Co., 374.
uv. Martin, 315.
Mason wv, Harris, 80, 100.
v. N. Y. Silk Mfg. Co., 497.
v. Pewabic Min. Co., 395.
vu. York & C. R.R. Co., 92.
Masters v. Eclectic L. I. Co., 76, 304,
312.
v. Rossie L. M. Co., ror.
Mathew’s Case, 500.
Mathez v, Neidig, 84, 86, 102, 495.
Matthews vw. Albert, 512.
v. Murchison, 396.
v. Skinker, 10,
v. Trustees, 55.
Maunsell v. Midland G. W. Ry. Co.,
26, 349, 570.
Maux Ferry G. R. Co. v. Branegan, 594.
May wv. Printup, 167.
Mayer v. Clark, 44.
- vu, Hellman, 597, 598.
Mayhew’s Case, 512,

1 Maynard v. Railey, 156,
XXX

Mayor of Kingston v. Horner, 30.

Mayor, etc, of Baltimore v, Balto. & O.
R.R. Co., 368.

Mayor, etc. of Colchester v. Seaber,
321, 385.

Mayor, etc, of Frederick v. Groshon, 54.

Mayor, etc. of N. Y. v. Conover, 65.

Mayor, etc. of Southampton uv. Graves,
448.

Mayor, etc. of Stafford v. Till, 48.

Mayor, etc. of Worcester v. Norwich &
W. R.R. Co., 249.

Mays v. Rose, 147.

McAllen v. Woodcock, 584.

McAlpin wv. Jones, 163, 608.

McAlpine v. Union Pac. Ry. Co., 369,

- 373:
McAuley v. Columbus, C. & I. C. Ry.
Co., 352.
McCallie.v. Walton, 133.
McCalmont v. Phil. & R. R.R. Co., 571.
McCargo wv. Crutcher, 455.
McCarthy v. Chicago, R. I. & P. R.R.
Co., 275.
v. Lavasche, 406.
McCay v. Black, 181.
McClaren v. Franciscus, 512, 523, 568.
McClinch v, Sturgis, 403.
McClure wv. People’s Freight Ry. Co.,

550. :
McComb wv. Chicago, St. L. & N. O.
R.R. Co., 456.
McCormick v. Los Angeles City Water
Co., 602.
v. Penn. Cent. R.R. Co.,

49.
McCoy wv. Farmer, 317, 318.
McCray v. Junction R.R. Co., 374.
McCulloch v. Maryland, 26.

v. Norwood, 317.

McCullough v. Merchants’ L. & T.Co.,

150, 151, 222,
McCurdy v. Myers, 310.
McCurdy’s Appeal, 76, 210.
McDermott v. Evening Journal Assoc.,

13.

McDonough w, Phelps, 494.
McElhenny’s Appeal, 77, 498, 588.
McElrath v. Pittsburg & S. R.R. Co.,

194.
McFarlan v, Triton Ins, Co., 32.
McGoon w. Scales, 318.
McGreary v. Chandler, 400,
McGregor v. Erie Ry. Co., 380.
McGuire v. O'Halloran, 405,
McHenry wv. N. Y., etc. R.R. Co,, 71.
McHose v. Wheeler, 462, 544.
Mcllrath vw. Snure, 247.

TABLE OF CASES.

 

The figures refer
to the pages.

MclIndoe w. City of St. Louis, 127.
McIntyre v. Union College, 101.
McIntyre Poor School zw. Zanesville
Canal, etc. Co., 426.
McKim wv. Glenn, 25.
v. Odom, 9, II, IOI, 115, 116,
257.
McKown vz. Furgason, 39.
McLaren wv. Pennington, 283.
McLean v. Eastman, 52.
McMahan v. Morrison, 347, 354, 365.
McMahon w. Rauhr, 322, 399.
McMullin v. McCreary, 503.
McRae wv. Locke, 62.
McVicker v. Ross, 554.
Mead wv. Keeler, 33.
uv. New York, H. & N. R.R. Co.,
352, 370.
Means, Appeal of, 417, 492, 495, 503-
Meara’s Admr. v. Holbrook, 193, 199,
200.
Mears v. Moulton, 399.
Mechanics’ Bank v. Heard, 300, 301.
v. Merchants’ Bank, 252.
uv. New York & N.H. R.R.
Co., 252.
v. Schaumburg, 437.
Mechanics’ Bldg. Assoc. v. Stevens,
8 ;

328,
Mechanics’ F. & M. Co. v. Hall, 575.
Mechanics’ Nat, Bank vw. Burnet Manuf.
Co., 34, 35.
Medbury wv. Rochester F. S. Co., 76.
Medical Inst’n of G, C. v. Patterson, 25,

417.
Medill wv, Collier, 406.
Meier v. Kansas Pac. Ry, Co., 147, 151,
222,
Melendy v. Barbour, 196,
Melhado v. Porto Alegre Ry. Co., 77.
Melvin v. Lamar Ins. Co., 558.
Memphis & L. R. R.R. Co. uv. Railroad
Commrs., 249, 252, 381, 421.
Memphis City v. Dean, 49, 78, 80, 130,
214, 538.
Menasha v. Milwaukee & N. R.R. Co.,
360, 361, 372, 390, 391.
Mercantile Ins, Co. v. Jaynes, 203.
Merchants’ Bank w. Bliss, 491, 501, 502,
541.
v. Cook, 103, 489.
v. State Bank, 588,
Merchants’ Exch. Nat. Bank v. Com-
mercial Warehouse Co., 482.
Merchants’ & M. Bank vw, Stone, 393,

402.
Merchants’ & P, Line v. Waganer, 113,
313
The rs refer
to the pages.

Merchants’ and P. Nat. Bank vw. Trus-
tees of Masonic Hall, 167.
Meredith Vill. Sav. Bank wv. Simpson,
197.
Meriwether v, Garrett, 28, 248, 321.
Merrell v. Pemberton, 225.
Merriam v, Wolcott, 36.
Merrick v. Peru Coal Co., 592.
v. Van Santvoord, 17, 24, 161,
263, 269, 328, 408,
Merrill v. Elam, 115.
uv. Reaver, 473.
v. Suffolk Bank, 291, 294, 295,
316, 317.
Merrimac Min, Co. uv. Bagley, 522.
Merritt, /7 re, 191.
v. Lyon, I9I.
Messersmith v. Sharon Sav. Bank, 124,

522.
ae Chapel Corp’n vw. Herrick,

462.
Methodist Episc. Church v. Town, 550.
v. Wood, 114.
Methodist Episc. Union Church wv.
Pickett, 418, 420, 423, 427, 428.
Metropolitan Board of Excise v. Barrie,

29.
Metropolitan El. Ry. Co. v. Manhat-
tan Ry. Co., 359, 590.
eS Trust Co, v. Tonawanda
alley & C. R.R. Co., 241, 242,

243.

Metz vw. Buffalo, C. & P. R.R. Co., 148,
199, 219, 394.

Metzner v. Bauer, 163.

Meyer v. Johnston, 206, 229, 231, 237,
239, 367.

Miami Exp. Co. v. Gano, 188, 316.

Michoud z. Girod, 508, 583, 591.

Mickles v. Rochester City Bank, 76,
100, 292, 302, 313.

Middletown v. Boston & N.Y. A. L.
R.R. Co., 359

Middletown Sav. Bank v, Jarvis, 252.

Miers v. Zanesville, etc. Turnpike Co.,

84.
Millard v. Webster, 42.
Millen v. Guerrard, 615,
Miller v. Barber, 573.
v. Great Republic Ins, Co., 511,
512, 513, 561.
. Illinois Cent. R.R. Co., 437.
. Loeb, 197.
. Proctor, 532.
. Rutland & W. R.R. Co., 392.
. State, 283,
Milliken v. Steiner, 136.
Milliner’s Admr. v. Harrison, 66.

Seaas

TABLE OF CASES.

 

XXXi

Mills v, Central R.R. Co., 353, 355,
358, 378.
uv. Northern Ry., etc. Co., 54,
130.
v. Stewart, 556.
Miltenberger v. Logansport Ry. Co.,
220, 231, 240, 241.
Milwaukee & Minn. R.R. Co. uv. Sout-
ter, 148, 184, 206, 217, 222, 224.
Milwaukee & N. I. R.R. Co. wv. Field,

515.
Miners’ Bank vw. United States, 333.
Miners’ Ditch Co. v. Zellerbach, 21, 37,

432.
Mining Co. wv. Cullins, 602.
Minnesota Co. v. St. Paul Co., 214,

253.
Minot wv. Paine, 616, 617.
v. Phila, W. & B. R. R. Co.,
362, 381.
Minturn v. Larue, 251, 421.
Miss. & T. R.R. Co. v. Harris, 568.
Miss., O. & R. R. R.R. Co. v. Cross,

552.
Miss. Valley Co. v. Chicago, St. L. &
N. O. R.R. Co., 369, 372, 373.
Missouri Valley Land Co. v. Bushnell,

127,
Mitehell, Ex parte, 237, 239.
v. Beckman, 491, 547.
v. Deeds, 426.
Mitchell’s Case, 512.
Mobile v. Watson, 321.
Mobile & O. R.R. Co. v. State, 283.
Moise v. Chapman, 171,
Moises v. Thornton, 462.
Mokelumne Hill C. & M. Co. v. Wood-
bury, 403, 405, 492, 504.
Monadnock R.R. Co. v, Felt, 551.
Montgomery R.R. Co. v. Hurst, 460.
Montgomery & W. P. R.R. Co. u,
Branch, 52, 92.
Montgomery Co. Agr. Soc, v. Francis,

92. :
Montpelier v. East Montpelier, 28.
Monumoi Great Beach v. Rogers, 114.
Moodalay wv. Morton, 456.

Moody v. Burton, 63.
Moore wv. Cable, 228.

v. Gennett, 269.

v. Leonard, 457.

v. Moore, 581.

vu. Schoppert, 80.

v. State, 29.

v. Whitcomb, 282. }
Moran v. Dawes, 43.

v. Lydecker, 181, 295, 296,
Morgan v. Louisiana, 21, 252.
XXXii

Morgan : organ 448, 459.
N. Y. & Albany R.R. Co.,
102, 168,
vu. Skiddy, 527, 529.
Morgan’s Case, 459, 460.
Morgan (County of) uv. Allen, 119, 121.
Moriarty v. Kent, 187.
Morison v. Morison, 227, 237.
Morris v, Chicago, R. I. & P. Ry. Co.,
274.
vu. Stevens, 267.
v. Underwood, 484.
v. Whelan, 65.
Morrison v. Dorsey, 190.
v. Menhaden Co., 259.
Morrow v. Superior Court, 492.
uv. Wood, 184.
Morton v. Metropolitan L. I. Co., 13.
Moseby v. Burrow, 163, 174, 195, 216,
296, 298, 300, 302, 309.
Mosler v. Potter, 114.
Moss v. Averell, 492.
_ vu, Oakley, 523.
Moss’s Appeal, 615.
Mott v. Connolly, 64.
v. Union Bank, 260,
Motteram v, Eastern Counties Ry. Co.,
463.
Mount Moriah Cem. Assoc. v. Com-
monwealth, 66.
Mount Pleasant v. Beckwith, 321.
Mowrey v. Indianapolis & C. R.R.Co.,
355» 357-
Moyer v. Penna. Slate Co., 488, 492,
503, 504.
Mozley v. Alston, 83, 591.
Mudgett vw. Horrell, 434, 466, 549.
Mullen wv. Pryor, 42.
Muller v. Dows, 27, 194, 216.
Mullins v. North & S. R.R. Co., 469.
Mummazv. Potomac Co., 52, 119, 280,
299, 316, 317, 318.
Munson w. Boston, H. & E, R.R. Co.,
474.
v. Syracuse, G. & C. RR.
: Co., 78.
Munt % Shrewsbury & C. Ry. Co.,
349, 570.
Murphy v. Briggs, 141, 597.
v. Farmers’ Bank, 74. ;
Murray wv. Lardner, 130.
v. Riggs, 140, 5994
v. Vanderbilt, te. 285, 608,
ae Turn Verein v, Funck, 301,
31
Musgrave v. Morrison, 567.
Muskingum Val. T. Co. v. Ward, 510,
513.

TABLE OF CASES.

 

The figures refer
to the pages.

Mussina v. Goldthwaite, 80, 315.

Mutual Ben. L. I. Co. wv. Davis, 50, 91,
263.

Mutual L. I. Co. v. Bigler, 212.

Myer v. Liverpool, L. & G. Ins. Co.,

269.
Myers v. Sheriff, 111.

Narragansett Bank v. Atlantic Silk
Co., 430.
Nashua Fire Ins, Co. v, Moore, 596.
Nassau Bank v. Brown, 492.
Natchez vw. Mallery, 477.
Nathan v. Whitlock, 188, 511.
National Bank v. Case, 516, 517, 549.
uv. Colby, 316, 322.
v. Graham, 14.
v. Insurance Co., 292, 308,
324.
uv. Matthews, 74, 127, 313,
; 328, 331.
v. Watsontown Bank, 547,

62.

National Bank of St. Charles v. De
Bernales, 50, 263.

National Bank of Washington v. In-
surance Co., 33, 422.

National Car Brake Shoe Co, v. Lake
Shore, etc. R.R. Co., 13.

National Docks R.R. Co. v. Central
R.R. Co., 328.

National Funds Assur.Co., /7 re, 61,90.

National Loan & B. Assoc. wv. Lichten-
walner, 96.

National MechJ Banking Assoc. wv.
Mariposa Co., 168.

National Pahquioque Bank v, First
Nat. Bank, 101, 327.

National Park Bank v. Nichols, 494.

National Security Bank v. Cushman,

437-
National Shoe & L. Bank wv. Mechan-
ics’ Nat. Bank, 91, 137.
National Trust Co. v. Miller, 95, 129,
162, 171, 178, 186, 273, 277,
612,

v. Murphy, 273, 277.
National Tube: Works Co. z. Gilfillan,

553.
National Union Bank v. Landon, 403.
Natoma Water & Min. Co. v, Clarkin,
127.
Neall v. Hill, 152, 207.
Neff v. Wolf River Boom Co., 391.]
Nelson v. Eaton, 18,
v, Edwards, 133.!
New wv, Nicoll, 226,
New Albany wv. Burke, 119, 566.
The figures refer
to the pages.

New Albany & S. R.R. Co, v, Fields,
473, 511, 558, 560.

‘Newark P, R. Co. v, Elmer, 55.

New Bedford R.R. Co. v. Old Colony
R.R. Co., 369.

New Boston v. Dunbarton, 30, 424.

Newby wv. Oregon Cent. Ry. Co., 36,

. 48, 126, 129.
v. Von Oppen, 263, 264.

New Central Coal Co, uv, George’s
Creék Coal & Iron Co., 332.

Newcomb w. Reed, 419.

Newell v. Borden, 530.

uv. Smith, 199.

New England Comm’! Bank », Stock-
holders of Newport Steam Factory,
487, 568.

New England Iron Co. uv, New York
L. & I. Co., 453.

New England Mfg.Co, v. Vandyke, 462.

New Hampshire v. Louisiana, 75.

New Haven wv. City Bank, 119, 338.

New Haven H. N.Co. uv. Linden Spring
Co., 575.

New a & Dela. Bridge Co. v. Phenix
Bank, 437, 438.

New Jersey Midland Ry. Co. w. Strait,
308, 355, 364, 374.

New Jersey P. & L. Bank v. Thorp, 104.

New Jersey Steamboat Co. v. Brockett,

14.

New Jersey Zinc Co. uv. N, J. Frank-
linite Co., 308,

Newling v. Francis, 385.

Newman wv, Davenport, 176.

New Orleans vi Home Mut. Ins. Co.,
248.

: v. Houston, 335.

New Orleans Gas Co, v, Louisiana
Light Co., 294.

New Orleans G. L. Co. v. Bennett, 195.

New Orleans, J. & G. N. R.R. Co. v.
Harris, 355.

New Orleans, J. & G. N. R.R. Co. v.
Wallace, 264,

New Orleans, M. & C. R.R. Co. v.
City of New Orleans, 321.

New Orleans, S. F. & L. R.R. Co. wv.
Delamore, 249.

Newport & C. Bridge Co. uv. Douglass,
21t.

Newry, etc. Ry. Co. v. Moss, 516.

New Sombrero Phosphate Co, v, Er-
langer, 77, 498.

Newton v. Carbery, 27.

v. Commissioners, 379.

Newton Mfg. Co. v. White, 23, 136,

308, 435.
o

TABLE OF CASES.

 

XXxili

N. Y. Central Ins. Co. vw. National
Prot. Ins. Co., 586.
N. Y. Dry Dock v. Hicks, 48, 50, 91,

273.

N. Y. Plevated R.R. Co., Matter of,
206, 331, 344, 426.

N, Y. Firemen’s Ins. Co. v. Ely, 15.

N. Y. Marbled Iron Works v. Smith,
295, 298.

N.Y. & N. H. R.R. Co. v. Ketchum,

77> 5921 594.
N. Y. & N. H. R.R. Co. uv. Schuyler,

113.

N. Y. & O. M. R.R. Co. v. Van Horn,
524.

N. Y..& S. Canal Co. v. Fulton Bank,

351.
N. Y., H. & N. R.R. Co. v. Hunt, 471.
N. Y., L. E. & W.R.R. Co. v. Nickals,
610, 618.
Niantic Sav. Bank v. Town of Douglas,

_ 359 375.
Nichols v. Perry Patent Arm Co., 159.
v. Squire, 540.
Nicholson v. Leavitt, 142. ‘a
Nimmons v. Tappan, 295, 296, 302, 309.
Noble v. Callentler, oe eee
v. Halliday, 116.
Noe v. Gibson, 198.
Noel v. Drake, 414, 587, 588.
Nocaa v. Town of Port Washington,
559.
Noonan », Lee, 111.
Norbury’s Case, 500.
Norris, Ex parte, 34.
v. Cooper, 499.
v. Cottle, 499.
v. Crocker, 540.
v. Irish Land Co., 66.
v. Johnson, 59.
v, Mayor, etc. of Smithville, zor.
es Bldg. Assoc. v. Sutton,
462.
North Amer. G, P. Co., J re, 172, 177.
North Carolina R.R. Co. uv. Drew, 372,

373-

North moka R.R. Co. v. Rodrigues,
550.

Northern Transp. Co. v. Chicago, 274.

North Missouri R.R. Co. wv. Akers, 264.

v. Winkler, 551.

North River Meadow Co. v. Shrews-
bury Church, 462.

Northrop v.. Bushnell, 119.

North Shore S. I. Ferry Co., Matter of,
563.

Norton v. Hodges, 488.

__.. .v. Shelby Co., 16, 35, 429,
XXXIV

Norwich v.-Breed, 462.
Noyes wv, Blakeman, 227.
v. Marsh, 588.
v. Rich, 216,
Nugent v. Supervisors, 352, 359, 375)

514.
Nusbaum w. Stein, 155.

Oakes vw. Turquand, 567.

Oakland G. L. Co. v. Dameron, 423.

Oakland R.R. Co. v. Oakland, B. & F.
V. R.R. Co., 344.

Oakland Ry. Co. v. Keenan, 247, 257.

Oakley v, Paterson Bank, 164.

Oberholser v, Greenfield, 43.

O’Brien v, Chicago, R. I. & P. R.R.
Co,, 276.

Ocean Nat. Bank v. Carll, 466.

O’Connor v, City of Memphis, 321.

Odd Fellows’ Mut. Aid Assoc. v. James,

539.
O’Dea wv. O’Dea, 277.
Ogden v. Murray, 594.
Ogilvie v. Knox Ins. Co., 84, 85, 86,
102, 119, 123, 143, 560, 567.
Oglesby v. Attrill, 440.
Ohio & Miss. R.R. Co. v. Davis, 148,
200,
v. Fitch, 214,
uv. McPherson, 534, 582.
v. Russell, 45, 216.
v. Wheeler, 269, 380.
Olds v. Tucker, 196.
Oldtown & L. R.R. Co. v. Veazie, 426.
Oliphant v..Woodburn Coal, etc. Co.,

79, 02,
Oliver v. Liverpool & L. Life & F. Ins.
Co., 487, 494.
Onions’ Case, 500.
Opdyke v. Marble, 448.
Oregon Cent. R.R. Co. v. Scoggin, 560.
O’Reilly v. Bard, 492, 503.
Ormsby v. Vermont C, M. Co., 344.
Orono v. Wedgewood, 114, 426.
Oroville & V. R.R. Co. v. Plumas Co.,

345-
Osborn wv. Bank of U. S., 26.
Osborne, £x parte, 499.
v. Harvey, 115.
v. Tunis, 430.
Osgood wv. DeGroot, 478.
v. Laytin, 86, 90, 186, 187, 190.
v. Maguire, 308, 312, 483, 484.
v. Ogden, 90, 478.
Otis v. Gross, 603.
Ottawa uv. People, 66.
Overend v. Gurney, 532, 537.
Overend & G, Co, uw. Gibb, 537, 581.

TABLE OF CASES,

 

The figures refer
to the pages.

Overing v. Russell, 127.
Overmyer v. Cannon, 495.
Overseers of Poor of Boston v. Sears,

32.
Overton v. Memphis & L. R.R. Cao.,
206.
Owen v. Homan, 147.
v. Smith, 174, 186, 190, 293, 349.
Owings v. Speed, 460, 461, 462.

Pacific R.R. Removal Cases, 26.

Paige v. Smith, 175, 193, 196, 199, 200.

Paine vw. Lake Erie & L. R.R. Co.,,
371, 379, 391, 423.

v. Stewart, 417, 512.
Painesville & H. R.R. Co. uv. King, 618.
Palestine v. Barnes, 248, 249.

Palmer v. Lawrence, 425.
v. Murray, 203.
uv. Ridge Min. Co., 522.
Palys wv. Jewett, 110, 196, 197.
Panama & S. P. Tel. Co. v. India Rub-
ber, G, P. & Tel. Works Co., 585.
Paola Town Co. wv. Krutz, 319.
Parbury’s Case, 470,
Paris wv. Paris, 617.
Parish v, Wheeler, 16.
Park v. Grant Locomotive Works, 613.
v. Petroleum Co., 103.
v. Spaulding, 399, 530.
Parker v, Browning, 190, 196.
v. McKenna, 507, 585.
Vv Nickerson, 507, 508, 579,
505, 591.
Parks vw. Evansville, I. & C. S. L. R.R.
Co., 571.
Parr uv. Bell, 198.
Parrott uv. Byers, 82, 110, ;
Parry v. American Opera Co., 261, 485.
Parsons v. Charter Oak L. I. Co., 163.
v. Eureka Powder Works, 144.
Partridge v. Badger, 433, 461, 462, 465.
Paschall v, Whitsett, 316.
Patent File Co., x re, 133, 599.
Patrick v. Metcalf, 614.
Patterson v. Lynde, 59, 128.
v. Wyomissing Mfg. Co., 491,
492.
Patton v. Taylor, rrr.
Paul vw, Virginia, 24, 263, 270. :
Paulding v. Chrome Steel Co., 44, §38,

599.
Paulsen v. Van Steenbergh, 96, 287.
Payne v. Bullard, 546, 576.
v. Hook, 72.
Payson vw. Withers, 473, 494, 495.
Peabody v, Flint, t36°
Peake v. Wabash R.R. Co., 462.
The figures vefer
to the pages.

Peale v. Phipps, 197.
Pearce v. Madison & I. R.R.Co., 353,

» 355, 376.

v. Olney, 331.
Pearson’s Executors’ Case, 500,
Pease v. Smith, 461. ;
Peck v. Coalfield Coal Co., 496.
v. Miller, 602.
Peckham v. Van Wagenen, 614.
Peirce v. Partridge, 246.
uv. Weare, 34.
Penn Bank v. Hopkins, 61.
Penniman wv. Briggs, 526.
Penna. Co, v. Weddle, 13.
Penna. R.R. Co. v. Canal Comrs., 26,
251, 417, 421.

v. Duncan, 51.

wv. Peoples, 56.

v. St. Louis A. & T. H.R.R.

Co., 348.

v. Vandiver, 13.
Penna. R.R. Co.’s Appeal, 548.
Penna. Trans. Co.’s Appeal, 395.
Penna. & O, Canal Co. v. Commrs, of

Portage Co., 325.

Penobscot Boom Co. v. Lamson, 307,

328.
Penobscot R.R. Co. v. Dummer, 435.
v. White, 434.

Penobscot & K. R.R. Co. vu, Bartlett,

575. .
Penobscot & K. R.R. Co. v. Dunn,
426, 462, 463, 551.
Pensacola Tel. Co. v. Western Un. Tel.
Co., 275.
Pentz v, Hawley, 195.
Pen-y-Van Colliery Co., Jz re, 291.
People v. Albany & S. R.R. Co., 55,
64, 75, 155, 329, 337-
v. Albany & Vt. R.R. Co., 68,
100, 330, 331, 339, 340.
. Assessors of Watertown, 31.
. Atlantic Mut. L. I. Co., 181.
, Auditor General, 66.
. Bank of Hudson, 63, 298.
v. Barnett, 216.
v. Board of Metropolitan Police,

Seas

F Board of Trade of Chicago,
67, 595.

. Bogart, 36.

. Booth, 329.

Brooklyn, F. & C. I. Ry. Co.,
329, 394.

. Brooks, 175.4

. Central City Bank, 164, 215.

v. Central R.R. Co. [of N. J.,

=

geea

Sa

 

, 266.

TABLE OF CASES.

People wv.

U
UV.
UY

S82 sgsees

SFkssse sxereggsg g

‘@

UU
U.

v,
w.
wv

XXXV

Cheeseman, 337, 341.

Clark, 74.

Clute, 64,

College of Cal., 37, 284, 285,
319, 322, 607.

Comms, of Taxes, 118.

Conklin, 65. -

. Cromwell, 66.
. Cummings, 66, 67. .
. Dispensary & Hosp. Society,

336, 338.

. Draper, 64, 65.

Excelsior G, L. Co., 39, 40,
303.

Farley, 64.

Farnham, 426.

. Fishkill & B. P. R. Co., 339.

Flint, 100.

Frank, 423.

Gardner, 483.

Globe Mut. Ins, Co., 100.

Globe Mut. L. I. Co., 156,
603.

Hall, 64.

Hartwell, 484.

Hektograph Co., 315.

een & M. P. R. Co., 328.
ingston & M. T. R. Co.,
303, 339 337) 341, 342.

Lake Shore & M. S. R.R.
Co., 450, 452.

Lieb, 34.

Livingston, 64.

Logan County, 473.

Manhattan Co., 10, 18, 25,
28, 344, 417, 429.

Masonic Ben. Assoc., 67.

Mattier, 64.

Maynard, 31.

Mayor, etc. of N. Y., 315.

McCullough, 484.

Mechanics’ Aid Soc., 67.

Mechanics’ & T. Sav. Inst.,
600.

Medical Soc. of Erie Co., 67,

595.
Merchants’ & M. Bank, 603.
Minck, 467.
Morris, 28, 321.
Mott, 448.
National Trust Co., 293, 319,
N. Y. Cent. & H. R. R.R.
Co., 68.
N. Y. Commercial Assoc.,

595- ;
Northern R.R. Co., 303, 328,
Northern Pac. R.R. Co., 445,
452, 455.
XXXVI

People v. O’Brien, 173, 334, 335, 341.
wv. Pacific Mail S.S. Co., 66, 445,
449, 450, 453.
uv. Pease, 485.
v. Pittsburgh R.R. Co., 337.
v. Reclamation Dist., 31, 147,
320.
. Remington, 602.
. Rensselaer Ins. Co., 303.
. Rensselaer & S. R.R. Co.,

343.
. Richards, 66.
Rome, etc. R.R. Co., 66.
. St. Louis & S. F. Ry. Co.,

454.

. Salomon, 66.

. Schwartz, 108.

. Security Life Ins. Co., 610.

. Security L. I. & A. Co., 150,
175, 600, 609, 610,

. State Ins. Co., 66.

. Steele, 67.

Supeinieats of Greene Co.,

VGIee gee eee

eee

. Supervisors of St. Lawrence
Co., 66

. Sweeting, 484.

. Thacher, 484, 485.

. Thompson, 485.

. Throop, 448, 449, 451.

. Troy House Co,, 296.

. Trustees of Ogdensburgh,

Qa

Seegede

403.
. Frustees of Schools, 66.
Ulster Common Pleas, 315.
. Universal L. I. Co., 176.
Utica Ins, Co., 15, 21, 22, 65,

338, 343, 485.
Walker, 291, 292, 451, 452.
; ee & W. Bank,

2

uv. Waterford & S. T.Co., 339.
uv. Wendell, 66.
v. Williamsburgh T. R. & B.

saeee

gs

Co., 330, 341.
People’s Bank wv. Mechanics’ Nat.
Bank, go.

People’s Ferry Co. v. Balch, 551, 552.
Pedra & R, I. Ry. Co. wv. Coal Valley
Min. Co., 363.
v. Preston, 471, 558.
Perkins v. Sanders, 492.
Cee H. & E. M. Co,

419.
Perry v. New Orleans, M. & C, R.R.
Co., 418.
wv. Shipway, 55.
v. Turner, 59, 493, 495.

TABLE OF CASES.

 

The figures refer
to the pages.

Persse, Jz re, 198.

Peter v. Kendal, 327.

Pettis v. Atkins, 403. ;

Pew wv. First Nat. Bank of é., 592, 594.
Peyton v. Lamar, 43.

Pfohl v. Simpson, 84, 86, 129.

Phelan # Ganebin, 56.

Philadelphia v. Fox, 28.

Phila. & B. C. R.R. Co.’s Appeal, 253,

257.

Phila, & R. R.R. Co. v. Common-
wealth, 216.

Phila. & W. R.R. Co. ». Maryland,
363, 371, 381. .

Phila. & W. C. R.R. Co. v. Hickman,
431, 463, 55% 552.

Phila, W. & B. R.R. Co. v, Cowell,

611
Phila., W. & B. R.R. Co. uv. Quigley,

12, 13.
Phila., ee & B. R.R. Co. v. Woelpper
216.
Philips v. Wickham, 282, 301, 307.
Phillips v, Campbell, 138, 599
v. Covington & C, Bridge Co.,
472.
uv. Newton, 162.
uv. Winslow, 253.
Phipps v. Jones, 402.
Phoenix Bank v. Donnell, 108, 423.
Pheenix lron Co. v. Commonwealth,

446,
Phcenix Warehousing Co. v. Badger
195, 469, 549.
Pickering v. Templeton, 543.
Pickersgill v. Myers, 187.
Pickett v. Pipkin, 111.
Pier v. George, 541.
Pierce v. Commonwealth, 205.
v. Crompton, 273.
vu. Emery, 20, 216, 253.
v. Milwaukee Const. Co., 85, 86,
102, 143.
v. Milwaukee & St. P. R.R.
Co., 249.
Piscataqua F. & M. Ins, Co. v. Hill,

592.

Pittsburg Coal Co. uv. Foster, 463.

Pittsburgh & C. R.R. Co. v. Bedford
& B. R.R. Co:, 37.

Pittsburgh & C. R.R. Co. v. County ot
Allegheny, 612, 618.

sage ae & C. R.R. Co. v. Graham

Sir
Pittsburgh & C. R.R. Co. v. Stewart,

SEL, 544.
Pittsburgh & L. E. R.R. Co. uv. Bruce,
420,
The figures refer
to the pages.

Pittsburg & S, R.R. Co, v. Allegheny

Co., 15.

Pittsburgh, C. & St. L. Ry. Co. v. Mar-
shall, 105.

Pittsburgh, W. & K. R.R. Co, uv. Ap-
plegate, 524.

Pixley v. Roanoke Nav. Co., 284.

Planters’ Bank vu. Bass, 163.

Planters’ Warehouse Co. wv. Johnson,

579.
Planters’ & M. Bank v, Padgett, 404,
409, 410,
Platt v. Archer, 316, 317.
v. Bentley, 477.
v. Crawford, 109.
uv. N. Y. & Boston R.R. Co., 378.
v. Stewart, 40.
Platteville v. Galena, etc. R.R. Co., 55.
Plimpton v. Bigelow, 24, 268, 269, 546.
Plymouth R.R. Co. v, Colwell, 71, 129,
248, 249.
Pneumatic Gas Co. v. Berry, 473, 481.
Poillon v. Mayor, etc. of N. Y., 70. -
Polar Star Lodge v. Polar Star Lodge,
300, 310.
Pollard v. Bailey, 58, 87, 488, 496.
Pond wv. Cooke, 180, 194.
v. Framingham & L. R.R. Co.,
44, 130, 159.
uv. Vermont Valley R.R. Co., 71,

80.
Pondville Co. v. Clark, 159.
Poole, Jackson & Whyte’s Case, 581.
Pope vw. Brandon, 133, 142.
v. Terre Haute Car Mtg. Co., 69,
264.
Port v. Russell, 579, 582, 584.
Porter v. Kingman, 196.
v. Waring, 441.
v. Williams, go.
Port Gibson v. Moore, 318, 385.
Port Huron & G. Ry. Co. uv. Judge of
St. Clair, 211.
Port Jervis v. First Nat. Bank, 437.

Portland Dry Dock & Ins. Co. v. Trus-.

tees of Portland, 300, 310.
Port Royal R.R. Co. v. Hammond, 266.
Portsmouth Livery Co. v. Watson, 51,

277.
Post v. Toledo, C. & St. L. R.R. Co.,
455, 456.
Potter 7. Merchants’ Bank, 438.
Poultney v. Bachman, 400.
Powers v. C. H. Hamilton Paper Co.,
178.
Pratt v. Goswell, 453.
uv. Jewett, 305, 314.
vu. Meriden Cutlery Co., 452.

TABLE OF CASES.

 

XXXVil

Pratt v. Pratt, 570, 572, 613.
v. Rathbun, 609.
v. Taunton Copper Mfg. Co., 548.
Prendergast v. Turton, 590.
President, etc. v. Trenton City Bridge
Co., 329.
President, etc: of Port Gibson v. Moore,
318, 385.
Preston v. Grand Collier Dock Co., 100.
Preusser v. Henshaw, 597.
Price v. Anderson, 617.
v. Wilson, 491, 492, 500.
Priest v. Essex Hat Mfg. Co., 568.
Prieur v. Commercial Bank, 67.
Pringle v. Woolworth, 174, 216, 485.
Prospect Park & C.I. R.R.Co., Matter
of, 361.
Prothro v, Minden Seminary, 461, 465.
Prouty uv. Lake Shore & M. S. Ry. Co.,
366, 370, 371, 382, 383.
v. Mich. Southern & N. I. R.R.
Co., 268,
Providence Bank wv. Billings, 11, 28,
__ 379.
uv. Wilkinson, 105, 114.
Provident Sav. Inst. v. Jackson Place
Skating Rink, 511, 512.
Provolt v. Chicago, R. 1. & P. R.R. Co.,
214.
Pugh & Sharman’s Case, 513.
Pullan v. Cincinnati & C. A. L. R.R.
Co., 211.
Pullman wv. Upton, 114, 120, 426, 516,

549.
Pullman Palace Car Co. v. Missouri
Pac. Ry. Co., 308, 363, 364, 369.
Pumphrey v. Mayor, etc. of Balto., 66.
Pynchon v. Day, 444, 450.

.Pyrolusite Manganese Co., Matter of,

286, 288.

Queen, The. See Reg.

‘Quinby zv. Strauss, 63.

Racine & M. R.R. Co. v. Farmers’ L.
& T. Co., 375, 379, 380.

Rafferty v. Bank of Jersey City, 425.

Railroad Comrs, v. Portland & O. C.
R.R. Co., 9.

Railroad Co. v. Brown, 45.

Commissioners, 381.

County of Hamblen, 21.

Georgia, 308, 362, 364, 368,

Harris, 27.

Hecht, 29.

Howard, 88, 119, 126.

. James, 253.

. Maine, 362, 364, 381, 382.

sssesgseges

R
XXXVI

Railroad Co. v. Orr, 76.
Railroad Cos. v, Gaines, 381.
Railway Co. v. Allerton, Io.
uv. Alling, 49, 50, 129, 130. |
v. Jewett, 155, 206,
uv. Whitton, 27.
Rainey v, Aydelette, 65.
Ramsey wv. Erie Ry. Co., 285.
uv. Gould, 573.
Rance’s Case, 615.
Rand v. Hubbell, 613, 617.
Randall v. Dusenbury, 227.
v. Elwell, 253, 254.
v. Hazelton, 63.
v. Van Vechten, 494.
Randfield v, Randfield, 197.
Randolph v. Larned, 249.
v. Wilmington & R. R.R.
Co., 249.
Ranger v. Great Western Ry. Co., 16.
Rankine v, Elliott, 195, 213.
Raritan W. P. Co. v. Veghte, 294.
Ratcliff v. Teters, 465.
Rayburn wv. Elrod, 461.
Read v. Frankfort Bank, 131, 280, 293,
317, 318.
Reading Industrial Mfg. Co. wv. Graeff,

504.
Receiver of Middle Dist. Bank, Matter
of, 477.
Receiver of Staite Bank wv. First Nat.
Bank, 192.
Receivers v. Paterson G, L. Co., 170.
Reciprocity Bank, Matter of, 472, 544.
Redmond w. Dickerson, 507, 585.
v. Enfield Mfg. Co., 161, 266,
276.
v. Hoge, 161, 162, 276, 285.
Reed v. Cumberland Mut. F, I. Co., 116.
v. McIntyre, 597, 598.
Reeder v. Maranda, 523.
Reg. v. Grand Canal Co., 453.
v. Great North of Eng. Ry. Co.,

13, 14.
v. London & St. K. Docks Co.,

453-
v. Mariquita & N. G, Min.Co., 444.
uv. Victoria Park Co., 246.
v. Wilts & B, Canal Nav., 455.
Regents of Univ. of Md. v. Williams,
283, 328.
Reichwald v. Commercial Hotel Co.,

77, 296.
Reid v. Northwestern R.R. Co., 257,
258.
Relfe v. Commercial Ins. Co., 137,
v. Rundle, 24, 25, 26, 160, 161,
163, 320, 417.

TABLE OF CASES.

 

The peers refer
to the pages.

Remington v. Harrison County Court,

49.
Renick v. Bank of West Union, 316.
Rensselaer & W. P. R. Co. uv. Barton,

543.
Revere v. Boston Copper Co., 299, 301,
310,
Rex v. Amery, 301, 327, 385.
Bank of England, 453.
. Barker, 454.
. Bedford Level, 34.
. Bishop of Chester, 454.
City of London, 339.
Commrs, of Land Tax, 454.
Grey, 301, 384.
Haworth, 457.
Leigh, 485.
London Assur. Co., 453.
Lucas, 459.
Martin, 462.
Mayor of London, 343.
Mayor, etc. of Hertford, 343.
Merchant Tailors’ Co., 449, 452,
458.
. Newcastle, 458.

SSSSsseessggegeggeg

v
v. Pasmore, 282, 284, 384, 385.

v. Severn, etc., Ry. Co., 67.

uv. Tower, 459.

v. Wildman, 454.

uv. Wilts & B. Canal Co., 452,

454.
Reynolds v. Douglass, 96.
v. Myers, 375, 418.
v. Schweinefus, 465.
Rhead v. Hounson, 111.
Rhodes wv. Lee, 167.
Rice v, Merrimack Hosiery Co., 5or.
v. Natl. Bank of Comwlth., 64, 74,
328, 344.
Rich v. Levy, 43.
v. Loutrel, 172, 173, 177.
Richards v. Chesapeake & O. R.R. Co.,
76, 222. .
v. New Hampshire Ins. Co.,
122, 140, 581.
v. People, 201.
Richardson v. Marqueze, 140.
v. Pitts, 405.
v. Richardson, 613, 615.
uv. Rogers, 142.
v. Vermont & M. R.R. Co.,
378, 613.
Richmond z. Irons, 185,
Richmond’s Case, 556.
Ricker v, Amer. L. & T. Co., 271, 414,
415.
Ridenour v. Mayo, 402, 403.
Rider wv. Morrison, 474, 509, 557.
The Agere refer
to the pages.

Ridgefield & N. Y. R.R. Co. v. Brush,
550.
Bese Township wv. Griswold, 362,

303.
Riker v. Alsop, 396.
Ringo v. Biscoe, 133, 141, 598.
Rinn v. Astor F. 1. Co., 201, 606,
Riper v. Poppenhausen, 39.
Ripley v. Sampson, 575.
Rison v. Knapp, 40.
Ritchie v. Kinney, 463.
Robbins zw, Clay, 135.
Roberts, Zx parte, 499.
uv. Mobile & O. R.R. Co., 551,
563. ,
v. National Ice Co., 108.
v. Stoner, 256.
Robertson v. Bullions, 147.
Robie v. Sedgwick, 30, 424, 425, 442.
Robins v. Embry, 133, 134, 140.
Robinson vw, Atlantic & G. W. Ry. Co. a
148, 214, 247.
Bank of Attica, 137, 273,

s

599.

Bidwell, 488.

Lane, 318,

Pett, 538.

Phila. & R. R.R. Co., 387.

Pittsburgh & C. R.R. Co.,
511, 558.

Smith, 54, 78, 80, 87, 278,
474, 530 538.

Robson wv. Dodds, 574.

Roche vw. Roanoke Classical Seminary,

550.
Rochester v. Bronson, 148, 150, 217.
v. Town of Rush, 71, 103,

248.
Rockford, R. I. & St. L. R.R. Co. vw
Sage, 77, 498, 594.
Rockwell v. Merwin, 109.
Rodbourn wv. Utica, I. & E. Ry. Co., 260.
Rodman v. Musselman, 56.
Rogers v. Danby Univ. Soc., 91.
wu. Lafayette Agr. Works, 80.
uv. Wheeler, 200,
Rogers Locomotive, etc. Works v. Erie
Ry. Co:, 67.
Rollins v. Clay, 296, 302, 309, 310.
Rollo v. Andes Ins. Co., 56.
Roman v. Fry, 512, 519.
Rondell v. Fay, 423.
Root v. Great Western Ry. Co.,, 115.
Roper v. McWhorter, 250.
Rorke v. Thomas, 126, 128, 309, 492,
.  §OI, 503.
Rose vw. Turnpike Co., 303, 309.
Rosenblatt v. Johnson, 310,

8

TABLE OF CASES.

 

XXXIX

Rosenfeld v. Einstein, 452, 453, 454.
Rosevelt v. Brown, 516, 549.
Ross v. Lafayette & Ind. R.R. Co., 563.
v. Union Pac. Ry. Co., 206.
Ruffin, £x parte, 123.
Ruggles v. Brock, 90, 560.
uv Collier, 421,
v. Southern Minn. R.R. Co.,
207, 211.
Rumsey v. People, 31.
Rundel v, Life Assoc. of Amer., 161,320.
Runk w. St. John, 163, 608.
Runnett v. Vinayak Pandurang, 470.
Runyan v. Coster, 127. -
Russell v. East Anglian Ry. Co., 201,
202, 207.
v. McLellan, 280, 301, 307, 308,
325.
v. Men of Devon, 103.
uv. Wakefield W. Co., 112, 528.
Rutten v. Union Pac. Ry. Co., 371.
Rutter uv. Tallis, 173.
Ryan v. Leavenworth, A. & N. Ww. Ry.
Co., 487, 581, 585.
Ryder vw. Alton & S. R.R. Co., 435.

Sabloniere Hotel Co., J re, 314.
Saffold v. Barnes, 567.
Safford v. People, 148, 216, 218.
Sage, Matter of, 67, 453, 455.
v. Central R.R. Co., 395.
v. Lake Shore & M.S. Ry.Co.,
362, 371.
St. Clair v. Cox, 69, 264, 267.
St. James’ Church v, Church of Re-
deemer, 586.
St. James Club, /z re, 322, 530.
St. ions & D.C. R.R. Co. v. Ryan,
588,
St. Joseph & D. C. R.R. Co. wv. Smith,

197.
St. Lawrence S. B. Co., Matter of, 60.

St. Louis v. Missouri R.R. Co., 421.
St. Louis Domicile & S. L. Assoc. v.

Augustin, go.
St. Louis G. L. Co, uv, City of St. Louis,
77:
St. Louis Perpetual Ins. Co. v. Cohen,
264.
St. Louis & S. F. Ry. Co. uv. Johnston,
18

3:
uv. Marker, 369.

| St. Louis, I. M. & S. Ry. Co. uv. Berry,

381.
St. Luke’s Church v. Mathews, 441.
wv. Slack, 67, 454.
St. Marylebone J. S. Banking Co., Jz
re, 550.
xl

St. Romes v. Levee S. C. P. Co., 548.

Salem Mill-Dam Co. v, Ropes, 560.

Salisbury Mills v. Townsend, 48, 105,
114, 548.

Salmon v. Hamborough Co., 565.

v. Richardson, 529.

Salomons v. Laing, 80, 112.

Salt Lake City v. Hollister, 12, 13, 14,
16.

Salt Lake, City Nat. Bank uv. Hendrick-
son, 487, 488, 492, 503.

Salway vu. Salway, 183.

Sampson v. Bowdoinham S. M. Co.,

423.
Samuel v. Holladay, 83, 99.
Sanborn wv. Lefferts, 309, 310.
Sandford v. Catawissa, etc. R.R.Co., 54.
v. Handy, 566.
v. Sinclair, 155.
Sandon wv. Hooper, 228,
San Francisco & N. P. R.R. Co. wv.
Bee, 128, 395.
Sanger wv. Upton, 119, 121, 427, 516, 565.
San José Sav. Bank v. Pharis, 520.
Santa Clara Co. v. Southern Pac. R.R.
Co., 13.
Santa Clara Min. Assoc. v, Meredith,

435» 594.
Santa Cruz R.R. Co. uv. Schwartz, 471,

551.
Sappington z. Little Rock, M. R. & T.
R.R. Co., 360, 371, 391.
Sargent v. Franklin Ins. Co., 479.
v. Webster, 133.
Saul uv. Virginia, 50.
Savage v. Medbury, 171, 172, 177.
uv, Putnam, 494.
, v. Walshe, 299.
Savage Mfg. Co. v. Armstrong, 263,

419.
Savannah & M. R.R. Co. v. Lancaster,

130.
Savings Bank of N. H. wv. Bates, 133,
141, 598.
Sawyer v, Hoag, 88, 90, 119, 120, 178,
507, 554, 566.
v. Pawners’ Bank, 593.
Sayles v. Bates, 472.
vu. Chicago, etc. R.R. Co., 13.
Scanlan wv, Crawshaw, It.
Schenectady & S. P. R. Co. v. Thatch-
er, 472.
Schmidt v. Gunther, 400.
School Dist. No. 3 uv. Greenfield, 282.
Schumm wv. Seymour, 594.
Scofield v. Eighth School Dist., 52, 572.
Scott v. Central R.R. & B. Co., 611,613.
v. Depeyster, 507, 532, 581, 592.

TABLE OF CASEs.

 

The figures refer
to the pages.

Scott v. Dixon, 529.
uv, Hansheer, 370.
Scovill v. Thayer, 120, 121, 182, 478,
561, 563, 565, 566, 575.
Screven wv. Clark, 189.
Sea Ins. Co. v. Stebbins, 98.
Searcy v. Stubbs, 203.
Searles v. Jacksonville, P. & M. R.R.
Co., 165.
Sears v. Hotchkiss, 572.
Secombe v. Railroad Co., 424.
Second Nat. Bank v. Hall, 408, 409.
uv. N. Y. Silk Mfg. Co., 95,
162, I71, 172, 302.
Second Precinct in Rehoboth v. Car-
penter, 442.
Secor v. Toledo, P. & W. Ry. Co., 198.
Security L. I. & A. Co., Matter of, 600.
Sedalia, W. & S. Ry. Co. v, Abell, 472.
Seeley v. N. Y. Nat. Exch. Bank, 613.
Sellers v. Phoenix Iron Co., 594.
Selma & T. R.R. Co. v. Tipton, 429.
Selma, R. & D. R.R. Co. v. Harbin,
383.
Semmes wv. Hartford Ins. Co., 568.
Sewell v. Ives, 400,
Seymour wv. Sturgess, 487, 494, 522.
Shackelford v. Shackelford, 44.
Shackleford v. Dangerfield, 563.
v. Miss. Cent. R.R. Co.,
382.
Sharp v. Speir, 286.
v. Warren, 399.
Sharp & James’ Case, 500.
Sharpe v. Dawes, 308.
salle acesy v, Rensselaer Ins. Co.,
182,
Shaw v. Bill, 216.
v. Boylan, 488.
v. Norfolk Co. R.R. Co., 104.
v. Raled Co., 357, 387, 388,
550.
Shawhan vz. Zinn, 83.
Shawneetown v. Baker, 49.
Shea wv, Mabry, 528, 579, 580.
Sheehan’s Case, 34.
Sheffield, A. & M. Ry. Co. v, Wood-
cock, 563.
Sheldon v. Adams, 203.
Sheldon H. B. Co, v, Eickemeyer H.
B. M. Co., 135, 480.
Shellington v. Howland, 496, 568.
Shephard z, Carriel, 337.
Sherman wv. Kane, 127, 442.
Sherwin uv. Bugbee, 425.
Sherwood v. Buffalo & N. Y. City R.R.

_ Co, 57.
Shields v. Ohio, 334, 362, 363, 364, 368.
The figures refer
to the eth

Shockley v. Fisher, 133, 134.
Shorb v, Beaudry, 123.
Short v. Medberry, 504.
Shotwell v. Mali, 529.
v. Smith, 211.
Shove v. Wiley, 466.
Shrewsbury v. Brown, 48.
Shryock v. Basehore, 144.
Shufeldt v. Boehm, 43.
Schultz v. Christman, 143.
v. Sutter, 133.
Sibell v. Remsen, 137, 273, 599.
Sibley v. Carteret Club, 596.
Silk Mfg. Co. v. Campbell, 79.
Silliman v. Fredericksburg, O. & C.
R.R. Co., 340, 436.
Silver Lake Bank v, North, 161, 265,
266, 273.
Simmons v. Henderson, 167.
Simons v, Vulcan Oil & M. Co., 77,
498, 588.
Simonson vz. Spencer, 58.
Simpkins v. Smith & P. Gold Co., 127.
Simpson wv. Denison, 26, 359.
v. Ottawa & P. Ry. Co., 220.
v. Westminster Palace Hotel
Co., 62, 572.
Siney v. N. Y. Consol. Stage Co., 202.
Singer S. M. Co. v. Union B. H., etc.
Co., 55.
Singerly v. Fox, 187.
Sinking Fund Cases, 130, 294.
Siren, The, 71.
Sizer v. Daniels, 530.
Skinner v. Maxwell, 145, 148, 247.
Skip v, Harwood, 171.
Skowhegan Bank v. Cutler, 548.
Skrainka v. Allen, 119, 523.
Slater’s Case, 512.
Slawson v. Loring, 494.
Slee v. Bloom, 282, 298, 299, 325, 327,
. 488, 525.
Slocum v. Providence Steam & G, P.
Co., 33.
uv. Warren, 423.
Smith v, Board of Water Commrs., 437.
vu. Craft, 597.
v. Danzig, 158.
v. Earl of Effingham, 196.
v. Gower, 308.
vu. Heidecker, 473.
vu. Huckabee, 52, 487, 488.
v. Hurd, II, 49, 60, 79, 527.
v. Kay, 111.
v. Mutual L. I. Co., 268.

uv. N. Y. Consol. Stage Co., 134, |
| Spiller v. Paris Skating Rink Co., 77,
| Spottiswoode’s Case, 499, 500.

75.
v. Poor, 60, 78, 81.

TABLE OF CASES,.

 

xli

Smith v. Putnam, 594.
v. Rathbun, 113, 114.
uv. St. Louis Mut. L. I. Co., 123,
265.
v. Skeary, 129.
v. Tallassee Branch P. R. Co.,
36, 552, 560.
Snow v. Winslow, 172.
Society for Propagation of Gospel v
New Haven, 272, 281, 284.

| Society for Propagation of Gospel v.

Town of Pawlet, 114, 426.

Society for Propagation of Gospel v.
Wheeler, 48, 91, 265.

Society for Visitation of Sick v. Com-
monwealth, 67.

Society Perun wv. Cleveland, 32, 33.

Sohier v. Loring, 474.

Solomon’s Lodge vw. Montmollin, 17,
18, 430.

Somers v, Keliher, 603.

Somerville v. Wimbish, 251.

Sonoma Co. Water Co. uv. Lynch, 423.

Sonoma Valley Bank v. Hill, 130.

Soper wv. Buffalo & R. R.R. Co., 436.

South Bay Meadow Dam Co. wv. Gray,

"48, 418, 425.
South Carolina R.R, Co. v, Blake, 370.
Southern Hotel Co. wv. Newman, 17,

431.
Southern Life Ins. & T. Co. v. Packer,

482,
Southern Pac. R.R. Co. vw. Orton, 331.
Southern Ry. Co., /# re, 210.
South Georgia & F. R.R. Co. v. Ayres,
348.
Southmayd wv. Russ, 490.
South Mountain Consol. M. Co., Zz re,

544.
South Wales Ry. Co. v. Wythes, 206.
Southwestern R.R. Co. v. Georgia, 381,
South & North Ala. R.R. Co. v. Falk-

ner, 603.
Spackman v. Evans, 121, 557.
Spahr vw. Farmers’ Bank, 33.
Spangler v. Butterfield, 37.

v. Ind. & Ill. Cent. Ry. Co.,

563.
Sparrow wv. Evansville & C, R.R. Co.,
359, 375, 514.

| Spaulding v. Strang, 141, 597.

Spear v. Crawford, 433, 543, 544.
v. Grant, 52, 488.
Spense v. Iowa Val. Const. Co., 487.

| Spering’s Appeal, 506, 507, 508, 532,

581, 592.
xlii

Sprague v. Hartford, P. & F. R.R. Co.,
380.
uv. Smith, 200,
uv. Steam Nav. Co., 592.
Springfield v. Walker, 13, 49.
Spring Valley Water Works, Ex parte,

33.
Spring Valley Water Works uv. San
Francisco, 32, 33, 423-
Spring Valley Water Works vw. Schott-
ler, 22.
Stafford v. American Mills Co., 162,
276.
Stafford Nat. Bank v. Palmer, 405.
Stamford Bank v. Ferris, 252.
Stanhope’s Case, 556.
Stanley v. Stanley, 548.
Stanton v, Alabama & C. R.R. Co.,
237, 240, 241.
uv. King, 227.
uv. Wilkeson, 153, 160,
Star Brick Co. v. Ridsdale, 423.
Stark v. Burke, 154, 160.
State v. Amer. Cotton Oil Trust, 414.
. Ashley, 343.
. Attorney General, 343.
. Bailey, 342, 347, 355.
Balto, & O, R.R. Co., 13, 14.
Bank of Maryland, 133, 134,
141, 144, 246,

esees

v. Bank of South Carolina, 296,

v. Barron, 302, 309, 343.

v. Bienville Oil Works Co., 446.

v. Board of County Comrs., 68.

v. Boogher, 100.

v. Boston, C. & M. R.R. Co., 20,
273.

v. Butler, 558.

vw. Carney, 68,

v. Carroll, 34.

uv. Carteret Club, 67.

v. Central Ohio M. R. Assoc.,338,

v. Chamber of Commerce, 595.

v. Chicago & N. W. Ry. Co., 360.

v. Columbia & H. T. P. Co., 109,
342.

v. Commercial Bank, 327, 336,
342.

v. Commr, of R.R. Taxation, 29,

335.

. Consolidation Coal Co., 329.

. Council Bluffs & Neb. Ferry
Co., 337.

. Curran, 334.

. De Gress, 63.

. Dubuclet, 68,

. Edgefield & Ky. R.R. Co., 240.

. Farmers’ College, 327, 337.

a3

Saegg

TABLE OF CASES.

 

The figures refer
to the pages.

State uv. Ferris, 548.
Fourth ‘N. H. Turnpike, 331.
Georgia Med. Soc., 67.
Gibson, 184.
Godwinsville, etc. Road Co.,
344, 345.
Goll, 67.
Gorham, 67.
Greer, 28.
Hammer, 60.
Harris, 343.
Hebrew Congregation, 67.
Jacksonville, P. & M. R.R.
Co., 206, 211, 215.
Jacobs, 484.
. Johnson, 63.
. Lady Bryan Min. Co., 66.
Maine Cent. R.R. Co., 26, 308,
354, 362, 381.
Marietta & C. R.R. Co., 67,
176, 182.
. Mayor, etc. of Jersey City, 29.
. McConnell, 74, 313.
. Merchant, 216, 296.
. Merchants’ Ins. & T.Co., 109,
284, 342.
Metz, 380.
. Milwaukee Chamber of Com-
merce, 67.
. Milwaukee, L. S. & W. Ry.
Co., 10, 338, 339, 340.
. Miss. O. & R. R. R.R
344.
. Moore, 74, 328.
. Morris, 29.
. Morris & Essex R.R. Co., 13,
14.
. Morristown Fire Assoc., 118,
546. :
. National Bank of B., 389.
. Northern Cent. Ry. Co., 210,
276, 283, 380,
. Oberlin B. & L. Assoc., 337.
. Paterson & H. T.Co., 74, 328.
. Pawtuxet Turnp. Co., 336, 342,

SF sees 8s x<ege

s

g

Co.,

e gee

Ss

geag

345-

v. Penna. & O. Canal Co., 343.

. People’s Mut. Ben. Assoc., 327,
336, 342.

. Phoenix Bank, 203, 315.

. Pipher, 64.

Price, 63.

. Railway Co., 340. 2

. Real Estate Bank, 144, 296,
327, 338.

. Rising, 68.

. Rives, 246, 293, 308.

. Seneca Co, Bank, 296.

geese a

sa

2
The figures refer
to the pages.

State v. Sherman, 354.
Smith, 125, 567.4
. Saciete Republicaine, 336.
. Southern Minn. R.R. Co., 66.
. Southern Pacific R.R. Co.,,
109, 329.
. Stewart, 63.
. Stone, 64.
. Taylor, 331, 440.
. Thomas, 44.
. Tolan, 6o. 3
. Trustees of Vincennes Univ.,
309, 420.
vu. Vanderbilt, 338.
v. Wright, 66. ’
State Board of Education v. West
Point, 66,
State Nat. Bank v. Robidoux, 302, 309.
State Sav. Assoc. v. Kellogg, 568.
State Treasurer v. Auditor General,
10, 274, 281, 354.
Steamboat Co. v. McCutcheon, 274.
Steam Navigation Co. v. Weed, 425.
Steamship Co. vw. Joliffe, 335.
Stedman v, Eveleth, 502, 503.
Steele wv. Sturges, 173.
Steiner’s Appeal, 261.
Stettauer v. New York & S. Const.
' Co., 457.
Steuben Co. Bank wv. Alberger, go.
Stevens v. Buffalo, etc. R.R. Co., 253,

Skee eee

ge

254.
v. Davison, 45, 159, 174, 182,
206, 207, 348.

uv. Mid-Hants Ry. Co., 386.
v. Phoenix Ins. Co., 269.
v. Rutland & B. R.R. Co., 84,
294, 355, 572.
Stewart v. Beebe, 109.
v. Father Matthew Soc., 343.
wu. Jones, 249.
v. Lay, 176, 195, 492, 506.
Stilwell v. Carpenter, 315.
Stinchfield v. Little, 494.
Stockbridge v. West Stockbridge, 30.
Stockton v. Mech. & L. Sav. Bank,

531.
Stockton & V. R.R. Co. v. Stockton,
66.

Stocks, Ex parte, 499.
Stoddard wv. Shetucket Foundry Co.,
485.
Stokes v. N. J. Pottery Co., 178.
wu. Stickney, 540. a
Stone v. Chisolm, 53.
uv. Farmers’ L. & T. Co., 379.
uv, Great Western Oil Co., 418,
uv. Hackett, 562.

TABLE OF CASES,

 

xiii

Stone v, Ilinois Cent. R.R. Co., 379.
u, Mississippi, 28.
Story v. Furman, 260, 490, 502, 593.
Stourbridge Canal v. Wheeley, 421.
Stout vw. Lye, 105.
Stover v. Flack, 506, 519.
Stowe v. Flagg, 417.
Streit v. Citizens’ F. I. Co., 166.
Stringer’s Case, 615.
Strong v. McCagg, 284, 313. '
v. N. Y. Laundry Mfg. Co.,
482.
uv. Wheaton, 543, 549.
Sturges v. Vanderbilt, 43, 93, 97, 129,
130, 291, 316, 520, 612.
Suburban Hotel Co., Zz ve, 305.
Sullivan v. Campbell, 399.
v. Triunfo G. & S. M. Co.,
308.
Supervisors of Fulton Co. v. Miss, &
W. R.R. Co., 514.
Susquehanna Bridge & B. Co. v. Gen-
eral Ins. Co., 429.
Susquehanna Canal Co. v. Bonham,
249, 250.
Sutton’s Hospital Case, 115.
Swan v. Howard, 296.
Swann wv. Clark, 241.
Swansea Dock Co. uv. Levien, 563.
Swartwout wv. Mich. A. L. R.R. Co.,
375, 558.
Sweatt vw. Boston, H. & E. R.R. Co.,

205.
Sweny v. Smith, 52, 329.
Swepson v. Exchange & Dep. Bank,

133, 140.
Swift v. Smith, 307, 308, 562.

Taft v. Hastert; P. & F. RR. Co.,
10,
v. Mills, 269.
v. Ward, 494.
uv. Warde, 433.
Talbot v. Scripps, 110.
Tallmadge v. Fishkill Iron Co., 124.
Talmage v. Pell, 90, 129, 178, 187,
497.
Tanner’s Case, 499.
Tappan v, Gray, 65.
Taylor v, Atlantic & G. W. Ry. Co.,
378.
uv. Baldwin, 197.
. Burlington & M. R.R. Co.,

2

56.
. Columbian Ins. Co., 162, 194.
. Earle, 310, 554.
, Gillean, 56.
. Holmes, 568, 576.

a2 8-8

4
xliv

Taylor v. Miami Exporting Co., 125.
v, Phila. & R. R.R. Co., 182.
v. South & North Ala. R.R. Co.,
480,
uw. Taylor, 519, 592.
Taylor’s Admr. v. Penna. Co., 275.
Taymouth vw, Koehler, 465.
Tazewell, County of, v. Farmers’ L. &
T. Co., 111.
Telegraph Co. vw. Davenport, 548.
v. Texas, 275.
Temple v, Lemon, 471.
Tennent v, City of Glasgow Bank, 560.
‘Tetinesses *v. Whitworth, 363, 368,
381.
Tenney v. East Warren Lumber Co.,
431.
Terhune v, Midland R.R. Co., 355.
Terrett v. Taylor, 63, 326, 327, 615.
Terry v. Anderson, 93, 97, 129, 417,
495, 576.
. Bamberger, 171, 186, 188.
. Eagle Lock Co., 613.
. Little, 488, 490.
. Martin, 495.
. Merchants’ & P. Bank, 317.
Tubman, 87, 96, 417, 576.
Texas & P. Ry. Co. v. Murphy, 369.
Thackrah v, Haas, 562.
Thatcher v. Powell, 158.
Thayer v. Middlesex Mut. F. I. Co.,
441, 457, 465.
Thebus v. Smiley, 478.
ae Nak Bank v, Eastern R.R. Co.,
18,
Thomas v. Armstrong, 249.
v. Brownville, F. K. & P. Ry.
Co., 586.
v. Dakin, 9, I.
v. Hobler, 115.
v. Railroad Co., 15, 16, 37,
251, 348, 349.
Thompson v. Abbott, 368.
. Brown, 532.
. Comrs. of Canal Fund, 65.
. Diffenderfer, 167.
. Erie Ry. Co., 455, 610.
. Gloucester City Sav. Inst.,
183.
. People, 328, 341.
. Riggs, 89.
v. Scott, 110, 197
Thornton v. Marginal Freight Ry. Co.,
57, 283, 293, 316, 317.
v. Wabash Ry. Co., 387, 390,

eeeege

Sse 8

gs

475.
Thorp wv. Wegefarth, 389, 394.
Tibbetts v. Blood, 400,

TABLE OF CASES,’

 

The figures refer
to the pages.

Ticonic W. P. & Mfg. Co. v. Lang, 551
567.

Tiemeyer v. Turnquist, 132.

Tiernan v. Wilson, 63.

Tink v. Rundle, 198.

Tinkham v, Borst, 272, 319, 608.

Tinsman v. Belvidere Del. R.R. Co.,
27, 28.

Tipling v. Pexall, 22.

Tippets v. Walker, 494.

Titcomb v. Union Marine, etc. Ins. Co.,

252.

Titherington’s Admr. v. Hodge, 183.

Titus v. Cortelyou, 450.

Tobey v. Russell, 195.

Toledo, A. A. & G. T. Ry. Co. vw
Dunlap, 370.

Toll Bridge Co. v. Betsworth, 437.

Tomlinson wv. Branch, 361, 362, 364, 368.

Toof v. Martin, 41.

Tool Co. v. Norris, 588.

Topeka Bridge Co. v. Cummings, 471.

Topping v. Bickford, 465.

Torrey v. Bank of Orleans, 581.

Totten v. Brady, 141, 597.

Towar wv. Hale, 319.

Town v, Bank of River Raisin, 133, 144.

Townes v. Nichols, 66.

Tracy v. First Nat. Bank, 90, 187.

Trask v. Peekskill Plow Works, 355,
358.

Trayhern v. National Mech. Bank, 184.

Treadwell v. Salisbury Mfg. Co., 44,
130, 159, 299, 306.

Trenton Mut. Life, etc. Ins. Co. v.
Perrine, 48.

Trevitt v. Converse, 141.

Trowbridge v. Scudder, 403, 409.

Troy & B. R.R. Co. v. Boston, H, T.
& W. Ry. Co., 348.

Troy & G. R.R. Co. v, Commonwealth,

6

56.
Troy & R. R.R, Co. v. Kerr, 33, 296,
302, 309.
Trustees v. Greenough, 84.
Trustees of Canandarqua Academy v.
McKechnie, 430.
Trustees of Huntington wv. Nicoll, 97.
spaee of University v. Moody, 18,
399. ; ae
Tuckerman v. Brown, 177.
Tumacacori Min. Co., /z re, 304.
Turgeau wv. Brady, 155.
Turnbull v, Payson, 548.
v. Prentiss Lumber Co., 159.
Turner vw. Fendall, 247.
v. Grangers’ L. & H. Ins, Co.,
473-
‘
’

The figures refer
to the pages.

Turner v, Indianapolis, B. & W. Ry.
Co., 243.

v. Peoria & & R.R. Co., 241.
Turquand v. Marshall, 537, 592.
Turrill vw. Ill. Cent. RR. Co., 14.
Tuscaloosa Bridge Co. v. Jemison, 49.
Tuscaloosa Mfg. Co. v. Cox, 78, 81, 579.
Twinam wv. Swart, 245.

Twin Lick Oil Co. z. Marbury, 23, 136,
435: 480, 580, 589, 590.

Tyng te . 5. Submarine & T. B. Co.,
45

Tysen v. Wabash Ry. Co., 208, 210,°
212, 368, 371.

Tyson z. Fairclough, 211.

v. Virginia & Tenn. R.R. Co., 99.

Uhl v. Dillon, 43, 153.
Umsted v. Buskirk, 492, 497, 505.
Underhill v. Gibson, 494.
Union Bank ~, Call, 463.
v. Ellicott, 133.
v. Knapp, 466. é
v.Wando Min. & Mfg.
Co., 488, 490.
Union Canal Co. wv. Gilfillin, 92.
v. Loyd, 438.
Union Gold Min. Co. v. Rocky Moun-
tain Nat. Bank, 322.
Union Iron Co. v. Pierce, 540.
Union Mut. L. I. Co. v, Frear Stone
Mfg. Co., 118, 120.
Union Nat. Bank v. Douglass, 120, 123,
126, 128, 583, 584.
v. Hunt, 445.
Union Pac. R.R. Co. v. Credit Mobilier,
579, 589.
Union Trust Co, v. Chicago & L. H.
R.R. Co., 241.
v. Ill. Midland Ry. Co,, 227,
229, 230, 240, 2at 242,
uv. Rochester & P. R.R. Co.,

362.
uv. Rockford, R.1.&St. L. R.R.
Co,, 214,
v. St. Louis, I. M. & S. R.R.
Co., 165, 210, 218,
uv. Souther, 241, 243.
United Hebrew Assoc. uv. Benshimol,

35.
United Service Co., J” re, 291.
United States v. County of Clark, 65.
v. Diekelman, 75.
v. Howland, 72.
v. Insurance Companies, 114,
426,
v. Kane, 198,
wv. Lee, 56, 71, 76,

TABLE OF CASES,

 

xlv

United States v. New Orleans R.R.
Co., 216.
v. Railroad Co., 28.
U.S. Bank @, Stearns, 419, 428.
U.S. Express Co. uv. Lucas, 264.
U. S, Ins. Co. v. Shriver, 437.
U.S. Rolling Stock Co., Jn re, 378.
U.S. Trust Co. v. Brady, 26.
v, New York, W.S. & B. Ry.
Co., 185, 225, 235, 242,
258.

25
v. U.S. Fire Ins, Co., 516.
Unity Ins. Co. v. Cram, 403.
University v. North Carolina R.R.
Co., 614.
University of Vermont, etc. v. Baxter’s
Estate, 370. —
Upton wv. Englehart, 90, 567.
v. Tribilcock, 88, 119, 120, 140,
178, 427, 509, 510, 511, 516,
: 522, 543, 544, 560, 598.
Utica Ins. Co. v. Lynch, 183,
v. Tillman, 418.
Utley v. ee pe L. M. Co., 50,

263.
v. Union Tool Co., 419.

Vail v. Hamilton, 125, 178, 190.
Valentine, Matter of, 286.
Valley Bank & S. Inst. v. Ladies’, etc,
Sewing Soc., 112.
Van Allen, Zz re, 171, 175, 191.
Van Alstyne v. Cook, 122.
Vanatta v. N. J. Mut. L. I. Co., 600.
Vance vz. Erie Ry. Co., 13, 14.
v. Phoenix Ins. Co., 487, 579,

592.

Van Cott wv. Van Brunt, 124, 440, 524,
553, 581.

Vanderbilt v. Bennett, 414.

Van Dyck v. McQuade, 89, 191, 477,
507, 532, 533, OI.

Van Hook v. Somerville Mfg. Co., 461.

v. Whitlock, 59.

Van Pelt v, U. S. Metallic Spring, etc.
Co., 76, 312.

Van Riper, Lx parte, 501.

Van Wagenen v. Clark, 86, 102, 195.

Van aponct v. Paterson G. L. Co.,
470.

Vatable v. New York, L. E. & W.R.R.
Co., 388, 475.

Vawter v, Missouri Pac. R.R. Co., 275,

Veeder v, Baker, 541.

Veiller v, Brown, 511.

Vermont & C. R.R. Co. v. Vermont
Cent. R.R. Co., 147, 197, 198, 201,
208, 218, 224, 235.
xlvi

Vernon Society v. Hills, 327.

Verplanck v, Mercantile Ins. Co., 54,
148, 152, 155, 171, 285, 306, 312,
5 !

507.
Vick v, La Rochelle, 473.
Vicksburg & M. R.R. Co. v McCutch-

en, 247.
Vicksburg, S. & T. R.R. Co. v, McKean,

560.
Victory Webb Printing Co. v. Beecher,
5OI, 540.
Vigers uv. Pike, 590.
Vilas v. Milwaukee & P. du C. Ry.
Co., 360.
Vincent v. Sands, 501.
Vinton’s Appeal, 615.
Volger v. Ray, 530.
Von Glahn v. De Rosset, 57.
v. Harris, 495.
Voorhees v. Bonesteel, I11.
Vose wv. Grant, 52.
uv. Reed, 208, 210, 212.
Voshell v. Hynson, 155.
Vreeland v. N. J. Stone Co., 571.

Wabash Ry. Co. v. Brown, 199.
Wabash, St. L. & P. Ry. Co. v. Central
Trust Co., 159, 166, 213, 226.
Wabash, St. L. & P. Ry. Co. v. Ham,

119, 126, 128, 360, 366, 368.
Wabash, St. L. & P. Ry. Co. w, Ili-
nois, 274.
Waite, Matter of, 273, 277.
Wakefield uv. Fargo, 504, 561.
Wakeman v, Dalley, 527.
Wales v. Stetson, 294.
Walkenshaw v. Perzel, 39, 42.
Walker v. British Guar. Assoc., 539.
v. Detroit Transit Ry. Co., 547.
v. Lewis, 504.
v. Mobile & O. R.R. Co., 560.
v. Reister, £27.
Walkley v. Muscatine, 66,
Wallace v. First Parish in Townsend,
461.
v. Loomis, 206, 219, 229.
Wallamet Falls C. & L. Co. uv. Kitt-
ridge, 331.
Walrod v. Ball, 42.
Walstab, Ex parte, 499.
Ward v. Brigham, 409.
v. Farwell, 339.
v. Griswoldville Mfg. Co., 565.
v. Johnson, 89.
v. Sea Ins. Co., 76, 135, 300, 312.
v, Society of Attornies, 135.
Wardell v. Railroad Co., 506, 580, 581.
_v. Union Pac. R.R. Co., 586.

TABLE OF CASES,’

 

The figures vefer
to the pages. 4

Warkworth Dock Co., £% parte, 121.
Warner v. Blakeman, III.
v. Callender, 86,
v. Hoffman, 609.
vu. Mower, 133.
Warren uv. King, 606, 618.
vu. Mobile & M. R.R. Co., 369.
v. Union Nat. Bank, 162. :
Washington & B. T. R. Co. v. State,
280.
Waterbury, Matter of, 173, 289, 315.
v. Merchants’ Un. Exp. Co.,
153, 159, 207, 302, 324.
Waters v, Gilbert, 460.
Watson v. Harlem, etc. Nav. Co., 55.
Watts v. Kinney, 266.
Watts’ Appeal, 480.
Waynesville Nat. Bank vw. Irons, 438.
Weare v, Gove, 494.
Weaver v. Huntingdon, etc. R.R. Co.,
252. .
Webber v. Leighton, 58, 479.
Webster vw. Turner, 298, 299.
wv. Upton, 90, 511, §16,.522,
544, 501.
Weeks v. Cornwall, 174.
uv. Love, 102, 194, 495.
Weigley v. Coal Oil Co., 504.
Weightman v. Corporation of Wash-
ington, 461.
Welch v. Ste. Genevieve, 147, 320.
Wellington v. Small, 63.
Wells v. Gates, 321, 402.
Wellsborough & T. P. R. Co. v. Grif-
fin, 394.
Wentworth v, Lloyd, 590.
West uv. Carolina L. I. Co., 112, 301,

331.
ieee & P. R.R. Co. uv. Jackson,
II. ;
West Devon G. C. Mine, Zn re, 446,
448, 452.
Western Bank of Scotland v. Baird,

536.

Western N. C. R.R. Co. wv. Rollins,
168, 283.

Western R.R. Co. v. Davis, 102.

v. Nolan, 81.

Western Screw & Mfg. Co. v. Cous-
ley, 77, 498.

Western Union Tel. Co. v. Mayer,
270.

Weston v. Hunt, 442.

West Winsted Sav. Bank, etc, Assoc.
v. Ford, 114, 426.

Wetherbee wv. Baker, 117.

Wetmore vw St. Paul & P. R.R. Co.,

396.
The figures refer
to the pages.

ee Bridge C. P. Co. w Green,
8

588.
Wheeler v. Millar, 58, 406, 434, 490.
uv. Miller, 417, 495, 496.
v. Philadelphia, 418, 420.
uv. Walker, 462, 463, 466.
Wheeling v, Mayor of Balto., 82.
Wheelock v. Kost, 516.
Whelpley w. Erie Ry. Co., 166, 217.
Whichcote v, Lawrence, 583.
Whipple v. Parker, gor, ,
uv. Union Pac. Ry. Co., 373.
Whitcombe wv. Fowle, 122.
White, Ex Zarte, 392.
v. Ambler, 466,
Baugh, 183.
Geraerdt, 256.
Haight, 186, 187.
‘Joy, IIa,
Low, 109.
Ross, 469.
v. Vermont, etc, R.R. Co., 130.
Whitehall & P. R.R. Co. uv. Myers,
550.
Whitehead v. Wooten, 155.
White Mountains R.R. Co, v, East-
man, 435, 462, 465, 558.
White Mountains R.R. Co. 7. White
Mts. (N. H.) R.R. Co., 92, 325.
White River Bank, Zz re, 454.
White oo Valley Co. uv, Vallette,
42
Whitman v. Porter, 494.
Whitney v. Buckman, 115.
v.N. Y. & Atlantic RR.
Co., 259, 320.
uv. Wyman, 74, 77, 313, 328.
Whittlesey v. Delaney, 89, 111, 129,
190.
v. Frantz, 259.
Whitworth v. Erie R.R. Co., 460.
Wilcox v. Bickel, 80, 83, 111, 571.
v. Kellogg, 44.
uv. Toledo & A. A. R.R. Co.,
32, 33-
v. Wheeler, 31.
Wilde v. Jenkins, 308, 330.
Wilder v. Shea, 247.
Wiles v. Suydam, 114, 406, 500, 501,
541.
Wilkes v. Ferris, 140, 599.
Wilkins v. Thorne, 266, 272, 278, 281,
285, 608,
Wilkinson v. Leland, 614.
Willamette F. Co. v. Stannus, 472.
Williams v, Paleone 171, 172, 177,

v. Bark “of Mich., 398, 494.

TABLE OF CASES.

 

xlvii

Williams wv. Boice, 612, 615.
Cheney, 425.
Halliard, 83, 531.
Hanna, 523.
Mechanics’ Bank, 252.
Prince of Wales Life,
etc. Co., 447, 448, 451.
Union Bank, 426,
Western Union Tel. Co.,
119, 460, 573, 613.
Williamson v. New Albany, etc., R.R.
Co., 165, 207, 210, 211, 218.
v. N. J. Southern R.R. Co., 253.
Willink v. Morris Canal, etc. Co., 189.
Willis: v. Corlies, 147.
v. Missouri Pac. Ry. oa 275.
Williston v. Mich, So. & N. I. R.R.
'  Co., 267, 268, 610,
Willitts v. Waite, 483.

Wilmer v. Atlanta & R. A. L. Ry.
Co., 27, 92, 163, 164, 215, 378.
Wilmersdoerffer v. Lake Mahopac

Imp. Co., 152.
Wilson v. Allen, 187, 188,
v. Bank of La., 56.
uv. Barney, 203.
v. City Bank, 41.
vu. Metcalfe, 256.
v. Proprs. of Central Bridge, 38,
299, 300, 301, 307.
v. Wilson, 188.
Wiltbank’s Appeal, 615.
Winans v. N, Y. & Erie R.R. Co., 13.
v, Schenectady, etc. R.R. Co.,

ss

13.

Winch wv. Birkenhead L. & C. J. Ry.
Co., 100, 348.

Winchester vw. Balto. & S. R.R. Co.,

437.
Winchester & S. R.R. Co. v. Colfelt,
250.
Wincock v. Turpin, 88, 193, 406.
Windham Prov. Inst. v. Sprague 496,
503, 523.
Winfield v. Bacon, 176, 196.
Winona & St. P, R.R. Co. wv. St. Paul
& S.C. R.R. Co., 48, 51.
Winsor wv, Bailey, 112, 573.
Winter v. Baker, 60,
Wiswall v. Greenville & R. P. R. Co.,
349, 570.
v. Sampson, 149.
Wiswell v. Starr, 203.
Wolf wv. Goddard, 9.
v. Schleiffer, 530.
Wontner w. Shairp, 529.
Wood v. Dummer, 52, 87, 119, 121.
v. Jefferson Co. Bank, 418,
xlviii

Wood wz. Truckee Turnp. Co., 249.
v. Whelen, 439.
Woodruff v, Dubuque & S, C. R.R.
Co., 413, 414.
uv. Erie Ry. Co., 176, 177,
|. 219, 231, 348, 355) 377
Woods v. Wicks, 488, 490.
Woodward wv. St. Louis & S, F. Ry.
Co., 13.
Woonsocket Un. R.R. Co. v. Sher-
man, 435. ,
‘Woven Tape Skirt Co., Jz re, 198.
Wray wv. Jamison, 187, 188,
Wren v. Kirton, 183.
Wright, x re, 40. .
Atkyns, 212.
. McCormack, 417, 493, 495,
497.
v. Miller, 63.
u, NGloesiilece & St. P. Ry. Co.,
360,
uv. Oakley, 335.
Wyatt v. Ohio & M. R.R. Co., 203.

U
U

TABLE OF CASES.

 

The figures refer
to the pages.

Wych v. Meal, ror, 116.
Wyckoff v. Scofield, 211, 221,
Wylde v. Northern RR. Co., 457.
Wynn v. Lord Newborough, "189.

Yates v. Van de Bogert, 18.
Yeager v. Wallace, 187.
York & C. R.R. Co. v. Ritchie, 563.
York & N. M. Ry. Co. z. “Hudson, 507,
508, 528, 580, 585, 591.

Young, /x re, 196, 198.

v. Drake, 315, 573.

v. Rollins, 155, 160, 221.

v. Rosenbaum, 492, 520.
Youngman wv. Elmira & W. R.R. Co.,

249, 250, 253-

Zabriskie v. Cleveland, C. & Cc. R.R.
Co., 571.
U. Hackensack & N.Y.R.R.
Co., 294, 351, 355, 558.
Zimmer zw, State, 368.
Zinn v. Mendel, 60, 128,
a
-

I

Il,
12,
13.
14.
15.

16.

17,
18,

on anh wn

9.
o. Presumptions affecting corporate

INSOLVENT CORPORATIONS.

CHAPTER I.

INTRODUCTORY DISCUSSION.

. Financial misfortunes affecting

corporations.

. Limits of the discussion.

. Questions of individual liability.
. Causes of corporate insolvency.
: t History and definition of corpo-

rations.

. Corporate powers and liabilities.
. Liability for torts and for con-

tracts distinguished.
Changes in the law.

acts,
Nature of corporation restated.
What is meant by a franchise.
Invisibility of corporations.
Domicil of a corporation.
Creation of corporations—Source
of the power. ,
Kinds of corporations.
Public and private corporations.
Power to grant public franchise.

 

$19

20.
21.
22.
23.
24.
25.
26.
27.
28.
29.

30.
31.
32:

33-
34-

35+
36.

Corporations by prescription or
at common law.

A corporation aggregate.:

A corporation sole.

De facto corporations.

De facto officers.

Quasd corporations.

Corporate name.

Fus désponend: of corporations.

Corporators liable as partners.

What constitutes insolvency.

Various interpretations of the
term.

Open and notorious insolvency.

Insolvency and inability to pay.

Meaning of the phrase “in fail-
ing circumstances.”

Presumptions concerning insol-
vency.

Effect of insolvency.

Corporate action after insolvency.

Effect of bankruptcy.

§ 1. Financial misfortunes affecting corporations.—A large
proportion of the commercial or business schemes entered
into by individuals, or by copartnerships, are, proverbially,
acknowledged failures, entailing financial loss upon their

projectors.

(nfortunately our private or business corpora-

tions do not constitute exceptions to this almost inexorable
rule affecting commercial enterprises; on the contrary, the
schemes which enlist the attention of a large number of
2 INTRODUCTORY DISCUSSION. $1

these organizations culminate in disaster, and the corpora-
tions are thrown into insolvency. Financial misfortunes
and entanglements affecting public or political bodies, such
as towns, cities, counties, and sometimes even involving
sovereign States and Empires, are matters of not infrequent
occurrence. It will be at once apparent to professional and
business men that the field of insolvent corporation law
which we are about to explore bids fair to yield a prolific
harvest of judicial decisions.

The observation may be ventured at the outset that the
liquidation of an insolvent debtor’s estate, or of the affairs
of a bankrupt copartnership, is an easy task when consid-
ered by comparison with the complications incident to wind-
ing up and dissolving an insolvent private corporation. The
principles of substantive law and rules of procedure under
which the interests of the public are guarded, the rights
of creditors, officers and stockholders preserved, pro-
tected and enforced, the affairs of an insolvent private
corporation liquidated, and its franchise surrendered, for-
feited, or blotted out, are not easily understood, and are
not always capable of accurate ascertainment either from
the text-books, the statutes, or the cases. The confusion
in the authorities relative to political or guasz political or
public corporations which have suspended, or repudiated
payment, is proverbial. The obstacles and embarrassments
which creditors of such corporations encounter, in seeking
to coerce recognition of their demands in the courts, are
numerous, and will incidentally come within the range of
our subject. It will appear, as the discussion progresses,
that a corporation, when once formed, is, serpent-like, a
difficult thing to exterminate. Cautious lawyers frequently
experience a feeling of deep anxiety concerning the finan-
cial welfare of a solvent client, who has formed a connection
with a private corporation, either as promoter, officer, or
stockholder. Experience demonstrates that incorporation
§ 2 INTRODUCTORY DISCUSSION. 3

may prove to be more of a snare than a protection. The
fancied security from personal risk or liability is frequently
illusive. This unsatisfactory condition of affairs is in some
measure attributable to the fact that the body of our cor-
poration law has been unsettled or supplemented by stat-
utes imperfectly framed and of doubtful construction.
Diversity in the policies of courts and legislatures in differ-
ent quarters of the Union, and lack of fidelity on the part
of both courts and legislatures to the great principles and
analogies underlying corporation law, have contributed
to prevent the logical development of this branch of
jurisprudence. The unsatisfactory and variable condition
of our statutory law relative to corporations may, indeed,
render the inquiry upon which we are entering one of
doubtful utility. We approach the consideration of the
subject with hesitation and embarrassment., The field has
been rendered barren by cultivation, and despoiled by im-
provident legislation. Our corporation case law of the
present day stands prominently forward as an evidence of
the wonderful subtlety of the human intellect. The reader
will find this branch of the law burdened with wearisome re-
finements, and alinost every rule barnacled with exceptions ;
too often the reasoning of the cases is illogical, and it is
common experience to encounter long lines of inharmo-
nious decisions affecting important corporate questions.
The growth of our corporation law has been abnormal, and
it may be said to have passed through various stages of
evolution. In some essential particulars it still remains in
a formative and unsettled state.

$ 2, Limits of the discussion—The investigation upon
which we are about to enter will not include, except inci-
dentally, questions affecting the organization of corporate
bodies. Nor will we treat in detail of the powers or duties of
officers, directors, or trustees covering acts embraced within
the period when the corporate organization was exercising
4 INTRODUCTORY DISCUSSION. § 2

its legitimate functions in a healthy and vigorous manner,
-unaffected by problems concerning insolvency, dissolution,
or forfeiture of chartered rights. Questions of the charac-
ter indicated are copiously considered, and at least in some
respects exhausted, in the numerous general treatises upon
corporations, private’ and municipal.? It will become nec-
essary, however, as we progress, occasionally to enter into
investigations of the validity of certain classes of corporate
transactions, and to show in what manner acts performed
prior to insolvency, liquidation, or winding up proceedings
may be challenged, more especially with a view of creating
a fund for creditors out of property wrongfully alienated or
misapplied by the corporation.

The reader will discover that when the blight of insol-
vency touches a corporation, and a receiver, liquidator, or
assignee is called upon to take charge of its affairs and
effects, or when complications concerning the forfeiture of
the charter or dissolution of the corporate body arise,
novel classes of questions are presented for consideration.
These complex problems concerning insolvency, forfeit-
ure, and dissolution are treated in most of the books
relating to corporations either in a superficial manner, or
often merely as collateral incidents affecting the gen-
eral subject. A pioneer effort will be put forth to classify
the great body of the cases relating to this branch of the
law, to formulate practical rules for the information and
guidance of the profession, where such a result is at-
tainable, and, if possible, to bring some order out of the
confusion in which the general subject is enveloped. The
wisdom of treating by itself a separate or isolated phase or
department of corporation law has been demonstrated in
several instances. The rapid accumulation of new cases

 

‘See Morawetz on Corporations, 2d — * See Dillon on Municipal Corpora-
ed., 2 vols., 1886; Cook on Stock and tions, 3d ed., 1881.
Stockholders, 1887; Taylor, on Corpo-
rations, 1884,
$3 INTRODUCTORY DISCUSSION. 5

and the development of novel and important questions af-
fecting corporations which have become involved in finan-
cial difficulties or liable to forfeiture of chartered rights will
render apparent the propriety of the present effort.

$ 3. Questions of individual liability—Questions concern-
ing the statutory and common law liabilities of incorpora-
tors, stockholders, and officers of corporations have grown
to such proportions as to constitute prolific, not to say ap-
palling, sources of contention in the courts. When.the
death-throes of insolvency come, “all the perfumes of
Arabia” will frequently be insufficient to sweeten “the smell
of the blood” upon the garments of the unfortunate pro-
moters of the unsuccessful enterprise, and well might
the persecuted officers and stockholders exclaim, in the
language of the play, ‘‘ Will these hands ne’er be clean ?”
As the insolvency of corporate bodies precipitates this
class of litigation, the effort will be made, incidentally, to
elucidate, among other things, the nature and extent of the
individual liability of persons connected with corporate
bodies as promoters, stockholders, or officers, to the end
that this feeling of insecurity and aversion to corporate al-
liances may, when ill-founded, be allayed, the true measure
of the personal liability ascertained and at least approxi-
mately declared, and some of the means brought to light
by which this obnoxious concomitant may be avoided.!
It must be remembered that freedom from individual lia-
bility is frequently a controlling or persuasive reason for
creating, joining, or investing in a corporate enterprise. If
the attribute of personal exemption from financial risk or
liability for corporate acts is to become a delusion, it will
result that enterprise will cease to seek accomplishment of
its objects in the form of corporate organization. In deter-

 

1See Chapter XXVI.
6 INTRODUCTORY DISCUSSION. $4

mining the extent of the individual risk or liability assumed,
parties seeking corporate alliances are generally content
with an examination of the statutes and cases in the State
in which the corporation was created. Such research will
not necessarily prove a complete safeguard, for the corpo-
ration may transact business in foreign States, where statutes
are in existence imposing certain liabilities upon parties con-
nected with foreign associations. Stockholders or officers
served with process in such foreign jurisdictions may find it
no easy task to repel personal liability concerning the ex-
istence of which nothing was known in the home jurisdic-
tion.

§ 4. Causes of corporate insolvency.—The financial disas-
ters which so frequently overwhelm corporations may, in
many instances, be attributed to the fallibility of human
judgment in the selection of the enterprise in which the
corporation embarks. The most sagacious people make
mistakes, and it is common experience to find the keenest
business men entangled in foolish and disastrous corporate
undertakings. Short-sighted and inexperienced people are
lured into the net by thousands. Possibly the business
conducted in the name of an invisible entity cannot, by
reason of cumbersome corporate machinery and charter
restrictions, be so easily, securely, and successfully con-
ducted or managed as the affairs of an individual or of a
copartnership, but it certainly is true that the characteristic
of corporate immortality fails to carry with it the attribute
of commercial infallibility. Officers and agents of corpo-
rations possess no charm or supernatural skill in the manage-
ment of corporate affairs, and the study and development of
this branch of our law unfortunately demonstrates that many
exceptions should be noted to the truth of the adage that
the many are wiser than one. It is believed that corporate
enterprise has failed by reason of divided responsibility and
the absence of concentrated action in fields where individual
§ 4

effort would have succeeded. The enterprises with which
corporate capital and skill are called upon to cope are usu-
ally of a character that do not attract, or rather repel or defy
individual effort. Capital is massed, often in large amounts,
in the stock and assets of a corporation to achieve some im-
portant public or private result. Corporations very fre-
quently embark in perilous schemes from which individual
enterprise would shrink, or in which it would fail of suc-
cess because not vested with the right to exercise the power
of eminent domain. The construction and maintenance of
extensive lines of railway, the erection and operation of
large factories, the development and sale of important pat-
ented inventions, the working of mines, the founding of
educational institutions or of banks and trust companies,
are enterprises which, in magnitude, are usually beyond the
resources of individual capital, and which, without a fran-
chise or the charm of “legal immortality,” would often fail

INTRODUCTORY DISCUSSION. 7

of successful consummation.

Corporate disaster and insol-

vency is in some measure attributable to the perils and the

 

* Adam Smith observed in his cele-
brated “Wealth of Nations”: “The
trade of a joint stock company is al-
ways managed by a court of directors.
This court, indeed, is frequently sub-
ject in many respects to the control of
a general court of proprietors. But the
greater part of those proprietors sel-
dom pretend to understand anything
of the business of the company. ....
The directors of such companies, how-
ever, being the managers rather of
other people’s money than of their
own, it cannot well be expected that
they should watch over it with the
same anxious vigilance with which
partners in a private copartnership fre-
quently watch over their own. Like
the stewards of a rich man, they are
apt to consider attention to small mat-
ters as not for their master’s honor.

Negligence and profusion,
therefore, must always prevail, more
or less, in the management of the af-
fairs of such a company..... That
a joint stock company should be able
to carry on successfully any branch of
foreign trade, when private adventurers
can come into any sort of open and
fair competition with them, seems con-
trary to all experience... .. The
only trades which it seems possible for
a joint stock company to carry on suc-
cessfully, without an exclusive privi-
lege, are those of which all the opera-
tions are capable of being reduced to
what is called a routine or to such uni-
formity of method as admits of little or
no variation.” The same distinguished
writer says that manufacturing corpo-
rations “scarce ever fail to do more
harm than good.” The reader must
§5

8 INTRODUCTORY DISCUSSION.

,

speculative nature of corporate enterprise.! Complications
concerning corporations arise in part also in discharging
duties of a public nature, or in exercising the semi-govern-
mental functions which inhere in corporations or which
‘they assume.

$5. History and definition of corporations—We may ob-
serve at the outset that the history of the origin and early
use of private corporations is enveloped in obscurity. It is
believed by many that Italy was the early home of trading
corporations, The assertion that commercial corporations
prevailed among the ancient Romans has been strenuously
controverted. The reader may recall that among early cor-
porations the famous Bank of Genoa was formed in 1407,
and the Dutch East India Company in 1602. The seven-
teenth century seems to have marked the period when busi-
ness enterprise began to assume corporate form to a marked
extent. Schemes of fraudulent inflation and of “ incorpo-
rated rascality” are not of recent invention, but appeared
hundreds of years ago, and statutes were long since enacted
in various countries to suppress financial bubbles and
swindles devised by adventurers under the guise of corpo-
rate forms. It resulted that corporations became unpopu-

 

recall the fact that Mr. Smith wrote at
a time when corporations were unpop-

development of the partnership princi-
ple.” It may be seriously questioned,

ular and little importance was attached
to them as business agencies.

? John Stuart Mill said: “I must re-
peat my conviction that the industrial
economy which divides society abso-
lutely into two portions—the payers of
wages and the receivers of them; the
first counted by thousands and the last
by millions—is neither fit for nor capa-
ble of indefinite duration.” To which
he added that ‘the possibility of
changing this system for one of com-

. bination without dependence and unity
of interest instead of organized hostil-
ity, depends altogether upon the future

however, whether the recent wonder-
ful growth of corporate influence and
enterprise in the United States has
tended to secure a more even distribu-
tion of wealth, or to materially elevate
the condition of the working classes or
of the poor. Colossal fortunes have
been accumulated in this country by
the manipulation of railroad corpora-
tions alone, but the wealth so gained
has concentrated in the hands of a few
people constituting an aristocracy in
many respects as obnoxious as that
fostered by the law of primogeni-
ture,
$5 INTRODUCTORY DISCUSSION. 9
lar. But incorporated enterprise has almost wholly lived
down this early unpopularity, and is now rapidly absorbing
all the great industries of the world.’

It will become important to the orderly progress of our
discussion to determine what is meant by the term “cor-
poration,” or rather to attempt a definition of it.? A corpo-
ration has been defined by high authority *to be “an arti-
ficial being, invisible, intangible, and existing only in con-
templation of law.” The distinguishing feature of such a
body is the capacity of perpetual succession of different per-
sons, who are regarded in law as a single individual.* It
cannot exist except by force of express law.® Being a
mere creature of the law ° it possesses and can exercise only
those powers which are given to it by charter, either ex-
pressly or impliedly, as necessary in strict furtherance of the

objects of its creation.*

“A corporation,” says the learned

 

*Prof. Walker says: “Corporations
are annually multiplying to such a de-
gree as even to excite alarm in some
minds, lest individual freedom of action
shall be swallowed up in the prevailing
spirit of association.” Walker’s Ameri-
can Law (9th ed.), p. 231. Speaking of
corporations “ whose only object is the
personal emolument of its members,”
Chancellor Blarid said: “It is remark-
able that there is no instance of the
creation of any body politic of this
description under the provincial gov-
ernment; but since the establish-
ment of the Republic they have in-
creased and multiplied to a very large
and still rapidly growing family.” Mc-
Kim v. Odom, 3 Bland Ch. (Md.) 418.

? See Liverpool Insurance Co. v. Mas-

sachusetts, ro Wall. 573. See § 9.
- § Chief Justice Marshall in Dartmouth
College v. Woodward, 4 Wheat. 518,
636. See Morawetz on Private Corpo-
rations, 2d ed.,vol. i, § 1. Buell v.
Buckingham, 16 Ia. 292.

4 Chief Justice Nelson in Thomas v.

Dakin, 22 Wend. (N.Y.) 71. Mr. Kyd
says: ‘‘A corporation, or a body poli-
tic, or body incorporate, is a collection
of many individuals, united into one
body, under a special denomination,
having perpetual succession under an
artificial form, and vested, by the policy
of the law, with the capacity of acting,
in several respects, as an individual,
particularly of taking and granting
property, of contracting obligations, and
of suing and being sued, of enjoying
privileges and immunities in com-
mon, and of exercising a variety of po-
litical rights, more or less extensive,
according to the design of its institu-
tion, or the powers conferred upon it,
either at the time of its creation, or at
any subsequent period of its existence.”
Kyd on Corporations, p. 13.

5 The Detroit Schuetzen Bund v. The
Detroit, etc. Verein, 44 Mich. 313.

6 See Railroad Comrs. v. Portland &
O. C. R.R. Co., 63 Me. 278; McKim v,
Odom, 3 Bland Ch. (Md.) 418.

7 Wolf v. Goddard,.9 Watts, (Pa.) 550;
10 INTRODUCTORY DISCUSSION.

$6
Judge Dillon, “is a legal institution, devised to conter upon
the individuals of which it is composed, powers, privileges,
and immunities which they would not otherwise possess, the
most important of which are continuous legal identity, and
perpetual or indefinite succession under the corporate name,
notwithstanding successive changes, by death or otherwise,
in the corporators or members of the corporation.”* For
example, the founders of the Bank of England are all dead,
but the corporation continues its existence.

§$6.—. “A corporation is the creature of the sover-
eign will,”* says another. eminent authority. It is “a
mere abstraction of law.”* “Corporations,” says Professor
Walker, ‘are called artzficzal persons, to distinguish them
from persons in their natural capacity, or simply human
beings. In other words, they consist of natural persons,
clothed by law with an artificial character and capacity.” 4
This language is used in an early case in Maryland: “A
corporation not being, like a natural person, one of the ele-

ments of society, of which government is formed, can only

 

Diligent Fire Co. v, Commonwealth,
75 Pa. St. 295. See The People v. Man-
hattan Co., 9 Wend. (N. Y.) 393.

11 Dillon Mun. Corp. § 18. The
reader will find this definition: “It
is called a corporation, or a body
incorporate, because the persons are
made into a body, and of a capacity to
take and grant, etc.,” Co. Litt. 250 a.
“‘ A corporation,” says Orton, J., in State
v. Milwaukee L. S. & W. R’way Co.,
45 Wis. 592, “is an artificial entity and
a fictitious person, and is only endowed
with life and the capacity to organize,
to act and be acted upon, to contract
and be contracted with, to sue and be
sued, to manage its business, perform
its functions, exercise its franchises, and
accomplish it objects, through xa¢ural
persons, and its personal members and
officers, in the corporate name.”

? Cooley, J., in State Treasurer v. Au-
ditor-General, 46 Mich. 234.

3 Great Eastern Ry. Co. v. Turner,
L. R. 8 Ch. Ap. 152; Matthews v.
Skinker, 62 Mo. 331. In Railway
Co. v. Allerton, 18 Wall. 235, Bradley,
J., said: “A corporation, like a part-
nership, is an association of natural
persons who contribute a joint capital
for a common purpose.” But this
statement is palpably too general. |

4 Walker’s Am. Law, gth ed., p.
231. The Supreme Court of Connecti-
cut says of a corporation: “It is az
artificial person ; and this denomina-
tion is given to it by reason of its re-
semblance to a natural person, in re-
spect of its powers, rights and legal
duties.” Catlin v, Eagle Bank, 6
Conn, 242.
§ 6 INTRODUCTORY DISCUSSION. ‘II
be considered as a creature of the law. It is the law alone
which gives to it a personality distinct from that of each of
its members, and confers on it the right to act by its presi-
dent, directors, or agents, in a manner analogous to that in
which the government itself acts by its regularly constitu-
ted functionaries.” Manifestly, “the great object of yan
incorporation is to bestow the character and properties of
individuality on a collective and changing body of men”;?
to ‘maintain a perpetual succession, and enjoy a kind of
legal immortality ”;* “to change its members without a dis-
solution of the association.” * Hence a corporation has been
termed “an admirable invention of the law, for the concen-
tration and perpetuation of human energies and interests,” ®
One of the purposes of incorporation is to create a legal
and ideal person in law distinct from all other personscom-
posing it, in order to avoid the extreme difficulty or utter
impracticability of a number of persons acting together in
‘their individual capacities.®

Corporations are, necessarily impersonal. This feature
unfortunately tends to the establishment of a much lower
tone of moral responsibility concerning corporate transac-
tions than ordinarily inheres in cases where individuals act
directly and assume personal responsibility. This result is
frequently manifested by exhibitions of arbitrary and op-
pressive treatment of corporate employés; by unconscion-
able business competitions; by levying arbitrary assess-
ments upon stocks; by “freezing out” minorities, and in

 

1McKim v. Odom, 3 Bland Ch. has been construed to mean continu-

(Md.) 418.

* Providence Bank v. Billings, 4 Pet.
562; Thomas v. Dakin, 22 Wend.
(N. Y.) 71.

5 Bla. Com. 467.

‘Baltimore & P. R.R. Co. v. Fifth
Baptist Church, 108 U. S. 330.

5 Walker’s Am. Law, p. 244. The
expression, “ perpetual succession,”

ous or uninterrupted succession (Scan-
lan v. Crawshaw, 5 Mo, App. 337),
though it seems that where these
words are used in a charter, and there
are no words limiting the corporate ex-
istence, the corporation may exist for-
ever. Fairchild v. Masonic Hall As-
socn., 71 Mo. 526.

§ Smith v. Hurd, 12 Met. (Mass.) 384.,
12 INTRODUCTORY DISCUSSION. $7

many other ways familiar to business men. The wonderful
increase of nondescript trusts, of coal, gas, oil, tin, and sugar
monopolies, and of ranch corporations, which are spread-
ing, octopus-like, over our fair land, crushing out individual
enterprise, may well arouse profound anxiety among the
middle classes of our people, and will inevitably result in
provoking continually recurring collisions between the
laboring classes on the one hand, and these rich organiza-
tions on the other. We are threatened with an aristocracy
of corporate associations, Princes and dukes are being suc-
ceeded by presidents and other corporate managers.

$7. Corporate powers and liabilities—Inroads have been
made upon the dncient notion that a corporation possessed
no existence outside the specifications of its chartered
powers, or that it could confer no rights, or be bound by
no acts, for which express chartered authority did not exist.
The analogy between the rights and liabilities of individuals
and of corporations is constantly gaining strength and be-’
coming closer. ‘The truth is,” says Miller, J.,1 “that, with
the great increase in corporations in very recent times, and
in their extension to nearly all the business transactions of
life, it has been found necessary to hold them responsible
for acts not strictly within their corporate powers, but done
in their corporate name, and by corporation officers who
were competent to exercise all the corporate powers. When
such acts are not founded on contract, but are arbitrary ex-
ercises of power in the nature of torts, or are gvasz-criminal,
the corporation may be held to a pecuniary responsibility
for them to the party injured.” It is said in an earlier case?
“that for acts done by the agents of a corporation, either
zx contractu or tn delicto, in the course of its business, and
of their employment, the corporation is responsible, as an
individual is responsible under similar circumstances.” ‘“ Cor-

 

’Salt Lake City v. Hollister,118U.S. * Philadelphia, W. & B. R.R. Co. v.
256, 260, Quigley, 21 How. 202, 210.
§7

INTRODUCTORY DISCUSSION.

13

porations act through their agents,” said Willard, P. J.,!
‘‘and the tendency of the modern decisions is to assimilate
their actions, rights, duties and liabilities to those of individ-
uals’ and commercial partnerships.” Though personal pain
or punishment cannot be inflicted upon a corporation, it can
be fined and indicted ;* held liable for an assault ;* for false
imprisonment,’ and malicious prosecution ;°® for libel ;* for
infringing a patent;® for a nuisance ;*® for obstructing a

 

1Conro v. Port Henry Iron Co., 12
Barb. (N. Y.) 53.

? Pennsylvania R.R. Co. v. Vandiver,
42 Pa, St. 365; S.C. 82 Am. Dec. 520;
Bass v. Chicago, etc. Ry. Co., 36 Wis.
463; Donaldson v. Mississippi & Mo.
R.R. Co., 18 Ia. 280. A corporation is
a person within the meaning of the
clause in section 1 of the Fourteenth
Amendment to the Constitution of the
United States, which forbids a State to
deny to any person within its jurisdic-
"tion the equal protection of the laws.
Santa Clara Co. v. South. Pac. R.R.
Co., 118 U.S. 394. The word “ per-
son” in a statute includes a private
corporation. Cincinnati Gas Light
and Coke Co. v. Avondale, 43 O. S.
257. And a municipal corporation
may be embraced within the word
“person.” Springfield v. Walker, 42
O. S. 543.

3 Donaldson v. Miss. & Mo. R.R. Co.,
18 Iowa 285; Regina v. Great North
of England Ry. Co., 9 Q. B. 315; State
v. Morris & Essex R.R. Co., 3 Zab.
(N. J.) 360; Commonwealth v. New
Bedford Bridge Co., 2 Gray (Mass.) 339;
Commonwealth v. Nashua & Lowell
R.R. Co., 2 Gray (Mass.) 54 ; Common-
wealth v. Vermont & Mass. R.R. Co.,
4 Gray (Mass.) 22; State v. Balt. & O.
R.R. Co., 15 W. Va. 362.

4The Eastern Counties Ry. Co. v.
Broom, 6 Exch. 314.

5 Chilton v. The London & Croydon
Ry. Co. 16 M.& W. 212; Lynch v.

Metropolitan Elevated R.R. Co., 90
N. Y. 77.

* Vance v. Erie Railway Co., 32 N. J.
Law 334; McDermott v. Evening Jour-
nal Assocn., 43 N. J. Law 488; s.c.
39 Am. Rep. 606; Pennsylvania Co. v.
Weddle, 100 Ind. 138; Morton v. Met-
ropolitan Life Ins. Co., 34 Hun (N. Y.)
366; Jordan v. Ala. Great Southern
R.R. Co., 74 Ala. 85; S.C. 49 Am.
Rep. 800; Woodward v. St. Louis &
San Francisco Ry. Co., 85 Mo. 142;
Salt Lake City v. Hollister, 118 U. S.
262 ; Goodspeed v. East Haddam Bank,
22 Conn. 530.

7 Philadelphia, W. & B. R.R. Co. v.
Quigley, 21 How. 202; Evening Jour-
nal Assn, v. McDermott, 15 Vroom (N,
J.) 430; S.C. 43 Am. Rep. 392. The
Chancellor said in this case (p. 431):
“Not only does common sense scout
the proposition that while a natural per-
son is liable for damages for libel, an
artificial one, composed of several natu-
ral persons, is not, but has legal license
and immunity to libel as and whom it
will; but it is a familiar principle that
a corporation is liable for the tortious
acts of its servants.”

*National Car Brake Shoe Co. v.
Lake Shore, etc. R.R. Co., 4 Fed. Rep.
219; Winans v. Schenectady, etc. R.R.
Co., 2 Blatchf. 279; Sayles v. Chicago,
etc. R.R. Co., 1 Biss. 468; Winans v.
New York & Erie R.R. Co., 21 How. 88.

* First Baptist Church v. Schenectady
& Troy R.R. Co., 5 Barb. (N. Y.) 79.
§7

highway ;* for trespass;* in exemplary or punitive dam-
ages ;* for vexatiously obstructing trade;* for Sabbath-
breaking ;° and for torts generally.6 The doctrine of theo-
retical perfection in corporations is impossible of practical
application. Like natural persons, corporations can over-
leap the legal and moral restraints imposed upon them; in
other words, they are capable of doing wrong.”

The doctrine of estoppel may be invoked against a cor-
poration in cases where it has accepted and enjoyed the
fruits of a transaction or agreement that was w/tra vires.
Were the rules otherwise, corporations would become mon-
strous engines for the perpetration of frauds. It is not,
however, intended to express approval of the principles
enunciated in many of the cases in which corporations
have been held bound by acts clearly ultra vires. Some
of the courts, in their efforts to prevent inequitable results
in this class of cases, have lost sight of the rule that parties

14 INTRODUCTORY DISCUSSION.

 

1 Reg. v. Gt. North of Eng. Ry. Co.,
9 Q. B. 315.

? Main v. North-Eastern R.R. Co., 12
Rich. Law (S. C.) 82; Coleman v.
Chester, 14S. C. 291.

* Atlantic & G. W. Ry. Co. v, Dunn,
19 O. S. 162; S.C. 2 Am. Rep. 382;
Denver & Rio Grande Ry. Co, v. Har-
ris, 122 U.S. 597.

4Green v. London General Omnibus
Co., 7 C. B. (N.S.) 290.

5 State v. Balt. & O. R.R. Co., 15 W.
Va. 362.

6 Carter v. Howe Machine Co., 51 Md.
290; Goodspeed v. East Haddam Bank,
22 Conn. 530; Turrill v. Ilinois Cent.
R.R. Co., 3 Biss. 66, 72; Vance v.
Erie Ry. Co., 32 N. J. L. 334; Even-
ing Journal Assn. v. McDermott, 44
N. J. Law 430. In the case of National
Bank v. Graham, 100 U. S. 702, it was
observed that “corporations are liable
for every wrong they commit, and in
such cases the doctrine of ultra vires

has no application. They are also
liable for the acts of their servants
while such servants are engaged in the
business of their principal, in the same
manner and to the same extent that
individuals are liable under like circum-
stances. An action may be maintained
against a corporation for its malicious
or negligent torts, however foreign they
may be to the object of its creation or
beyond its granted powers. It may be
sued for assault and battery, for fraud
and deceit, for false imprisonment, for
malicious prosecution, for nuisance, and
for libel.’ See s. P. Boogher v. Life
Association, 75 Mo. 319; Ss. C. 42 Am.
Rep. 413; Salt Lake City v. Hollister,

‘118 U. S. 256, 260; State v. Morris &

Essex R.R.Co., 23 N. J. Law 369; and
especially Denver & R. G. Ry. Co. v.
Harris, 122 U. S. 608; New Jersey
Steamboat Co. v. Brockett,121U.S. 637.

” Bissell v. Mich. Southern, etc. R.R.
Co., 22 N. Y. 264,
$8

dealing with corporations are bound to take notice of the
corporate limitations. Mr. Justice Miller, however, resets
a landmark in this branch of the law when he declares the
general doctrine of this country to be “that the powers of
corporations organized under legislative statutes are such
and such only as those statutes confer. Conceding the rule
applicable to all statutes, that what is fairly implied is as
much granted as what is expressed, it remains that the char-
ter of a corporation is the measure of its powers, and that
the enumeration of these powers implies the exclusion of
all others.” Thus, it is beyond the power of a railroad
corporation, or of a corporation chartered to manufacture
and sell, musical instruments, to guarantee the expenses of
a musical festival. No action can be founded on such a
guaranty, although it was entered into in the belief that the
festival would benefit the organization signing the agree-
ment.”

INTRODUCTORY DISCUSSION. 15

$ 8. Liability for torts and for contracts distinguished.—It
should be observed that the liability of corporations on
contracts not authorized by law, and beyond the scope of
their corporate powers, is governed by a different principle
from that which applies in the cases of torts. In the for-
mer case the party dealing with the corporation is under no
obligation to enter into the contract. No force or restraint
or fraud is practised upon him. The powers of the corpo-
ration are matters of public law, open to his examination,

 

1 Thomas v. Railroad Co., 101 U.S,
82, Danforth, J., said in Janders v.
Frank St. M. E. Church, 97 N. Y. 124:
“When a statute covers the whole sub-
ject, and prescribes the persons who
may bind a corporate body and the
manner in which they may bind it, re-
sort cannot be had to other instrument-
alities. The designation of certain
agents and methods for the doing of
an act implies a prohibition of any
others.” Citing People ex rel. Atty.

Genl. v. Utica Ins. Co., 15 Johns. (N.
Y.) 357; N. Y. Firemen Ins. Co. v.
Ely, 2 Cow. (N. Y.) 678; Crocker v.
Whitney, 71 N. Y. 161; Donovan vy.
Mayor, etc. of N. Y., 33 N. Y. 291.

* Davis v. Old Colony R.R Co., 131
Mass, 258. A corporation as well as
a natural person may, of course, repu-
diate a contract executed by an agent
without authority. Pittsburg & Steub.
R.R. Co. v. Allegheny Co., 79 Pa. St.
210.
16 INTRODUCTORY DISCUSSION. $9

and he must judge for himself as to the binding effect of
the proposed agreement.' But when a tort is committed
by a corporation, the elements of force or fraud being pres-
ént, the injured party is usually without the power to avert
the loss or damage inflicted upon him, and his right of re-
covery against the corporation is predicated upon a differ-
ent theory from that which governs in contract cases.

’ $0. Changes in the law.—While, as we have seen, it
may not be, strictly and logically speaking, correct to say
that a corporation can be guilty of fraud, yet, as the pur-
poses of the incorporation can only be accomplished through
the agency of individuals, there can be no doubt that if the
agents conduct themselves fraudulently, so that, were it
a case of employment by a natural person, the principal
would have been affected by the fraud, the same rule must
prevail where the principal under whom the agent acts is a
corporation.” Mr. Morawetz comments upon the import-
ance of bearing in mind distinctly “that the existence of
a corporation independently of its shareholders is a fiction ;
and that the rights and duties of an incorporated associa-
tion are in reality the rights and duties of the persons who
compose it, and not of an imaginary being.”*? Justice Field
observed :* “ Independently of all restrictions upon munic-
ipal corporations, there is a rule of justice that must con-
trol them as it controls individuals.” In other words, the
executed dealings of corporations must be allowed to stand
for and against both parties when the plainest rules of good
faith require it.© Yet the reader must not lose sight of the
rule that ‘whenever a corporation makes a contract, it is
the contract of the legal entity ; of the artificial being cre-

 

‘Salt Lake City v. Hollister, 118U. | 4 Norton v. Shelby Co., 118 U. S.

S. 263. 454.
2 Ranger v. Great Western Ry. Co., 5 5 Thomas v. Railroad Co., 101 U.S.
H. L. Cas. 72-87. 86, citing Comstock, C. J., in Parish v.

3 Morawetz on Corporations, 2d ed., Wheeler, 22 N. Y. 494.
vol. i, § 1.
$ 10 INTRODUCTORY DISCUSSION. 17.
ated by the charter; and not the contract of the individual
members.”’ It perhaps matters little whether we regard a
corporation in the light of a combination of legal relations
or as a body of shareholders with rights of perpetual suc-
cession, so long as in seeking a precedent to determine the
effect of a corporate act we keep the personal nature of the

corporation prominently in view,

$10. Presumptions affecting corporate acts.—Presump-
tions, we may observe, are applicable to individuals and
corporations alike ;* and acts of corporations are proved in
the same manner as acts of individuals.* Corporations,
like natural persons, are entitled to the benefit of the rule
which imputes innocence rather than wrong to the conduct
of men.’ The dealings of these bodies, which, according to
their apparent import, are within its powers, are not to be
regarded as illegal and unauthorized without some evidence
to show that they possess such character. Thus all instru-
ments or contracts signed by the proper officers of a bank

 

! Bank of Augusta v. Earle, 13 Peters
587; Ss. P. Merrick v. Van Santvoord,
34.N. Y. 212.

? Miller, J., very appropriately ob-
serves, in Liverpool Ins. Co. v. Massa-
chusetts, 10 Wall. 574: ‘“‘The subject of
the powers, duties, rights, and liabilities
of corporations, their essential nature
and character, and their relation to the
business transactions of the commu-
nity, have undergone a change in this
country within the last half century,
the importance of which can hardly be
overestimated. .... The law of cor-
porations has been so modified, liberal-
ized, and enlarged, as to constitute a
branch of jurisprudence with a code of
its own, due mainly to very recent
times. To attempt, therefore, to de-
fine a corporation, or limit its powers
by the rules which prevailed when they
were rarely created for any other than

2

municipal purposes, and generally by
royal charter, is impossible in this
country and at this time.” (See § 5.)

Bank of U. S. v. Dandridge, 12
Wheat. 64-70, per Story, J. Farm-
ers’ Loan & Trust Co. v. Curtis, 7 N.
Y. 466. See Solomon’s Lodge v. Mont-
mollin, 58 Ga. 547 ; Gregory v. Brooks,
37 Conn. 365; Cabot v. Given, 45 Me.
144; Hilliard v. Goold, 34 N. H. 230;
Alexander v. State, 56 Ga. 478.

4 Southern Hotel Co. v. Newman, 30
Mo. 118.

* Cheever v. Gilbert Elevated Ry.
Co., 43 N. Y. Superior 478, 484; Chau-
tauque Co. Bank v. Risley, 19 N. Y.
369. See Farmers’ Loan & Trust Co.
v. Clowes, 3 N. Y. 474.

6 Kent v. Quicksilver Mining Co., 78
N. Y. 183; Lindsley v. Simonds, 2 Abb.
Pr. N.S. (N. Y.) 73.
e

§ 10

are presumed to be made with authority, until the contrary
is shown.! Parties acting as corporate officers are presumed
to be rightly in office ;? the assent of a corporation will be
presumed to the bringing of a suit in its name ;? and an
action instituted by a State will be presumed to have the
authority of the Governor behind it. When a corporation
is once shown to exist, the presumption will obtain that it
still continues.® ‘“ Acts done by the corporation, which pre-
suppose the existence of other acts to make them legally
operative, are presumptive proofs of the latter.”° The pre-
sumption prevails that a corporation authorized to take
title to real estate, acquired its lands for the purposes of its
incorporation.” So it will be presumed that a quorum at-
tended a business meeting of a corporation regularly called.®
The validity of corporate contracts depends upon the same
general principles which govern in contracts between natural
persons ;*® and it has been even said that a seal need only
be used by a corporation when the law would require an
individual to use one.” And the presumption will be in-
dulged that a corporate seal appearing on a document was
affixed by competent authority.“ Allen, J., remarked, in

18 INTRODUCTORY DISCUSSION.

 

' Gillett v. Campbell, 1 Denio (N. Y.) L. 325. See Hoag v. Lamont, 60 N.

520.

? Hilliard v. Goold, 34 N. H. 230.

8 Bangor, etc. R.R. Co, v. Smith, 47
Me. 45.

4 Alexander v, State, 56 Ga. 478.

®See People v. Manhattan Co., 9
Wend, (N. Y.) 351; Gelston v. Hoyt,
1 Johns, Ch. (N. Y.) 543.

6 Story, J., in Bank of United States
v, Dandridge, 12 Wheat. 70; Nelson v.
Eaton, 26 N. Y. 415. See Bennett v.
Clough, 1 B. & Ald. 461.

7 Yates v. Van ‘De Bogert, 56 N. Y.
526,

® Citizen Mutual Fire Ins. Co. v,
Sortwell, 8 Allen (Mass.) 217.

° Ex parte Benson & Co., 18S. C. 43.

” Crawford v. Longstreet, 43 N. J.

Y. 96.

1 Solomon’s Lodge v. Montmollin, 58
Ga. 547. In Trustees of University v.
Moody, 62 Ala. 392, Brickell, C. J.,
said: “The technical rule of the an-
cient common law, ‘that a corporation
could not manifest its intention by any
personal act or oral discourse, and that
it spoke and acted only by its common
seal,’ if it ever obtained in this country,
is now obsolete.” And in Crawford v.
Longstreet, 43 N. J. Law, 329, the New
Jersey Supreme Court say: “The
second ground of error is that the court
below sustained the validity of the lease
to the corporation, against the plaintiff’s
objection that it was void because not
executed under the corporate seal of
§ 11

the New York Court of Appeals: ‘‘ Neither the corporate
seal nor a formal resolution of the managers is necessary to
the making of a valid contract by a corporation.”* Rob-
ertson, J., employed this language: ‘A corporation, being
an artificial person, is presumed capable of making every
contract a natural person could make.”* This, however,
we submit, is too sweeping a statement.

“INTRODUCTORY DISCUSSION. 19

$ 11. Nature of corporation re-stated.—On the other hand,
a corporation has been described somewhat rhetorically if
not inaccurately to be ‘an intellectual being, different and
distinct from all persons who compose it. It has individ-
uality. The estate or rights of the corporation belong com-
pletely to the body, and not to the individuals who com-
pose it ; nor can any one of them (as such) dispose of such
estate or any part of it, In this respect the right to the
property is different from the rights held in common.
What is due to the corporation is not due to any of the in-
dividuals who compose it ; and debts due by such corpora-
tion are not due by the individual members.” It is out-
side the scope of our inquiry to further pursue this investi-
gation as to the exact nature of a corporation, or the mod-
ern changes and variations in the law. The analogies be-
tween the legal effect of individual and of corporate acts
must, however, be kept constantly in view. The tendency
of the courts to measure corporate acts and _ liabilities
largely by the principles applicable to natural persons, free
from corporate restrictions, is to be in some measure com-
mended ; but where public interests are likely to be injuri-

 

the company. This contention was
founded upon the ancient rule of the
common law that a corporation could
neither act, speak, nor whzsfer apart
from the instrumentality of its common
seal. But the rule, opposed as it was
to the demands of practical business ne-
cessity, suffered at an early day, in Eng-
land, important modifications ; and in

this country, since the decision in Bank
of Columbia v. Patterson, 7 Cranch 304,
the doctrine has received but slight
recognition, and now it may be con-
sidered as practically abrogated.”

1 Hoag v. Lamont, 60 N. Y. tot.

*Feeny v. People’s Fire Ins. Co., 2
Robertson (N. Y.) 60.
20 INTRODUCTORY DISCUSSION. § 12

ously affected by attempted usurpations of corporate au-
thority, the doctrine that a corporation can only enter into
contracts, or be bound by acts expressly authorized by, or
clearly implied from, its charter, should be rigidly enforced.
Efforts to avert individual cases of injustice cannot be per-
mitted to overturn a safeguard so necessary for the public
welfare as this rule clearly seems to be. As our subject
relates particularly to the dissolution or death-throes of
these associations or imaginary beings, the subject and de-
tails of the law governing their creation, and the sources
from which corporate powers arise, can, as we have said, be
only incidentally touched upon.

$12. What is meant by a franchise.—Let us next advert
briefly to the meaning of the term “franchise.” Black-
stone says: “Franchise and liberty are used as synony-
mous terms; and their definition is a royal privilege, or
branch of the king’s prerogative, subsisting in the hands of
a subject.” The learned commentator adds: ‘To be a
county palatine is a franchise, vested in a number of per-
sons. It is likewise a franchise for a number of persons to
be incorporated, and subsist as a body politic ; with a power
to maintain perpetual succession, and do other corporate
acts.”* Kent defines franchises as ‘‘ privileges conferred by
grant from government, and vested in individuals.”* In
Pierce v. Emery*® the court remark: ‘A corporation is
itself a franchise belonging to the members of the corpora-
tion; and a corporation, being itself a franchise, may hold
other franchises, as rights and franchises of the corpora-
tion.”* It was formerly said that a franchise was ‘a branch

 

12 Bla. ‘Com. 37. property in the corporate name, to sue
* 3 Kent’s Com. 458. and be sued in that capacity, to have
* 32 N. H. 507. and use a corporate seal, and by that to

‘In State v. Boston, C.& M. R.R. contract, and some others, perhaps, are
Co., 25 Vt. 442, it is said: “All the franchises, which constitute the very
functions of a corporation are, in one definition of a corporation.” Compare
sense, franchises. The right to hold Chicago& W.I.R.R. Co. v. Dunbar, 95
§ 12 INTRODUCTORY DISCUSSION, 2I

of the royal prerogative, existing in the hands of a subject,”*
and Blackstone, as we have seen, borrowed the expression.
Chief Justice Taney said: “It is essential to the character
of a franchise that it should be a grant from the sovereign
authority.”* The uncertainty of the meaning of the term
has been a subject of judicial comment. In Morgan v.
Louisiana® the court said: ‘Much confusion of thought
has arisen in this case and in similar cases from attaching
a vague and undefined meaning to the term ‘franchises.’ It
is often used as synonymous with rights, privileges, and im-
munities, though of a personal and temporary character ;
so that, if any one of these exists, it is loosely termed a
‘franchise,’ and is supposed to pass upon a transfer of the
franchises of the company. But the term must always be
considered in connection with the corporation or property
to which it is alleged to appertain. The franchises of a
railroad corporation are rights or privileges which are essen-
tial to the operations of the corporation, and without which
its road and works would be of little value; such as the
franchise to run cars, to take tolls, to appropriate earth and
gravel for the bed of its road, or water for its engines, and
the like. They are positive rights or privileges, without the
possession of which the road of the company could not be
successfully worked. Immunity from taxation is not one
of them.” The learned Spencer, J., employed this lan-
guage: “If there are certain immunities and privileges in
which the public have an interest, as contradistinguished
from private rights, and which cannot be exercised without
authority derived from the sovereign power, it would seem
to me that such immunities and privileges must be fran-

 

Ill. 571, and especially Morgan v. Lou- Bank of Augusta v. Earle, 13 Pe-

isiana, 93 U.S. 217; Railroad Co. v. ter, 595.

County of Hamblen, 102 U. S. 273. 593 U. S.217, 223; see Chesapeake
1See Finch, 164. Miner’s Ditch Co. & Ohio R’way Co. v. Miller, 114 U.S.

v. Zellerbach, 37 Cal. 590; People v, 185.

Utica Ins. Co., 15 Johns. (N. Y.) 386.
22 INTRODUCTORY DISCUSSION. § 13

chises.”1 Then it is said that “the term ‘franchise’ has
several significations and there is some confusion in its use.
The better opinion, deduced from the authorities, seems to
be that it consists of the entire privileges embraced in and
constituting the grant.” *

§ 13. Invisibility of corporations.—The application of the
word “invisible” to corporations is not, strictly speaking,
accurate. A corporation is neither a ghost, a phantom, nor
a spirit ; indeed, it was expressly stated in early times that
a corporation had no soul. The acts of a corporate body
are inspired and controlled by the judgment and discretion
of the members of the association. The corporation itself
is the chain that holds the stockholders or members to-
gether, and enables them to act as one man. The powers,
duties, and obligations of a natural person devolve in large
measure upon this fictitious or imaginary being. The cor-
poration must, necessarily, as we have seen, act by agents.‘
The directors are the officers or agents of the corporation,
and represent the interests of that abstract legal entity, and

 

1People v. Utica Ins. Co., 15 Johns,
(N. Y.) 387.

® City of Bridgeport v. N. Y.& N.H.
R.R. Co., 36 Conn. 266, See Spring
Valley Water Works v. Schottler, 62
Cal. 106. We may note here that the
franchise of a railroad corporation is an
incorporeal hereditament, not included
within the terms “ lands or tenements.”
Gibbs v. Drew, 16 Fla. 147; S.C. 26
Am, Rep. 700, *

Lord Coke quotes the opinion of
Chief Baron Manwood as to the nature
of corporations as follows: They are
“invisible, immortal, and that they had
no soule; and therefore no subpoena
lieth against them, because they had
no conscience nor soule; a corporation
is a body aggregate, none can create
soules but God, but the King creates

‘corporations,’ and therefore they have
no soules.” Tipling v. Pexall, 2 Bulst.
233. Professor Walker says: “We
often hear a corporation spoken of as a
body without a soul,—as an invisible,
intangible, and immortal being ; as ex-
isting only in the contemplation of law ;
and the like. But such expressions are
calculated to throw darkness rather
than light over the actual nature of
corporations. It is sufficient to con-
ceive of them as consisting of natural
persons, united together in an artificial
character by the force of law, for the
purpose of concentrating or perpetuat-
ing individual ability.” Walker’s Am.
Law, gth ed., p. 232.

4 Foster v. Ohio-Colorado, etc. Min.
Co., 537; 17 Fed. Rep. 130.
§ 14 INTRODUCTORY DISCUSSION. 23

of those who own the shares of its stock.’ ‘Every corpo-
ration speaks by men, and its artificial existence blends
with that of its agents and officers.” The Supreme Court
of Louisiana say, ‘‘ A corporation cannot see or know any-
thing except by the eyes or intelligence of its officers.”
Judge Dillon says: ‘“‘The corporation is an artificial per-
son, Owning its property and necessarily acting by its
agents; and these agents are the directors.”* The corpo-
rate transactions usually have the same purpose in view as
though inspired for the benefit of a private individual.
The acts should therefore, as we have said, properly be
governed by the tests applicable to natural persons. Con-
cerning the use of this word invisible, as defining the nature
of a corporation, Mr. Kyd forcibly observes: ‘‘ That a body
framed by the policy of man, a body whose parts and mem-
bers are mortal, should in its own nature be immortal, or
that a body composed of many bulky, vzszb/e bodies, should.
be zzvzszb/e, in the common acceptation of the words, seems
beyond the reach of common understandings. A corpora-
tion is as visible a body as an army ; for though the com-
mission or authority be not seen by every one, yet the
body, united by that authority, is seen by all but the blind.
When, therefore, a corporation is said to be invisible, that
expression must be understood, of the rzg4¢ in many per-
sons, collectively to act as a corporation, and then it is as
visible in the eye of the law, as any other right whatever,
of which natural persons are capable; it is a right of such
a nature, that every member, sefarately considered, has a
freehold in it, and all, zoeztly considered, have an inherit-
ance, which may go in succession.” ®

§ 14. Domicil. of a corporation—Speaking of the domicil

 

1Twin Lick Oil Co, v. Marbury, 91 ‘Factors’ & Traders’ Ins. Co. v. Ma~
U.S. 589. See Conro v. Port Henry rine Dry Dock, etc. Co., 3: La. Ann.
Iron Co., 12 Barb. (N. Y.) 53. 151.

2 Newton Mfg. Co, v. White, 42 Ga. 4 Buell v. Buckingham, 16 Iowa 292. -,..
160. 5 Kyd on Corp., vol. i., pp. 15, 16.
24 INTRODUCTORY DISCUSSION. § 14

of a corporation, Porter, J., said, in Merrick v. Van Sant-
voord:! “ A corporation is an artificial being, and has no
dwelling either in its office, its warehouses, its depots or its
ships. Its domicil is the legal jurisdiction of its origin,
irrespective of the residence of its officers or the place where
its business is transacted. It retains that domicil until it
ceases to exist.” But clearly it is not intended by this state-
ment to imply that a corporation is limited in a business
sense to the borders of the State in which it was created.
While no State need allow a foreign corporation to do busi-
ness within its borders, with the possible exception of com-
mercial corporations, yet, not having been restricted, such
a corporation comes into the foreign State “as it has been
created.” Chief Justice Waite said: ‘“ Every corporation
necessarily carries its charter wherever it goes, for that is
the law of its existence. It may be restricted in the use of
some of its powers while doing business away from its cor-
porate home, but every person who deals with it everywhere
is bound to take notice of the provisions which have been
made in its charter for the management and control of its
affairs both in life and after dissolution.”*® A corporation
cannot personally go beyond the jurisdiction in which it was
created,* and cannot migrate to another sovereignty,® yet it
may sue and be sued where it does business and has officers
representing it in foreign States, upon whom process can
be served.® And every person who deals with a foreign cor-
poration impliedly subjects himself to such laws of the for-
eign government affecting the powers and obligations of
the corporation with which he voluntarily contracts as the

 

134 .N, Y. 218. + Plimpton v. Bigelow, 93 N. Y. 598.
2? Canada Southern Ry. Co. v. Geb- See § 323.
hard, 109 U. S. 537; Paul v. Virginia, 5 Canada Southern Ry. Co. v. Geb-
8 Wall. 168, hard, 109 U. S. 537; Bank of Augusta
3 Relfe v. Rundle, 103 U.S. 226. See v. Earle, 13 Peters 588.
Kerchner v. Gettys, 18S. C. 525; Bank = *Gibbs v. Queen Ins. Co., 63 N, Y.
of Augusta v. Earle, 13 Peters 519; 114; S.C. 20 Am. Rep. 513.
Christian Union v. Yount, ror U.S. 352.

- See
$ 15 INTRODUCTORY DISCUSSION. 25

known and established policy of that government author-
izes. It results that all persons becoming stockholders in
a corporation must be conclusively presumed to have con-
tracted with reference to, and assumed all the liability pre-
scribed by, the law of the domicil of the corporation. ‘Such
presumption is indulged, because the corporation must of
necessity be controlled by the existing law of the State
where it has its being, and it has no power to accept a party
as stockholder on its books with a view to any other princi-
ple than that prescribed by the law of the State.”?

Our Union comprising a large number of sovereign States,
questions of domicil are frequently presented especially con-
cerning corporations that derive powers from the legislative
authorities of more than one State. A railroad corporation
composed of distinct corporations chartered by the legisla-
tures of different States, having one set of shareholders and
a united capital stock, has a domicil in each State, and a
business meeting held in any one State will bind the cor-
poration as to its property everywhere.®

 

§$ 15. Creation of corporations—Source of the power.—“‘ A
corporation,” said Chief Justice Waite, ‘is the creature of
legislation.” * Corporate existence and privileges are derived
solely from the sovereign authority.> Hence it was held that
an incorporated college did not possess the power to create
any other body politic or corporate. Under the civil law,
as Blackstone observes,’ corporations ‘seem to have been
created by the mere act and voluntary association of their
members. But,” continues the learned commentator, “with

 

1Canada Southern Ry. Co. v. Geb- 4 Relfe v. Rundle, 103 U. S. 225.
hard, 109 U. S. 537. See Chap. XVI. 5 Atkinson v. Marietta & C. R.R. Co.,
2 McKim v. Glenn, 66 Md. 484, citing 15 O.S. 33; People v. Manhattan Co.,
Canada South. Ry. Co.v. Gebhard, 109 9 Wend. (N. Y.) 393.
U. S. §27, 537; Glenn v. Clabaugh, 65 6 Medical Institution of Geneva Col-
Md. 65. lege v. Patterson, 1 Denio (N. Y.) 61.
3 Graham v. Boston, H. & Erie R.R. 71 Bla, Com. 472.
Co., 118 U. S. 161.
26 INTRODUCTORY DISCUSSION. $15
us in England, the king’s consent is absolutely necessary
to the erection of any corporation, either impliedly or ex-
pressly given.” In early times in England the king seems
to have been considered “in virtue of his royal preroga-
tive” as vested with the exclusive power to create corpora-
tions by grant. The power of the British Parliament is now
practically omnipotent, hence its right to enact or confirm
a charter to which royal assent would, of course, be pre-
sumed, seems to be complete.’ In America the legislative
power is the fountain of corporate authority.” The courts
cannot review the exercise of this power.? With us, a State
may create a corporation which shall be composed of two
or more corporations organized under the laws of the same
State, as well as of two or more natural persons, and a State
may create a corporation composed of natural persons be-
longing to different States. And it is considered that there
is no greater objection to a State creating a corporation to
be composed of corporations chartered by different States
than of natural persons who are residents of such States,*

 

1 « Parliament created this company,
and I think the power must rest with
Parliament to vary the constitution of
the company, to control it, to annihilate
it, or to deal with it as in its wisdom it
shall think fit.” Great Western Ry. Co.
v. Rushout, 5 De G. & Sm. 290,307. See
Heathcote v. North Staffordshire R’way
Co., 2 Macn. & G. 100, The use of
corporate funds to aid an application to
Parliament affecting a corporate charter
may, however, be enjoined. See Simp-
son v. Denison, 10 Hare 51; Great
Western Ry. Co. vy. Rushout, 5 De G,
& Sm. 290; and compare Maunsell v.
Midland, etc. Ry. Co., 1 Hem. & M.
130.

2 See Pennsylvania Railroad Co. v.
Canal Comrs., 21 Pa. St. 22; Relfe v.
Rundle, 103 U.S. 225.

3 United States Trust Co. v. Brady,
20 Barb, (N. Y.) 122. The Federal

government has only incidental power
to create corporations. McCulloch v.
Maryland, 4 Wheat. 316; Osborn v.
Bank of United States, 9 Wheat. 738.
See Farmers’ & Mech. Nat. Bank v.
Dearing, 91 U. S. 29; Legal Tender
Case, 110 U. S. 421; Pacific Railroad
Removal Cases, 115 U.S. 1. The pro-
posal made in the Federal convention
to confer upon Congress the express
power to create corporations (Mad.
Pap. 1354, 1576) was not adopted.

4 Bishop v. Brainerd, 28 Conn. 299.
See Chap. XX. “There is no particu-
lar form of words requisite to create a
corporation,” observes Chancellor Kent
in Denton v. Jackson, 2 Johns. Ch. (N.
Y.) 324. “A grant to hold mercantile
meetings has been held to confer a cor-
porate capacity.” See State v, Maine
Central R.R. Co., 66 Me. 506.
$$ 16, 17

It is said by Mr. Justice Swayne, in Railroad Co. v. Harris :'
‘We see no reason why several States cannot, by compe-
tent legislation, unite in creating the same corporation or
in combining several pre-existing corporations into a single
one.”* But though one corporation be consolidated with
another incorporated by a different State, still in its own
State it exists under the laws thereof.®

There is, moreover, no objection to the creation of an
indefinite number of corporations under one act.*

§ 16, Kinds of corporations.—Corporations are commonly
divided or classified as public and private. The former, as we
shall see, are organized for governmental purposes, while the
latter, as the name signifies, are created to subserve private
ends, usually,of a pecuniary or social nature. Private cor-
porations are divided into ecclesiastical, eleemosynary and
civil As will appear, private charters, to be binding,
must be accepted, but acceptance may be presumed from
the fact of application being made for the charter.®6 We
shall necessarily touch upon questions incident to insol-
vency, forfeiture of chartered rights, or dissolution in some
form, as appertaining to these various classes of corpora-
tions,

INTRODUCTORY DISCUSSION. 27

$ 17. Public and private corporations.— A public corpo-
ration, as we have stated, is one created for political pur-
poses ;* to aid in the administration of the government,
as, for instance, a city or county. Corporations are public
only when, in the language of Chief Justice Marshall, the

 

1142 Wall. 65, 82.
2 See Bishop v. Brainerd, 28 Conn.

The Detroit Agitations Verein, 44
Mich, 313; see § 17.

289; Wilmer v. Atlanta & R.A.L. Ry.
Co., 2 Woods 417.
3 Muller v. Dows, 94 U.S. 444; Rail-
way Co. v. Whitton, 13 Wall. 270.
4 Falconer v. Campbell, 2 McL. 195.
A society cannot be legally incorpora-
.ted to resist the enforcement of the
laws. The Detroit Schuetzen Bund v.

5 See Morawetz on Corporations, 2d
ed., vol. i., § 4.

® Atlanta v. Gate City Gas Light
Co., 71 Ga, 106, See Newton v. Car-
bery, 5 Cranch C. C. 632.

*Tinsman v. Belvidere Delaware
R.R, Co., 26 N, J. Law 148, 171.
28 INTRODUCTORY. DISCUSSION. § 17
‘‘whole interests and franchises are the exclusive property
and domain of the government itself.” Public corpora-
tions can acquire no vested rights as against the govern-
ment,” and no assent of the people is requisite to their crea-
tion, maintenance, or destruction. Private corporate char-
ters, on the other hand, cannot be foisted upon the promoters
against their consent ; but, when granted and accepted, such
charters become compacts between the incorporators and
the State, and rights acquired by individuals on the faith of
these compacts cannot be divested. The importance of
keeping these distinctions in view is manifest. Even im-
plied powers are not the subject of repeal.® “It isto be kept
in mind,” says Chief Justice Waite, “that it is not the char-
ter which is protected, but only any contract the charter
may contain.”" The provision in a charter, that the officers
of a corporation shall be elected in a particular way, is not a
contract, and is repealable ;* a right given to sell lottery

 

? Dartmouth College v. Woodward,
4 Wheat. 672.

* People v. Morris, 13 Wend. (N. Y.)
325.
® Chief Justice Waite said in Meri-
wether v. Garrett, 102 U. S. 511:
“Municipal corporations are mere in-
strumentalities of the State for the
more convenient administration of lo-
cal government. Their powers are
such as the legislature may confer, and
these may be enlarged, abridged, or
entirely withdrawn at its pleasure.
This is common learning, found in all
adjudications on the subject of munici-
pal bodies and repeated by text-writers.
There is no contract between the State
and the public that the charter of a
city shall not be at all times subject to
legislative control. All persons who
deal with such bodies are conclusively
presumed to act upon knowledge of the
power of the legislature. There is no
such thing as a vested right held by

any individual in the grant of legisla-
tive power to them.” Citing United
States v. Railroad Co., 17 Wall. 322;
Commissioners of Tippecanoe Co. v.
Lucas, 93 U. S. 108; People v. Morris,
13 Wend. (N. Y.) 325; Philadelphia v.
Fox, 64 Pa. St. 169; Montpelier v. East
Montpelier, 29 Vt. 12.

4 Dartmouth College v. Woodward,
4 Wheat. 518; Charles River Bridge
Co. v. Warren Bridge Co., 11 Peters
421; Providence Bank v. Billings, 4
Peters 514.

5 Public corporations are exempted
from liability for injuries in cases where
private corporations would be held lia-
ble. Tinsman v. Belvidere Del. R.R.
Co., 26 N. J. Law 148; Baltimore &
Potomac R.R.Co. v. Reaney,42 Md.117.

° People v. Manhattan Co., 9 Wend.
(N. Y.) 351.

** Stone v. Mississippi, 101 U. S. 814,
817.
* State v. Greer, 9 Mo. App. 219.
§§ 18, 19 INTRODUCTORY DISCUSSION. 29

tickets is a privilege or license, and not acontract ;! a pro-
visioh that a corporation shall be served in a particular way
may be changed ;? and an agreement by a State surrender-
ing its police power is not binding.? The policy has been
generally adopted in this country of preventing the provi-
sions of a charter from becoming a contract by a reserva-
tion of the power to alter or repeal the charter.‘

§ 18, Power to grant public franchise.—Neither public nor
private property can be condemned for private use. The leg-
islative power upon the subject of chartering a railroad has
the limitation upon it that the franchise must be granted for
public, and not for private purposes, or at least public con-
siderations must enter into every valid grant of a right to
appropriate a public street for railroad uses. The construc-
tion and maintenance of a street railway by an individual
or association of individuals, without legislative authority,
would constitute a public nuisance, and subject the persons
maintaining it not only to an indictment, but also to a
private action in favor of any person sustaining special in-
jury. It follows that the use of a public franchise as a mere
cover for a private enterprise is contrary to public policy.®

$ 19. Corporations by prescription, or at common law.—In
theory the rules of the common law are considered to have
originated in statutes, the records of which have been lost
in the mists of ages, So, in reference to corporations of a
political character which are said to exist by prescription or
at common law, the charters are presumed to have been
granted by the sovereign power, and to have been lost.
“The law presumes that what has long been suffered to ex-
ist must have had a rightful origin.”® There seems to be

 

1 State v. Morris, 77 N. C. 512. 4See State v. Commr. of Railroad
° Railroad Co. v. Hecht, 95 U.S. 168. Taxation, 37 N. J. Law 237; State v.
3See Boyd v. Alabama, 94 U. S. Mayor, etc. of Jersey City, 31 N. J.
645; Moore v. State, 48 Miss. 147; Law 579.
Metropolitan Board of Excise v. Bar- _* Fanning v., Osborne, 102 N. Y. 447.
rie, 34 N. Y. 657. 6 Walker's Am. Law, 9th ed., p. 232.
30 INTRODUCTORY DISCUSSION. § 19

no doubt that corporations may exist by prescription, which
presupposes an authorized and legitimate creation? If
‘persons have long used the name, and exercised the fran-
chises of a corporation, the law presumes without seeking
other evidence, that they had original authority for so do-
ing; or, in other words, that they were once duly consti-
tuted a corporation.”*® ‘Thus it has been ruled to be proper
to prove a parish by reputation,’ and where a corporation
has gone into operation, and rights have been acquired
under it, every presumption should be made in favor of the
legality of its existence.* A charter may be presumed® by a
jury to exist from facts and circumstances evidencing long
claim and exercise of corporate rights.° Justice Story said :
“Tn the first place, we may advert to the known fact, that
a charter may be presumed to have been given to persons
who have long acted as a corporation, and assumed the exer-
cise of the powers of a corporate body, whether of an ordi-
nary or extraordinary nature. This is the case in respect
to all corporations existing by presumption. Yet the very
case supposes that no written proof can be adduced of a
charter, or of a vote of the corporators to accept the
charter.”" ‘Municipal corporations are created for the
public good—are demanded by the wants of the community ;
and the law, after long-continued user of corporate powers,
and the public acquiescence, will indulge in presumptions in

 

1 Robie v. Sedgwick, 35 Barb.(N.Y.) Bell, J., said: “It has been settled
326. . ... that in a case where no charter
? Walker’s Am. Law, p. 232. or act of incorporation of a town can
3 Dillingham v. Snow, 5 Mass. 547, be found, it may be proved to be a
per Parsons, C. J. See Inhabitants of town by reputation, or it may be shown
Stockbridge v. Inhabitants of West to have claimed and exercised the

Stockbridge, 12 Mass. 400. powers of a town, with the knowl-
‘Hager’s Town, etc. Road Co, v. edge and assent of the legislature, and
Creeger, 5 H. & J. (Md.) 122. without objection or interruption, for so

5 New Boston v. Dunbarton, 15 N.H. long a period as to furnish evidence of
201; Mayor of Kingston v. Horner, a prescriptive right.”
Cowp. 102; Londonderry v. Andover, "Bank of the United States v. Dan-
28 Vt. 416. dridge, 12 Wheat. 71.

6TIn Bow v. Allenstown, 34 N. H. 365,
§ 20 INTRODUCTORY DISCUSSION. 31

favor of their legal existence.”! In public affairs, where the
people have organized themselves under color of law into
the ordinary municipal bodies, and have gone on year after
year, raising taxes, making improvements, and exercising
the usual franchises, their rights are properly regarded as
depending quite as much upon the acquiescence of the
public as upon the regularity of the original incorporation,
and no ex post facto inquiry will be permitted to undo the
corporate existence.” Commenting upon this subject, Mr.
Morawetz observes® that ‘the acquiescence of the public
cannot upon the same principle be held to legalize a pri-
vate corporation ; for the public are ordinarily not concerned
in the existence of a private corporation, and acquiescence
can have no weight where there is no cause for objecting.”
Referring to a guas¢ public corporation the Supreme Court
of California say :* ‘‘ Legislative recognition of a corpora-
tion is in many cases sufficient proof of its existence.” In
a new country, such as ours, however, in which corporate
organization is a matter of recent date, the attempt to prove
the existence of a corporation by prescription is seldom
made, charter authority to act as such being generally shown.

§ 20, A corporation aggregate.—Our inquiry as to the dif-
ferent kinds of corporations may be briefly continued. A
corporation aggregate is a collection of individuals united
in one body, under such a grant of privileges as secures a
succession of members without changing the identity of the
body, and constitutes the members, for the time being, one
artificial person, or legal being, capable of transacting some
kind of business like a natural person.’ “A corporation
aggregate never dies,” ®

 

1 Jameson v. The People, 16 Ill. 259; ’ Morawetz on Corporations, 2d ed.,
1 Dillon on Mun. Corp. § 37; Mora-- vol. i, § 36.
wetz on Corporations, 2d ed., vol.i., | * People v. Reclamation Dist. No. 108,
§§ 17, 36. 53 Cal. 349.

*The People v. Maynard, 15 Mich. 5 Bronson, J., in People v. Assessors
470. See Rumsey v. The People, 19 of Watertown, 1 Hill (N. Y.) 620.
N.Y. 41. 6 Wilcox v. Wheeler, 47 N. H. 490.
INTRODUCTORY DISCUSSION.

§$ 21, 22

§ 21. A corporation sole.—A corporation sole, on the other
hand, is one that consists of a single member. Bishops,
parsons and vicars are examples under the institution of
the English church. The King of England is made a sole
corporation in order to prevent an zuterregnum, or vacancy
of the throne."

32

§ 22, De facto corporations. Defects and irregularities in
the formation of a corporation do not invalidate acts per-
formed by the corporation in good faith under a claim of
corporate right ; the acts are valid as the acts of a de facto
body, and are not liable to attack in a collateral proceed-
ing.” A person who contracts with a de facto corporation
cannot, in an action against him founded upon the con-
tract, impeach the legality of the organization of the cor-
poration.? A railroad corporation that has attempted
organization under a general law, and has filed papers con-
stituting colorable compliance with the statute, but so de-
fective as not to be valid against the people, may yet be

 

17 Bl. Comm.470,. Professor Maine
says: “It is an axiom with us that the
king never dies, being a corporation
sole. His capacities are instantly filled
by his successor, and the continuity of
dominion is not deemed to have been
interrupted. With the Romans it
seemed an equally simple and natural
process, to eliminate the fact of death
from the devolution of rights and obli-
gations.” Maine’s Ancient Law, pp. 187,
188, In Overseers of Poor of Boston v.
Sears, 22 Pick. (Mass.) 125, the court
said: ‘We are not aware, that there is
any instance of a sole corporation, in
this commonwealth, except that of a
person, who may be seized of parson-
age lands, to hold to him and his suc-
cessors, in the same office, in right of
his parish.” An individual carrying on
business under a general banking law is
not a corporation. Codd v. Rathbone,

19 N. Y. 37. See Bank of Havana v.
Magee, 20 N. Y. 358. Hallett v. Har-
rower, 33 Barb. (N. Y.) 542.

* Spring Valley Water Works v. San
Francisco, 22 Cal. 434; Eaton v. As-
pinwall, 19 N.Y. 119; McFarlan v.
Triton Ins. Co., 4 Denio (N. Y.) 392;
Society Perun v. Cleveland, 43 O. S.
481.

® Butchers’ & Drovers’ Bank v. Mc-
Donald, 130 Mass. 264; Commission-
ers of Douglas Co. v. Bolles, 94 U. S.
104. See Wilcox v. Toledo & Ann
Arbor R.R. Co., 43 Mich. 584. The
conversion of a trading company, act-
ing as a corporation de facto, into
one de jure, will not exempt the prop-
erty held in the latter character from
liability for the obligations of the
former. Georgia Ice Co. v. Porter, 70
Ga. 637, citing Morawetz on Corpo-.
rations, § 143.
§ 22

held a de facto corporation, as against a subscriber to its
capital, upon very slight proof of user.1| In Commission-
ers of Douglas County v. Bolles,? Strong, J., uses these
words in a case in which it was sought to attack the regu-
larity of the corporate organization: “It has been a cor-
poration de facto, at least, if not de jure, from the date of its
organization. Its corporate existence, therefore, and its
ability to contract, cannot be called in question in a suit
brought upon evidences of debt given to it.”* Some
of the cases hold that a liberal construction is to be
adopted with regard to the acts required to create a corpo-
ration,‘ and, as we have said, every presumption is to be
indulged in favor of the legal existence of the corporation
after it has gone into operation.’ Defects, such as the
omission of the names and number of the trustees who are
to manage the concerns of the company for the first year ; ®
the failure to file a duplicate of the articles of association
with the secretary of state;’ or a misstatement of the
length of the line in the articles of association of a railroad
company ;® or a failure to pay ten per cent. of the capital
stock subscribed at the organization ;* or stating the
name of a city as ‘the place of business,” instead of “the
princtpal place of business,” as required by law,” will not

INTRODUCTORY DISCUSSION, 33

 

'Buffalo & Allegany R.R. Co. v.
Cary, 26 N. Y.75. See Cayuga Lake
R.R. Co. v. Kyle, 64 N. Y. 187. If
there is any legal authority for the
organization of acorporation, and a de-
fective attempt is made to comply with
the legal requirements, a de facto cor~
poration is created, the legal existence
of which the. State alone can question.
See Spahr v. Farmers’ Bank, 94 Pa. St.
429; Cochran v. Arnold, 58 Pa. St.
399. Compare Slocum v. Providence
Steam and Gas Pipe Co., 10 R. I. 114.

394 U. S. 106.

%See Society. Perun v. Cleveland, 43
0. S. 481. Wilcox v. Toledo & Ann
Arbor R.R. a 43 Mich.. 584.

*Compare Nat. Bank of Washington.
v. Insurance Co., 41 Ohio St. 12.

5 Spring Valley Water Works v. San
Francisco, 22 Cal. 441 ; Judah v. Amer-
ican L. S. Ins. Co., 4 Ind. 334; Dun-
ning v. New Albany and Salem R.R.
Co., 2 Ind. 437.

6’ Mead v.. Keeler, 24 Barb. (N. Y.)
20.
™Cross v. Pinckneyville Mill Co., 17
Ill. 54.

*Troy and Rutland R.R. Co. v. Kerr,
17 Barb. (N. Y.) 581.

®° Katon v. Aspinwall, 19 N. Y. 119.

Kx parte Spring Valley Water
Works, 17 Cal, 132.
34 INTRODUCTORY DISCUSSION. § 23

invalidate the incorporation in so far as parties dealing with
it are concerned, and such persons cannot attack its corpo-
rate existence.

§ 23. De facto officers—Akin to this topic is the rule of
law recognizing de facto officers of corporations. In The
King v. Bedford Level,’ Lord Ellenborough defined a de
facto officer to be “one who has the reputation of being
the officer he assumes to be, and yet is not a good officer
in point of law.” The following rules are announced
by the Connecticut Supreme Court as governing the sub-
ject: “An officer de facto is one whose acts, though not
those of a lawful officer, the law, upon principles of policy
and justice, will hold valid so far as they involve the inter-
ests of the public and third persons, where the duties of the
office are exercised :—First. Without a known appointment
or election, but under such circumstances of reputation or
acquiescence as were calculated to induce people, without
inquiry, to submit to or invoke his action, supposing him
to be the officer he assumed to be. Second. Under color of
a known and valid appointment or election, but where the
officer had failed to conform to some precedent require-
ment or condition, as to take an oath, give a bond, or the
like. Third. Under color of a known election or appoint-
ment, void because the officer was not eligible, or because
there was a want of power in the electing or appointing
body, or by reason of some defect or irregularity in its ex-
ercise, such ineligibility, want of power, or defect being un-
known to the public. Fourth. Under color of an election
or appointment by or pursuant to a public unconstitutional
law, before the same is adjudged to be such.”* A suit

 

16 East 356, 368. See Mechanics’ 423; Peirce v. Weare, 41 Iowa 378;
Nat. Bank vy, Burnet Manf. Co., 32 N. Sheehan’s Case, 122 Mass. 445; Ex
J. Eq. 238. parte Norris, 8 S. C. 408; People v,

2 State v. Carroll, 38 Conn. 449, 471. Lieb, 85 ‘Ill. 484; Carleton v. People,
See s. P. Brown v. Lunt, 37 Me. 10 Mich, 250, As to rights of officers
§$ 24, 25 INTRODUCTORY DISCUSSION. 35

brought by the de facto officers of a corporation cannot be
defeated by showing that such officers were not legally
elected,’ especially where there are no other officers claim-
ing to represent the corporation.’
There must, however, be an office de jure, in order that
the existence of a de facto officer may be recognized; oth-
erwise ‘the pretended officer is merely a usurper, to whose
acts no validity can be attached.”* It is said by Manning,
J.: “Where there is no office there can be no officer de
facto, for the reason that there can be none de jure.” *

§ 24. Quasi corporations.—Limited partnerships and joint
stock companies are often cited as illustrations of guasz
private corporations; while overseers of the poor, school
trustees or commissioners, and public officers succeeding to
the rights of their predecessors in office are mentioned as
guast public corporations; that is, as persons or associa-
tions possessing some corporate attributes.

§ 25. Corporate name.—Concerning the name of a corpo-
ration, Blackstone says: ‘‘ Where a corporation is erected,
a name must be given to it; and by that name alone it must
sue, and be sued, and do all legal acts.”*> ‘The law knowsa
corporation only by its corporate name,” says another au-
thority. The corporate name is said to be the very being
of its constitution, the “knot of its combination,” without
which it could not perform its corporate functions.* A
name is a necessary element in the existence of a corpora-
tion. It has been said by an eminent judge that a corpo-
ration “is created a body politic and corporate, that it may
tn tts corporate name transact all the business which its

 

de facto, see 19 Am. Dec. 68, note, * Norton v. Shelby Co., 118 U. S.
and compare especially Norton v. 449.

Shelby Co., 118 U. S. 447. 4 Carleton v. People, 10 Mich. 259.
1 Mechanics’ Nat. Bank v. Burnet ° 1 Bla. Com. 474; see §§ 38, 123.
Manf. Co., 32 N. J. Eq. 238. 6 Walker’s Am. Law, 9th ed., p.'232.

? Charitable Asso. v. Baldwin, 1 =” Smith’s Merc. Law, 3d ed., 141.
Metc. (Mass.) 359.’ ~ See King v. Randlett, 33 Cal. 318.
36 INTRODUCTORY DISCUSSION. § 26
charter or other organic act authorizes it to do.”* A
change of the corporate name does not necessarily involve
a change of the identity of the corporation,’ and it may be
responsible under the new name for old debts. The
reader may recall that a Federal court cannot interfere to
prevent the organization of a corporation bearing the same
name as that of a foreign corporation doing business in the
State,* nor can a decree of a court changing the name of
a corporation be impeached in a collateral proceeding.®
But, by analogy to the law of trade-marks, an injunction
may be granted to a corporation, restraining persons from
appropriating or using the corporate name that the plain-
tiff had regularly adopted in good faith. The use of an
abbreviation of its name by a corporation is not an act of
usurpation, and will not support a proceeding by guo war-
ranto to oust the corporation from the enjoyment of its
franchise.”. And the omission of the word “The” in sign-
ing the name of the corporation to a deed of assignment,
is not fatal to the subscription.®

The name may be acquired by usage and implication.®

$26. Jus disponendi of corporations,—All corporations
capable of taking and holding property have the jus dzs-
ponendi as fully as natural persons, except in so far as they

 

* Hawes v. Oakland, 104 U.S. 453.
See Newby v. Oregon Central Ry. Co.,
Deady 609. Where an individual does
business under a corporate name, and
sues in such name, he may be allowed
under the modern procedure to amend,
Bank of Havana v. Magee, 20 N. Y.
355; compare Merriam v. Wolcott, 61
How. Pr. (N. Y.) 394.

2 Girard v. Philadelphia, 7 Wall. 1.

3 Dean v.i La Motte Lead Co., 59
Mo. 523. See Chap. XX,

‘Lehigh Valley Coal Co. v. Ham-

, blen, 23 Fed. Rep. 225.

5 Freeland v. Pennsylvania, Cent. Ins,

Co., 94 Pa, St. 504. \

§ Newby v. Oregon Central Ry. Co.,
Deady 609; Holmes v. Holmes, etc.
Manf. Co., 37 Conn. 278. Compare
London & P. Law Assur. Soc. v. Lon-
don, etc. Life Ins. Co., 11 Jurist 938;
Insurance Oil Tank Co. v. Scott, 33
La. Ann. 946.

* People v. Bogart, 45 Cal. 73.

* De Riesthal v. Walton, 66 Md. 470.
A judgment cannot. be entered against
the “Independent Tunnel Company”
upon a default against the “ Independ-.
ent Company.” King v. Randlett, 33
Cal. 318; S.C. 5 Morrison’s Mining
Rep. 605.

® Smith v. Plank Road Co.,30 Ala.650,
§ 26 INTRODUCTORY DISCUSSION. 37
are restrained by statute.'’ This power is necessarily in-
cident to ownership.* The very idea of private property
in which the public has no right, involves the idea of a
right to sell and convey, when the exigencies of the corpo-
ration require it. It has already appeared that, in the ab-
sence of charter restrictions, the power of a corporation to
make contracts is usually measured by the general objects
and purposes of the incorporation, and it .is always pre-
sumed that any proper contract may be entered into, the
scope and tendency of which is manifestly to further the
design and purposes of the corporate creation.’ Justice
Sharswood states the rule to be that a corporation, unless
specially restricted by its charter, or some statute, has
general power to dispose of its property, in whole or in
part, but it has no right to sell or assign its franchises with-
out special authority of law. This we submit, however, is
too broad a statement of the rule. Directors and a majority:
of shareholders cannot sell out the entire property of a
solvent and paying railroad company against the consent of
a minority,° and a corporation in which any duties of a pub-
lic nature inhere will not usually be permitted to deprive
itself of such of its property as is essential to enable it to
discharge its corporate functions. A railroad company has
no authority to sell or lease zm perpetuwm all its property
and business to another corporation, and compel a dissent-
ing shareholder to accept stock of the other company, or a
fixed and arbitrary price per share. And the power to ex-
ercise the right of eminent domain cannot readily be trans-

 

4 Pittsburgh & Connellsville R.R. Co,

People v. College of California, 38
Cal. 171; Pittsburgh & Connellsville
R.R. Co, v. Bedford & B. R.R. Co., 81*
Pa. St. 111.

_ ? Miners’ Ditch Co. v. Zellerbach, 37
Cal. 588.

3 Spangler v. Butterfield, 6 Col. 364;
Kitchen v. Cape Girardeau, etc. R.R.
Co., 59 Mo. 517.

v. Bedford & B, R.R.Co.,81* Pa. St.111,

5 Kean v. Johnson, 9 N. J. Eq. 4o1.

6 Boston & Prov. R.R Co. v. New
York, etc. R.R., 13 R. I. 260. See
Thomas v. Railroad Co,, ror U. S. 80;
Ashbury Railway, etc. Co. v. Riche, L.
R.7 H. L. 653; Black v. Delaware &
R. Canal Co., 22 N.J. Eq. 130.
38 INTRODUCTORY DISCUSSION. § 27

ferred.!| Of course, we do not mean to say that there may
not be cases where a majority of stockholders may law-
fully vote to sell all the company’s property and surrender
their charter, ¢. g., “where the purpose of the incorpora-
tion could not be accomplished, the business contemplated
could not be carried on; where the capital had been ex-
hausted in endeavors to go on, leaving no means to go
further,” etc.”

§ 27, Corporators liable as partners.— Parties assuming to
act in a corporate capacity without legal organization as a
corporate body, have been held liable as partners to those
with whom they contract.?

This statement of an important rule is drawn from the
opinion of Gray, C., in the New York Commission of
Appeals. While it is plausible on its face, the rule as stated
is not universally accepted. On the contrary, the principle
it embodies has been so sharply controverted in the author-
ities, that the subject is considered of sufficient importance
to call for treatment in a separate chapter. This question
of partnership liability constantly comes up when insolvency
overtakes the association. Perhaps this phase of the law
is too fully developed to warrant a discussion de novo, as
many of the highest courts of the various States have as-
sumed decided positions with reference to the question,
and have promulgated views which are at least binding in
the States where the cases arose. On the one hand, it is
said that an unincorporated association of individuals closely
resembles a copartnership, and as the members designed to
share in the benefits and profits, they ought properly to be
held liable for debts. The opposite view is that the mem-

 

1See Mahoney v. Spring Valley * Fuller v. Rowe, 57 N. Y. 26.
Water Works Co., 52 Cal. 159. 4See Chap. XXII, §§ 464, 467, re-
* Wilson v. Central Bridge Co.,9 R.I. viewing the cases at considerable
§90, 598, cited in Boston, etc. R.R.Co. length.
v. New York, etc. R.R. Co., 13 R.1. 263.
§ 28 INTRODUCTORY DISCUSSION.

39
bers never agreed to become partners as regards themselves
or third parties, and never held themselves out to the world
as such.

§ 28. What constitutes insolvency.—This general and frag-
mentary discussion of horn-book law must give way to the
consideration of the particular phases of the law of corpo-
rations contemplated in this treatise. Financial misfortune
being the usual or controlling influence in forcing a sus-
pension, liquidation, or dissolution of a corporate body, it
becomes important to ascertain as clearly as possible the
meaning of the term “insolvency” as used in this connec-
tion. The word “insolvency” is ordinarily applied to one
whose estate is not sufficient to pay his debts, or to a per-
son who is unable to satisfy all his debts from his own
means.!' By way of contrast, a party is said to be solvent
who has property subject to court process sufficient to
satisfy all his legal obligations.* “A corporation, like an in-
dividual,” says Lawrence, J., “is insolvent when it is not able
to pay its debts. Insolvency means a general inability to
answer, in the course of business, the liability existing and
capable of being enforced.”* In the Glen Iron Works * case

 

1Wait on Fraudulent Conveyances,
§ 273; Riper v. Poppenhausen, 43 N.
Y. 75; Marsh v. Dunckel, 25 Hun (N.
Y.) 169, 170. See Buchanan v. Smith,
16 Wall. 308; Herrick v. Borst, 4 Hill
(N. Y.) 652; Brouwer v. Harbeck, 9 N.
Y. 594; Dabney v. Bank of South Caro-
lina, 3 S. C. 152; Denike v. New York
and R. Lime, etc. Co., 80 N. Y. 608.

*Ibid.; Herrick v. Borst, 4 Hill (N.
Y.) 652, approved in Walkenshaw v.
Perzel, 32 How. Pr. (N. Y.) 240; Brou-
wer v. Harbeck, 9 N. Y. 594. See Eddy
v. Baldwin, 32 Mo. 374; McKown v.
Furgason, 47 Iowa 637.

People v. Excelsior Gas Light Co.,
3 How, Pr. N.S. (N. Y.) 138, citing
Brouwer v. Harbeck, 9 N. Y. 594;

Marsh v. Dunckel, 25 Hun (N. Y.) 169;
s. P. Riper v. Poppenhausen, 43 N.Y.
75; Walkenshaw v. Perzel, 32 How.
Pr. (N. Y.) 240; Cutten v. Sanger, 2
Younge & J. 459; Ferry v. Bank of
Central New York, 15 How. Pr. (N. Y.)
451; Denike v. New Yorkand R. Lime,
etc. Co., 80 N.Y, 608. In Ferry v. Bank
of Central New York, 15 How. Pr. (N.
Y.) 451, Allen, J., said: “Insolvency in
the abstract, has the same signification,
whether applied to corporations or as-
sociations, and means a general in- |
ability to pay one’s debts; an inability
to fulfil one’s obligations, according to
his undertaking.”
417 Fed. Rep. 327.
40 § 28

INTRODUCTORY DISCUSSION,
it is said that the term insolvency “ signifies insufficiency of
property to satisfy creditors,” but this definition is mani-
festly meagre. The recovery of a judgment against a cor-
poration is not a necessary test of insolvency, since a corpo-
ration may be insolvent against which no judgments have
been entered.!' The ordinary acceptation of the term “ in-
solvent,” when applied to a bank, means inability to meet
liabilities in the usual course of business. A bank may be
solvent, and yet, from temporary causes, over which its
officers have no control, suspend until these causes be re-
moved.” Le Blanc, J., observed in Bayly v. Schofield,®
“IT take insolvency, as it respects a trader, to mean that
he is not in a situation to make his payments as usual ; and
that it does not follow that he is not insolvent, because he
may ultimately have a surplus upon the winding up of his
affairs,” * As the term insolvency was used in bankrupt and
insolvent laws, especially as applied to traders, it signified
the financial condition of a person unable to pay his debts,
as they fell due in the usual course of trade.” The mere
fact that the demand notes of a corporation remain out-
standing, is not, we may observe, in itself, an act of insol-
vency, in the absence of any proof of demand of payment,®
but the non-payment of a check drawn by a commercial
house upon its bankers, is some evidence of insolvency.”

 

“See Dabney v. Bank of State of S.
C,, 35. C. 153.

People v, Excelsior Gas Light Co.,
3 How. Pr. N. S. (N. Y.) 138. See

Ferry v. Bank of Central New York, 15
How. Pr. (N. Y.) 445.

7 Dodge v. Mastin, 5 McCrary qtr.
If a bank is so circumstanced as'to de-
pend upon the individual resources and
exertions of its directors and stock+
holders, and compelled to rely upon
their private funds to meet its engage-
ments, and only claims to be able to
pay at a future day, it cannot be said
to be solvent, Ferry v. Bank of Cen-
tral New York, 15 How. Pr. (N. Y.) 454.

31M. &5S. 353.

5 Bayly v. Schofield, 1 M. & S. 338,
350. See Denike v. New York & R..
Lime, etc. Co., 80 N. Y.608; Rison v.
Knapp, 1 Dillon 186; J re Wright, 2
Nat. Bank. Reg. 493; Platt v. Stewart,
13 Blatchf. 481; Graham v. Stark, 3
Benedict 520. The reader will find a
large collection of these cases in Bump
on Bankruptcy, roth ed., pp. 411, 412,
812, 813.

® Denike v. New York and Rosendale
Lime, etc. Co., 80 N. Y. 599.

* Brown v. Montgomery, 20 N.Y, 287.
§$§ 29, 30 INTRODUCTORY DISCUSSION. 4I

“Stopping payment,” said Bronson, Ch. J., “is of itself
sufficient evidence of the insolvency of a bank; .... and
when... . there is nothing to rebut the presumption, the
evidence of insolvency -is conclusive.” ! The contention has
been put forth that a corporation which was able to meet its
matured obligations was not insolvent. The court, however,
in a case in Illinois, exacted a higher standard of solvency
of an insurance company, and held that, to be solvent, its
assets should exceed its liabilities, matured and unmatured.?

§ 29. Various interpretations of the term.—The term insol-
vency, then, is not always used in the same sense. It is
sometimes used to denote the insufficiency of the entire
property and assets of an individual to pay his debts. This
is its general and popular meaning. But it is also used in
a more restricted sense, to express the inability of a party
to pay his debts as they become due in the ordinary course
of business.2 The meaning of the word solvency is, as we
have seen, usually tested by its opposite, zzsolvency. Sup-
pose a man unable to pay all his debts from his own means,
or that all his debts cannot be collected out of those means
by legal process; is there any doubt that in the general
sense of the word he is insolvent ?* Debts are paid with prop:
erty, and in its primary and ordinary sense, “insolvency is ;
the inadequacy of a man’s funds to the payment of hisdebts.”®

§ 30. Open and notorious insolvency—The expression
‘open and notorious insolvency,” which sometimes occurs
in the cases, is said to imply not only the want of sufficient
property to pay all of one’s debts, but the absence of all
property within reach of the law, applicable to the payment
of any debt.®

 

1Gillet v. Moody, 3N. Y.481. Com- 4 Cowen, J., in Herrick v. Borst, 4
pare Wilson v. City Bank, 5 B. R. 270, Hill (N. Y.) 652.

? Chicago Life Ins, Co. v. Auditor, 52 Bell’s Com. 162, quoted in Her-
etc., ror Ill, 82. rick v. Borst, 4 Hill (N. Y.) 652.

®Toof v. Martin, 13 Wall. 47, per ® Hardesty v. Kinworthy, 8 Blackf.
Field, Justice. (Ind.) 304.
42 INTRODUCTORY DISCUSSION. §§ 31-34

§ 31. Insolvency and inability to pay.—It is true that “ insol-
vency ” and “inability to pay ” are synonymous, but solvency
does not mean ability to pay at all times and under all cir-
cumstances and everywhere on demand; nor does it require
that a person should have in his possession the amount of
money necessary to pay all claims against him."

§ 32. Meaning of the phrase “in failing circumstances.”—
The phrase, ‘in failing circumstances,” used in the consti-
tution and statutes, when applied to a bank, must be taken
to mean a state of uncertainty whether the bank will be able
to sustain itself, depending on favorable or unfavorable con-
tingencies, which in the course of business may occur, and
over which its officers have no control. Thus, an individual
may be said to be in failing circumstances when he is put
to unusual shifts to meet his liabilities, such as borrowing
money at unusual rates of interest, and making sacrifices in
the disposition of his property which he would not do but
for his condition.?

§ 33. Presumptions concerning insolvency.— Where a party
is proved to be solvent, this condition of affairs is presumed
to continue until the contrary is shown.’ Insolvency is
never presumed. But where a man is shown to be a bank-
rupt, the presumption will be indulged that five months later
he continues in that condition,* and there is express author-
ity to the effect that a condition of insolvency once shown
will be presumed to continue.®

§ 34. Effect of insolvency —‘ The insolvency of a corpo-
ration,” observes Mr. Morawetz,° “ does not, per se, put an

 

' Robertson, Ch. J.,in Walkenshaw v. and much less that he was guilty of
Perzel, 4 Robt. (N. Y.) 426; S. C. 32 fraud in the purchase.”
How. Pr. (N. Y.) 233. In Millard v. * Dodge v. Mastin, 5 McCrary 412.
Webster, 54 Conn. 417, the court, speak-  * Walrod v. Ball, 9 Barb. (N. Y.) 271.
ing of a debtor charged with fraud, said : 4 Donahue v. Coleman, 49 Conn. 464.
“But the fact that he had not property = * Mullen v. Pryor, 12 Mo. 307; Body
enough to make immediate payment of v. Jewsen, 33 Wis. 402.
all claims against him falls short of 6 Morawetz on Corporations, 2d ed.,
showing that he was then insolvent, vol. ii., § 786.
§ 34 INTRODUCTORY DISCUSSION.

43

end to the power of the company to manage its assets, or
fix the lien of creditors upon the specific property in hand.
It would be productive of the greatest inconvenience to
permit the creditors of a corporation to interfere with its
management, upon the sole ground that the company’s
debts are in excess of its available assets. A corporation
is authorized to continue the management of its affairs, to
deal with its property, and to assign it for value in due
course of business, notwithstanding its actual insolvency, so
long as there is an honest intention and a reasonable ex-
pectation on the part of the company of redeeming its
fortunes; and it is only when a corporation is about to
defraud its creditors by waste of its assets, or when the
insolvency of the company is hopeless, so that further
prosecution of the enterprise would clearly be at the ex-
pense of the creditors, that the latter may interfere to pro-
tect their lien.”* These rules are manifestly just, and are
in the main analogous to the cases of individuals. A sim-
ple contract creditor cannot ordinarily interfere with the
_ property of a debtor before judgment. If the property of
an honest, struggling debtor could be tied up by injunc-
tion upon mere unadjusted legal demands, he would be
constantly exposed to the greatest hardships and grossest
frauds, for which the law would afford no adequate remedy.”
“The authorities are clear,” says the learned Justice Camp-
bell,? “that chancery will not interfere to prevent an in-
solvent debtor from alienating his property to avoid an exist-

 

1See Andrew v. Vanderbilt, 37 Hun
(N. Y.) 468 ; Sturges v. Vanderbilt, 73
N. Y. 391, 392; Baker v. Louisiana
Portable R.R. Co., 34 La. Ann. 754;
Matter of Louisiana Savings Bank, 35
La. Ann. 199. See §§ 41, 86.

2 Wait on Fraudulent Conveyances,
§ 52; Shufeldt v. Boehm, 96 IIl. 560;
Peyton y. Lamar, 42 Ga. 134; Cub-
bedge v. Adams, 42 Ga, 124; Oberholser

v. Greenfield, 47 Ga. 530; Moran v.
Dawes, 1 Hopk. Ch. (N. Y.) 365; Dortic
v. Dugas, 52 Ga. 231; Buchanan v.
Marsh, 17 Iowa 494; Rich v. Levy, 16
Md. 74; Brooks v. Stone, 19 How. Pr.
(N. Y.) 395; Uhl v. Dillon, 10 Md,
500; Hubbard v. Hubbard, 14 Md.
356. Compare Case v. Beauregard, ¢g
U.S. 125; Locke v. Lewis, 124 Mass, I,
3 Adler v. Fenton, 24 How. 411.
§$§ 35, 36

ing or prospective debt, even when there is a suit pending to
establish it.” So, the simple contract creditors of a firm
have, ordinarily, no specific lien upon the firm property,
such as will enable them to interfere with any disposition
which the firm may make of it. As is stated in Treadwell
v. Salisbury Manufacturing Company,’ “it is too well set-
tled to admit of question, that a court of chancery has no
peculiar jurisdiction over corporations, to restrain them in
the exercise of their powers, or control their action, or pre-
vent them from violating their charter, in cases where there
is no fraud or breach of trust alleged as the foundation of
the claim for equitable relief.” ®

44 INTRODUCTORY DISCUSSION.

§ 35. Corporate action after insolvency.— Where an, in-
solvent corporation has been for some years in the hands
of the court, and an injunction issues restraining the man-
agers from exercising the franchises of the company, the
court may order an election of directors by the stockhold-
ers. We know of no positive rule of law that prevents an
insolvent corporation from continuing business.®

§ 36. Effect of bankruptcy or receivership.—The bank-
ruptcy of a corporation, as of a bank, does not vacate the
office of its directors ;* nor is it a defense to a suit brought
upon a note of the corporation.’ And the appointment of
a receiver of a railroad corporation does not necessarily
prevent the directors from discharging their functions in

 

1 Wait on Fraud. Conv. § 52. Wil R.R. Co. 35 N. J. Eq. 349. See

cox v. Kellogg, 11 Ohio 394; Gwin v.
Selby, 5 Ohio St. 97; Field v. Chap-
man, 15 Abb. Pr. (N. Y.) 434; The
State v. Thomas, 7 Mo. App. 205;
Shackelford v, Shackelford, 32 Gratt.
(Va.) 481; Allen v. Center Valley Co.,
21 Conn. 130; Mayer v. Clark, 40 Ala,
250.

*7 Gray (Mass.) 393, 399.

8s, p, Pond v. Framingham & Lowell
Railroad Co., 130 Mass. 194.

“Lehigh Coal & Nav. Co. v. Central

§ 36.
5See Catlin v. Eagle Bank, 6 Conn.

233; Bishop v. Brainerd, 28 Conn.
301; Carey v. Giles, 10 Ga.9; Lambv.
Laughlin, 25 W. Va. 300; Paulding
v. Chrome Steel Co., 94 N. Y. 338;
Dutcher v. Importers’ & T. Nat. Bank,
59 N. Y. 5; Pond v. Framingham,
etc. R.R. Co., 130 Mass. 194.

6 Holland v. Heyman, 60 Ga. 174.

* Athol Nat. Bank v. Hingham Manf.
Co., 121 Mass. 399.
§ 36 INTRODUCTORY DISCUSSION. 45

matters not affecting the receivership, and an injunction re-
straining any action whatever on their part will not be con-
sidered necessary to accomplish the objects of the receiver-
ship. The corporation, however, ceases to be liable for
acts done by the receiver in the management of its
affairs* in cases where the receiver’s possession is com-
plete ; but the liability continues where the possession of the
receiver and of the corporation is joint.2 The legislature
possesses the power to restrain creditors from maintaining
actions against corporations whose effects are in the hands
of receivers.‘ .

 

1Stevens v. Davison, 18 Gratt. (Va.) ? Bell v. Indianapolis, etc. R.R. Co.,
819. See Ohio and Miss. Ry. Co. v. , 53 Ind. 57.
Russell, 115 Ill. 52; Lehigh Coal & Railroad Co. v. Brown, 17 Wall.
Nav. Co. v. Central R.R. Co., 35 N. J. -445. See $219.
Eq. 349. : 4 Leathers v. Shipbuilders’ Bank, 40
Me. 386.

,
CHAPTER II.

REMEDIES AFFECTING CORPORATIONS, OFFICERS AND STOCK-

§ 37.
38.

. 39.
40.
4.
42.
43.

44.

45.
46.

47.
48.
49.
50.

BI.

HOLDERS,

Multiplicity of remedies.

Actions by and against corpora-
tions.

Foreign corporations.

Actions at law.

Jurisdiction of equity.

Remedy by injunction.

Garnishment against corpora-
tions.

Process of garnishment against
receivers,

Supplementary proceedings.

Statutory methods of liquida-
tion.

Remedies against stockholders.

Concurrent remedies.

No action at law by creditor for
unpaid subscription.

Election of remedies on stock
subscription.

Right of stockholders to test an
election of directors.

 

§ 52.
53-

54.
55.

56.
57
58.
59.

60.
61.

62.
63.

64.

Remedies against directors.

No action at law in Massachu-
setts,

Injunction against directors.

When action for damages will
not lie.

Creditors’ remedies against re-
ceivers.

Nature of guo warranto proceed-
ings.

No injunction pending guo war-
ranto,

Information in equity not a sub-
stitute.

Concerning mandamus.

Mandamus to enforce perform-
ance of public duty.

Service of process upon foreign
corporations,

Process against public corpora-
tions,

Suits in Federal courts.

* $ 37. Multiplicity of remedies.—The path of the practitioner
is beset with difficulties in discharging the task of selecting
an appropriate remedy, or combination of remedies, to
accomplish a particular result in litigations affecting in-
volved or insolvent corporations, their officers or stock-
holders. Besides actions at law and suits in equity in vari-
ous forms, statutory proceedings of different kinds and for
different objects are allowed in many of our States in mat-
ters concerning the liquidation or winding up of insolvent
corporate bodies. Several suits or proceedings either inde-
§ 37 REMEDIES, 47

pendent of, or dependent upon, one another, are, in some
cases, requisite to accomplish a given practical result. Thus
a creditor seeking to enforce payment of his claim must, in
some instances, first procure a judgment against the cor-
poration, and upon the return of an execution unsatisfied
proceed in equity to sequestrate the assets of the corpora-
tion, and secure the appointment of a receiver of its prop-
erty. The receiver may, in turn, be compelled to institute
actions or suits to reach legal or equitable assets of the de-
funct corporation, or to proceed against its stockholders for
unpaid subscriptions, or its officers for misfeasance or non-
feasance in office, or to enforce common law or statutory
liabilities. Added to this, the statutory liabilities may, in
some cases, be enforced by a judgment creditor in a direct
suit. Cross actions and suits for contribution are frequently
necessary to adjust the rights and equities of the stock-
holders, officers and creditors. These various proceedings
will not accomplish the dissolution or annihilation of the
corporation ; an action or statutory proceeding must, as is
elsewhere shown, be instituted for that special purpose.
This latter proceeding is vitally essential to interested par-
ties in a numerous class of cases; otherwise liability may
arise against stockholders and officers growing out of acts
performed in the apparent right of the defunct organization.

Our remedial law, as applied to corporations, can scarcely
challenge admiration. The system is too disjointed. The
endless entanglements of corporate litigations are matters
of common knowledge and notoriety. A writer can ren-
der little practical service in a field so frequently invaded
by badly framed statutes and codes; but attempt will be
made to point out certain distinctions and principles affect-
ing remedies which it is considered necessary for the prac-
titioner to keep in view. The discussion of this phase of
our subject must necessarily be brief and fragmentary, in
view of the space allotted to the entire work.
§ 38

§ 38 Actions by and against corporations.—It follows
from the conclusions stated in our opening chapter,’ that a
corporation may sue and be sued in its corporate name.”
This results from the conclusion already given that a cor-
porate body must do all legal acts in the name of the cor-
poration.? When such acts are challenged in the courts,
the corporate name must necessarily be invoked. In
Curtiss v. Murry,‘ the court said: “It is a rule as old,
perhaps, as the earliest laws forming or authorizing the
formation of corporations, that a corporation must sue
and be sued by its corporate name. Indeed, one of
the powers and capacities ‘necessarily and inseparably in-
cident to every corporation,’ is that of suing and being
sued by its corporate name. A corporation, like a person,
is recognized in law only by its name, and in its corporate
capacity, rights and liabilities, it is as distinct from the per-
sons composing it, as an incorporated city is from an inhab-
itant of the city.”® A corporation may sue out a real writ,®
secure an interpleader,’ bring an action for use and occupa-
tion,’ prove its claim as a creditor in bankruptcy and vote
for an assignee,® and by injunction protect its name in the
trade against unscrupulous competition.” Even a de facto
corporation which, ny Teeny of Of eanizaHiory might be

48 REMEDIES,

 

1 See § 25,

? Heaston v. Cincinnati, etc. R.R.
Co., 16 Ind. 278; South Bay Meadow
Dam Co. v. Gray, 30 Me. 547; Bangor,
O. & M. R.R. Co. v. Smith, 47 Me. 44;
Baltimore & Ohio R.R. Co, v. Galla-
hue, 12 Gratt. (Va.) 655; Shrewsbury
v. Brown, 25 Vt. 197; Holmes v.
Holmes, etc. Manf. Co., 37 Conn. 278;
The Camanche, 8 Wall. 448; Trenton

Mut. Life, etc. Ins. Co. v. Perrine, 23

N. J. L. 402; Knickerbocker Life Ins.
Co. v. Ecclesine, 42 How. Pr. (N. Y,)
201; Central Bridge Co. v. Lowell, 4
Gray (Mass.) 474. See §25.

3 Bla, Com. 474.

4 26 Cal. Gad,

5 See Winona & St. P. R.R. Co. v. St.
Paul, etc. R.R. Co., 23 Minn. 360.

6 Society for Propagation ot Gospel,
etc. v. Wheeler, 2 Gall. 126. See New
York Dry Dock v. Hicks, 5 McL.
III.

7 Salisbury Mills v. Townsend, 109
Mass. 115,

® Mayor, etc. of Stafford v. Till, 4
Bing. 75.

"Ex parte Bank of England, 1
Swanst. Io.

1° See Holmes v, Holmes, etc. Manf.
Co., 37 Conn. 278; Newby v. Oregon
Cent. Ry. Co., Deady 609.
§ 38

one de jure, can sue and be sued.’ Causes of action for
negligence or misconduct against directors belong to the
corporation, and should be prosecuted in its name,’ though,
as we shall see,® when the corporation is under the control
of the guilty parties, or unjustly refuses upon request to
prosecute, a stockholder may become plaintiff, and main-
tain a suit of this character for the benefit of himself and
others similarly situated. The general rules which prevail
in respect to suits affecting corporations are, as already
shown, much the same as those which govern in actions
between natural persons. Thus, a corporation may appear
by an attorney,* and such appearance confers jurisdiction
to the same extent as actual service of process.*> Hence, if
a corporation voluntarily appears in an attorney-general’s
action brought to dissolve it, the court obtains jurisdiction
to appoint a receiver.6 A corporation may execute a bond
found to be necessary in the course of a judicial proceeding.
This is one of the incidental powers.? Corporations may
arbitrate. The form of the submission is unimportant, and
it is not necessary that the matters in dispute should be
stated with the degree of fullness and particularity which is
requisite in pleading. The board of directors, we may ob-
serve, are vested with the right to direct any litigation af-
fecting the corporation,® except that where there has been
a breach of duty on the part of the directors, or their inter-

REMEDIES. 49

 

‘See Heaston v. Cincinnati, etc.
R.R. Co., 16 Ind. 279; Holmes v. Gil-
‘liland, 41 Barb. (N. Y.) 568. See § 22.

2See Brinckerhoff v. Bostwick, 88
N. Y. 52; Allen v. Curtis, 26 Conn.
456; Smith v. Hurd, 53 Mass. (12
Met.) 371; Kent v. Jackson, 2 De G.
M. & G. 49.

3 See §§ 98, 99.

4 McCormick v. Penn. Cent. R.R.
Co., 49 N. Y. 303.

5 Atty. Genl. v. Guardian Mut. Life
Ins. Co., 77 N. Y. 272.

4

8 Id.

7 Collins v. Hammock, 59 Ala. 448.

® Brady v. Mayor, etc. of Brooklyn,
1 Barb. (N. Y.) 584; Tuscaloosa Bridge
Co. v. Jemison, 33 Ala. 476; Alex-
andria Canal Co. v. Swann, 5 How.
83; Springfield v. Walker, 42 O.S. 547;
City of Shawneetown v. Baker, 85 Ill.
563; Remington v. Harrison County
Court, 12 Bush (Ky.) 148; Kane v.
City of Fond du Lac, 40 Wis. 495.

® Memphis City v. Dean, 8 Wall. 64;
Railway Company v. Alling,99 U.S. 472.
REMEDIES. $ 39

50
ests are adverse to the contemplated suit, a stockholder
may, as already intimated, become plaintiff for the benefit
of himself and others similarly situated,’ upon refusal of the
corporation to bring the suit or to allow the use of the cor-
porate name, or upon proof that a request to the directors
to institute the action would be futile.? Directors’ author-
ity over litigation extends to compromising of suits
in good faith. In Donohoe v. Mariposa Land and Mining
Company,® the court say: “It cannot be contended that
the directors of a corporation do not possess authority, act-
ing in good faith, and in the exercise of their best judgment,
to settle a pending action, or that the settlement is not bind-
ing on their stockholders, even though it may subsequently
appear that they failed to secure the best terms to which
the corporation might have been entitled.”

As will presently appear, in suits against corporations,
process is usually served upon an officer or agent.*

$ 39. Foreign corporations.—J urisdiction is not limited to
domestic or home corporations. As will presently be
shown,° a foreign corporation may by comity sue in our
courts,° and such a corporation may do business in a State
other than that of its creation, unless forbidden so to do by
its charter, or by the laws of such other State? Thus, a
foreign corporation may sue to enforce a loan,* and may
bring an action of ejectment.? The courts of New York

 

* See §§ 98, 99.

? See Dodge v. Woolsey, 18 How.
345; Greaves v. Gouge, 69 N. Y. 154;
Railway Co. v. Alling, 99 U. S. 463.
See §§ 98, 99.

* 66 Cal. 317, 319.

‘Hiller v. Burlington & M.R. R.R.
Co.,70 N. Y.227. See Harris v. Somer-
set & K. R.R. Co., 47 Me. 298; Clark
v. Chapman, 45 Ga. 486, See §§ 62, 63.

5 See § 93, and Chap. XVI.

®Utley v. The Clark-Gardner L. M.
Co, 4 Col. 371; Saul v. Virginia, 8
Wall. 168; Eslava v. Ames Plow Co.,

47 Ala. 384; Mutual Benefit Life Ins.
Co, v. Davis, 12 N. Y. 569; Bank of
Michigan v. Williams, 5 Wend. (N. Y.)
482. See §62. Bank of Augusta v,
Earle, 13 Peters 538; Christian Union
v. Yount, 101 U.S. 352; National Bank
of St. Charles v. De Bernales, 1 Car. &
P. 569.

”Kerchner v. Gettys, 18 S.C, 525,

*Leasure v. Union Mutual Life Ins.
Co., 91 Pa, St. 491.

* Sedgwick & Wait on Trial of Title
to Land (2d ed.) § 195;. New York Dry
Dock v. Hicks, 5 McL. 111.
$ 40 REMEDIES, 51
have jurisdiction of an action for the sale of the collateral
security of a foreign corporation, held in that State, so far
as the jurisdiction depends on the corporation having prop-
erty within the State.1 Where a foreign corporation is
permitted to appear as a litigant, the rules of the forum
necessarily govern. It must be remembered in this con--
nection that the consent extended to a foreign corporation
to do business in a State may be accompanied by such con-
ditions as the State may think fit to impose, and these con-
ditions must be deemed valid and effectual by the court,
“provided they are not repugnant to the Constitution or
laws of the United States, or inconsistent with those rules
of public law which secure the jurisdiction and authority of
each State from encroachment by all others, or that prin-
ciple of natural justice which forbids condemnation without
opportunity for defense.” *

§ 40. Actions at law.—It being universally conceded that
corporations may sue and be sued, it follows that they may.
institute actions either for breach of contract or to recover’
damages.* Ordinary common-law actions can be main-
tained against corporations. Hence, a corporation may be
sued for an injury done to private property in the exercise
of the right of eminent domain.* In litigation, the corpo-
ration, as has already appeared, is subject to the same
general rules of pleading as private persons, for such rules
are general, and ‘were designed to embrace all persons,
natural or artificial, capable of suing or of being sued.” ®

 

1Coffin v. Chicago Northern Pacific
Construction Co., 67 Barb. (N. Y.)
337-

® Lafayette Ins. Co. v. French, 18
How. 407; Doyle v. Continental Ins.
Co., 94 U.S. 539. See § 39, and Chap.
XVI.

3See American Mutual Life Ins. v.
Owen, 15 Gray (Mass.) 493; Winona &

St. P. R.R. Co. v. St. Paul & S.C, R.R.
Co., 23 Minn. 359; British American
Land Co. v. Ames, 6 Met. (Mass.)
391; Portsmouth Livery Co, v. Wat-
son, 10 Mass. 9I.

4 Pennsylvania R.R. Co. v. Duncan,
1Ir Pa, St. 352.

5 Hunt v, City of San Francisco, 11
Cal. 250, 258. See Chap. VI. ;
a3 REMEDIES, § 41

$ 41. Jurisdiction of equity.—A private corporation, char-
tered to transact business, is considered to be a trustee as to
its capital, property and assets, first for the payment of its
creditors, and afterward for the benefit of its stockholders.
While its corporate life and operations, according to the de-
sign of its charter, continue, its general creditors, as al-
ready shown, have no specific lien which would entitle
them to maintain a suit in a court of equity.1 During the
continuance of the corporation, its property and effects
may, of course, be subjected to the payment of its debts in
an action at law. If, however, its capital and property
have been distributed among its stockholders, or trans-
ferred to parties who are not doza fide purchasers for value
without notice, and the corporation has been dissolved, or
become so disorganized that it cannot be made answerable
in an action at law, then it seems, according to certain au-
thorities, a court of equity will pursue and lay hold of such
property and effects, and recover them for creditors.* As
a matter of course, a breach of trust on the part of a cor-
poration may be restrained in equity,* and a suit may be
upheld on the chancery side of the court to annul a
forfeiture of shares. It is maintained in New York that
the lien of a creditor upon the assets of an insolvent
corporation is only enforceable in an equitable proceed-
ing.” So it was held in Brown v. Adams, that it was not
within the power of a court of law to inquire into the rights
of a stockholder to a distributive share in the assets remain-
ing after an adjustment of the affairs of a corporation. Ina

 

See § 34.

* Montgomery & W, P. R.R. Co. v.
Branch, 59 Ala. 153. Compare gen-
erally Wood v, Dummer, 3 Mason 308 ;
Mumma v. Potomac Co., 8 Peters 281;
Smith v. Huckabee, 53 Ala.'191; Sco-
field v, Eighth School District, 27
Conn. 499; Bagshaw v. Eastern Union
Railway Co., 7 Hare 114.

8 Conro v. Port Henry Iron Co.,, 12
Barb. (N. Y.) 27.

4Sweny v. Smith, L. R. 7 Eq.
324.

5 McLean vy. Eastman, 21 Hun (N.
Y.) 312. See Vose v. Grant, 15 Mass,
505; Spear v. Grant, 16 Mass. 9.

° 5 Biss, 182,
§ 41 REMEDIES. 53

recent case in the United States Supreme Court, it is said
that, to enforce the personal liability of directors of a cor-
poration for the excess of its debts over its capital stock, a
suit in equity affords the only appropriate remedy, none
being prescribed by the statute. Directors may be re-
strained in equity from acting in opposition to a vote of a
majority of the stockholders.* So, equity may compel a
director to convey to a corporation, or its grantee, lands pur-
chased with the corporate funds, but taken in the name of
the directors. Necessarily, chancery has power to compel
trustees to execute their trusts, and may remove them if
necessary. This is independent of statute* In New Jer-
sey, a bill in equity to enforce the personal liability of di-
rectors for waste and misapplication of corporate funds
may be sustained in the name of the corporation, although
adequate redress may be had at law. Manifestly, the
proper remedy against an insolvent corporation, where the
property is of such nature that it cannot be levied upon and
sold under execution, is a bill in equity to marshal and dis-
tribute the assets.° But a court of equity will not, upon the
petition of a general creditor, restrain a corporation from
converting its assets into money by a sale thereof to a
stockholder, when such sale is not in fact in fraud of the
stockholders, or of the creditors, nor in prejudice of the
rights of either; when no stockholder objects, and when
the sale is made for an adequate price, with the intent to
apply the proceeds to the payment of the full amount of
the debts of the company, or an equal proportion of every
debt." As is elsewhere shown, the liability of directors of

 

1 Stone v. Chisolm, 113 U. S. 302. Church in Hartford v. Witherell, 5
* Exeter & C. Railway Co. v. Buller, 5 Paige (N. Y.) 296.

Railway Cases, 211. 5 Citizens’ Loan Asso. v. Lyon, 29
® Buffalo, N. Y. & Erie R.R. Co.v. N. J. Eq. 110.
Lampson, 47 Barb. (N. Y.) 533. ® Trons v. Manufacturers’ Nat. Bank,

4 See Kniskern v. Lutheran Churches, 6 Biss. 301.
1 Sandf. Ch. (N. Y.) 439; Bowden v. 7 Barr v. Bartram & F. Manf. Co. 41
M’Leod, 1 Edw. (N. Y.) 588; Baptist Conn. 506-510, See § 34.
54 REMEDIES. §°42
corporations for violations of duty, or breaches of trust,’
and the jurisdiction of courts of equity to afford redress to
the corporation, and in proper cases to its shareholders,” are
independent of any statute. Provisions of a statute com-
pelling directors to account for official misconduct in the
management and disposition of the funds and property com-
mitted to their charge, are declaratory of the jurisdiction
formerly exercised by the Court of Chancery.? While ac-
tions to recover for losses should generally be brought in
the name of the corporation, yet, if it refuses to prosecute,
the stockholders, who are the real parties in interest, will,
as has just been shown, be permitted to sue in their own
names, making the corporation a defendant. And this
course of procedure has been allowed where it appeared
that the corporation was under the control of those who
must be made defendants in the suit.°

$ 42. Remedy by injunction —One of the most common
forms of procedure in equity against incorporated associa-
tions is by injunction. This form of remedy has been in-
voked in such a multitude of cases affecting corporations that
we can venture only a few illustrations. Necessarily a cor-
poration may be restrained by a court of equity from abusing
or misusing its powers,® and from committing acts wd¢tra
vives," and directors may be enjoined from violating their

 

1 See Verplanck v. Mercantile Ins. 5 See Brinckerhoff v. Bostwick, 88

Co., 1 Edw. Ch. (N. Y.) 88; Atty.
Genl. v. Utica Ins. Co., 2 Johns. Ch.
(N. Y.) 371; Citizens’ Loan Asso, v.
Lyon, 29 N. J. Eq. 110.

> See §§ 74, 75, 98, 99.

® Brinckerhoff v. Bostwick, 88 N. Y.
59; Robinson v. Smith, 3 Paige Ch.
(N. Y.) 233. See Atty. Genl, v. Utica
Ins. Co., 2 Johns. Ch. (N. Y.) 389;
Charitable Corporation v. Sutton, 2
Atk. 400,

4 Brinckerhoff v. Bostwick, 88 N. Y.
59; Greaves v. Gouge, 69 N. Y. 154.

N. Y. 59; Butts v. Wood, 37 N.Y.
317; Robinson v. Smith, 3 Paige (N.
Y.) 222.

"Sandford v. Catawissa, etc. R.R.
Co., 24 Pa. St. 378; Atty. Genl. v.
Mayor, etc. of Liverpool, 1 Mylne &
C. 171; Mayor, etc. of Frederick v.
Groshon, 30 Md. 436; Colles v. Trow
City Directory Co, rz Hun (N. Y,)
397. See § 54,

*See Lord Auckland v. Westminster
Local Board of Works, L. R. 7 Ch. 597 ;
Mills v. Northern Ry, etc. Co,, L. R. 5
$ 43 REMEDIES. 55
fiduciary duties.’ So an injunction will issue prohibiting a
corporation from carrying its assets beyond the jurisdiction
of the State of its creation ;* from constructing needless
works ;* and from polluting a stream! An injunction may
be had to restrain a minority of a religious corporation
from interfering with the control of the majority ;° to pro-
hibit a trespass;*® to prevent an improper expulsion of
members from a club or society ;* to check a wasting of
corporate funds when they are being devoted to the alleged
purpose of destroying competition and establishing a mo-
nopoly ;* and to stop a corporation from effecting its own
dissolution,® or from consolidating with another corpora-
tion.” An injunction will not be granted to restrain an
officer from performing the general and ordinary duties of
his office." But an officer may be restrained from commit-
ting any particular wrong affecting private rights or any
particular fraudulent acts.”

§ 43. Garnishment against corporations——While the rule
prevails that a State cannot bé subjected, directly or indi-
rectly, to garnishment or trustee process,” since it cannot be

 

Ch. 621; London B. & S.C. Ry. Co. v.
London, etc. Ry. Co., 4 De G. & J.
362; Hodgson v. Earl of Powis, 1 De
G. M. & G.6; Cohen v. Wilkinson, 1
Macn. & G. 481; Platteville v. Galena,
etc. R.R. Co., 43 Wis. 493.

'Cannon v. Trask, L. R. 20 Eq. 669 ;
Dowling v. Pontypool, etc. Ry. Co., L.
R. 18 Eq. 714; Carlisle v. South East-
ern Ry. Co., 1 Macn. & G. 689.

? Matthews v. Trustees, 7 Phila. (Pa.)
270,

3 Newark Plank Road Co, v. Elmer,
9 N. J. Eq. 754.

‘Holsman v. Boiling Spring Bleach-
ing Co., 14 N. J. Eq. 335; Dickenson
v. Grand Junction Canal Co., 15 Beav.
260.

5 Cooper v. Gordon, L, R. 8 Eq. 249;
Perry v. Shipway, 4 De G, & J. 353.

*See Eversfield v. Mid-Sussex Ry.
Co., 3 De G, & J. 286.

™ Labouchere v, Earl of Wharncliffe,
L. R. 13 Ch. D. 346; Fisher v. Keane,
L. R. 11 Ch. D. 353. But see Fisher
v. Board of Trade, 80 Ill. 85; Gregg v.
Mass. Med. Soc., 111 Mass, 185.

* Colles v. Trow City Directory Co.,
11 Hun (N. Y.) 398.

® Singer Sewing Machine Co. v. Union
Button Hole, etc. Co., 1 Holmes 253.

Watson v. Harlem, etc. Nav. Co.,
52 How. Pr. (N. Ys) 348.

11 People v. Albany & Susq. R.R. Co.,
55 Barb. (N. Y.) 344.

12 Howe v. Deuel, 43 Barb. (N. Y.)
504; Fisk v. Chicago, etc. R.R. Co.,
53 Barb, (N. Y.) 513.

13 Dewey v. Garvey, 130 Mass. 86;
Buchanan vy, Alexander, 4 How, 20;
56

REMEDIES. § 44

sued without its consent,’ yet a private corporation may be
made a garnishee.? An attachment may be levied upon
property in the hands of a corporation in the same manner
as if it were held by a natural person. In Wisconsin gar-
nishment process may be maintained in a case where the
judgment debtor is a corporation.°

§ 44. Process of garnishment against receiver—When a
corporation is in the hands of a receiver it has been held
that he is the proper person upon whom to make service of
process, to bring in the corporation as garnishee.* The
right to interfere with a receiver by the service of process of
garnishment is at best a doubtful one. In Massachusetts,®
a receiver cannot be charged with trustee process, and in
Texas* the same rule prevails as to garnishment. “The
receiver is not subject to garnishment,” is the language of
the highest court of Georgia.1| The Supreme Court of
Colorado, in the case referred to,® attempt to distinguish
the cases last cited from the one decided, but we can dis-
cover no controlling reason for encouraging a rule which

 

Troy & Greenfield R.R. Co. v. Com- jects of garnishment.” Taylor v. The

monwealth, 127 Mass. 43; Derr v. Lu-
bey, 1 MacArthur (D. C.) 187; Rollov.
Andes Ins, Co., 23 Gratt. (Va.) 509;
Wilson v. Bank of La., 55 Ga. 98; Rod-
man v. Musselman, 12 Bush (Ky.)
354.

1 Compare United States v. Lee, 106
U. S. 196, and cases cited.

? Knox v. Protection Ins, Co., 9 Conn,
434. Daggett, Ch. J., said: ‘The de-
fendants are a corporation, and there-
fore not liable to the process of foreign
attachment; or, in other words, can-
not be made garnishees. I ask, why
not? Corporations can become in-
debted in all the modes in which indi-
viduals can, They can receive and
hold goods and effects which may be
entrusted to them. It is difficult, then,
to see why they may not be the sub-

Burlington & M.R.R. Co., 5 Iowa 114;
Boyd v, Chesapeake & Ohio Canal Co.,
17 Md. 195; Balto,& Ohio R.R. Co. v.
Gallahue, 12 Gratt. (Va.) 655; Harris
v. Somerset & K. R.R. Co., 47 Me.
298; Clark v. Chapman, 45 Ga. 486;
Johnson v. Hersey, 70 Me. 74; Penni-
sylvania R.R. Co, v. Peoples, 31 O. S,
537-
§ Ballston Spa Bank v. Marine Bank,
18 Wis. 490; Everdell v. The Sheboy-
gan & Fond du Lac R.R. Co., 41 Wis.
395. See La Fountain v. Southern
Underwriters’ Assoc., 79 N. C. 516.

4 Phelan v. Ganebin, 5 Col. 17.

5 Columbian Book Co. v. De Golyer,
115 Mass. 69.

§ Taylor v. Gillean, 23 Texas 514.

7 Field v. Jones, 11 Ga, 416.

® Phelan v. Ganebin, 5 Col. 17.
ee eS

$§ 45, 46 REMEDIES, 57

would warrant a litigant in interfering, by garnishment pro-
ceedings, with the administration of the affairs of a corpo-
ration in the hands of a receiver. Owing to the peculiar
nature of a receivership, the practice might well. result in
confusion and embarrassment.’

§ 45. Supplementary proceedings——Under the practice
prevailing in North Carolina,? proceedings supplementary
to execution will lie against a corporation organized for the
purposes of private gain. This, however, is exceptional,
these proceedings being usually restricted to natural persons.
In New York State these proceedings will not be granted
against a corporation.?

§$ 46. Statutory methods of liquidation.—Questions are
constantly coming up in corporate litigations concerning
statutes framed with the design of facilitating liquidation.
In a case which arose in North Carolina,’ it was held that
a statute’ which continued the existence of defunct corpo-
rations for three years after the expiration of their charters,
for the purpose of bringing and defending suits, and closing
their general business, ousts the former jurisdiction in equity
to appoint a receiver at the instance of creditors to wind up
the corporate affairs. In Massachusetts, under somewhat
similar legislation, which continued the corporate body for
three years, for the purpose of enabling it gradually to settle
and close its concerns, and allowed the court within that
period to appoint receivers, it was held that, after the ex-
piration of this period, the creditors’ rights and remedies be-
came extinct.®

 

1See Blake Crusher Co. v. New
Haven, 46 Conn. 473; Cooke v. Town
of Orange, 48 Conn. 401.

*La Fountain v. Southern Under-
writers’ Assoc., 79 N. C. 514.

?Examine §§ 2463 & 1812 Code Civ.
Pro. Hinds v. Canandaigua & N. F.
R.R. Co., 10 How. Pr. (N. Y.) 487;
Hammond v. Hudson River Iron, etc.

Co., 11 How. Pr. (N. Y.) 29; Sherwood
v. The Buffalo & N. Y. City R.R. Co.,
12 How. Pr. (N. Y.) 136.

4Von Glahn v. De Rosset, 81 N. C.
467.

5 Revised Code of North Carolina,
ch. 26, §§ 5, 6.

6 Thornton v. Marginal Freight Rail-
way Co., 123 Mass. 32.
58 § 47

REMEDIES.

S$ 47. Remedies against stockholders.—There is a struggle
in the authorities over the question whether or not the
remedy of a creditor against a stockholder to enforce his
individual liability is at law or in equity.’ Local statutory
provisions so largely enter into the discussion and affect
the decisions, and the introduction of codes commingling
legal and equitable jurisdictions have so revolutionized pro-
cedure, that’ there is little satisfaction to be gained in at-
tempting, from the cases, to define any general line of policy.
Some of the authorities, predicated to a greater or less de-
gree upon statutes, seem to favor the theory that the stock-
holder’s liability may be enforced at law. Another line of
cases upholds the theory that the remedy is in equity, where,
it is considered, the rights of the corporation, the stockhold-
ers and the creditors can all be adjusted upon the principles
of equality and justice in one suit.2 Harris v. First Parish in
Dorchester,‘ is an authority in point to the effect that a com-
mon-law action will not lie by a creditor of a corporation
against a stockholder to enforce the stockholder’s zxdzvzdual
statutory liability for loss or deficiency resulting from the
directors’ corporate mismanagement ; the remedy being by
bill in equity, The court considered that if actions at law
would lie in such cases, suits might be multiplied to an in-
definite extent ; each creditor would have a separate suit
against each stockholder, several actions could be brought
against one stockholder, and interminable proceedings to
enforce contribution between stockholders would result.
As opposed to this, the contention may well be advanced
that a creditor having a small claim would be without

 

1Bush v. Cartwright, 7 Oregon 329.

2 Corning v. McCullough, 1 N. Y. 47;
Simonson v. Spencer, 15 Wend. (N.Y.)
548; Bank of Poughkeepsie v. Ibbot-
son, 24 Wend. (N. Y.) 473. Compare
Jessup v. Carnegie, 80 N. Y. 441;
Wheeler v. Millar, go N. Y. 353; Web-

ber v. Leighton, 8 Mo. App. 507;

Bailey v. Bancker, 3 Hill (N. Y.) 188;

Lowry v. Inman, 2 Sweeny (N. Y.) 117.

_ * Bush v, Cartwright, 7 Oregon 336;

Pollard v, Bailey, 20 Wall. 520; Briggs

v. Penniman, 8 Cowen (N, Y.) 395.
423 Pick. (Mass.) 112.
$§ 48-50 REMEDIES. 59

practical redress, for he would hesitate to bring a suit which
would involve an adjustment of multitudinous equities with
which he has little concern.

§ 48. Concurrent remedies.—As recognized by some au-
thorities, creditors, in case of a personal statutory liability
of stockholders, have a concurrent remedy by a suit at law,
or by bill in equity, for the enforcement of such liability.’
It will be apparent from an examination of these various
decisions that the practitioner must, of necessity, carefully
examine the wording of the statute imposing the liability
which it is sought to enforce, and acquaint himself with the
local authorities governing the question.

$ 49. No action at law by creditor for unpaid subscription. —
An action a¢ /aw does not lie by a creditor against a share-
holder of a corporation organized under the laws of Oregon
for unpaid subscriptions. The liability is not zo the credit-
ors, but for the indebtedness. The subscriber must be sued
in such a manner as will result in putting the amount paid,
directly or indirectly, into the treasury of the corporation
for distribution according to law. No one creditor can as-
sume that he alone is entitled to sue at law and appropriate
exclusively to himself any amount a stockholder may owe.’

$50. Election of remedies on stock subscription——A_ cor-
poration may usually sue upon a promise to pay a subscrip-
tion, or it may sell the stock and recover the deficiency of
the subscriber.2" A clause to that effect is frequently in-
serted in the subscription paper, and all doubt as to the
form of procedure thus put at rest.

 

1Eames v. Doris, 102 Ill. 358; Van Patterson v. Lynde, 106 U. S.
Hook v. Whitlock, 3 Paige (N. Y.) 519.
409; Norris v. Johnson, 34 Md. 485; 3 Boston, Barre & Gardner R.R. Co.
Bank of Poughkeepsie v. Ibbotson, 24 v. Wellington,’ 113 Mass. 87; City
Wend. (N. Y.) 473; Perry v. Turner, Hotel Co. v. Dickinson, 6 Gray (Mass.)
55 Mo. 418; Adkins v. Thornton, 19 586.
Ga, 325. See § 47.
60 REMEDIES. §§ 51, 52

§ 51. Right of stockholders to test an election of directors.
—We will consider for a moment certain remedies affect-
ing directors, As inhabitants and tax-payers in a munici-
pal corporation, by virtue of the interest they have in the
municipal government, have a standing in court to test the
legality of an election of officers of the municipal corpora-
tion,! by parity of reasoning, stockholders in a private cor-
poration, by virtue of their interest in the management of
its affairs, have such a status as will give them a standing in
court to test the regularity of an election of directors.”

§ 52. Remedies against directors.—In courts of law there
is considered to be no legal privity between stockholders
and officers, and, ordinarily, an action at law will not lie in
favor of the former against the latter for the mismanage-
ment of the concerns of the corporation.? As was said by
the court in one case: ‘So long as the corporation is faith-
ful to its trust, the stockholders, as individuals, have no
occasion and no right to resort to, or enforce any remedies,
legal or equitable, to vindicate any injury to the corporate
property. When it is guilty of a breach of trust, then,
and only then, the relationship of the stockholders, arising
from that trust, gives them a right to pursue the proper
remedy to vindicate their rights.”* In Connecticut this
language is used : ‘“ The general rule of law is, that an action
at law must be brought by the person having the title or
right to the thing demanded, or to the damages which are
sought to be recovered for the injury. Hence, the Wood-
bury Bank should have brought this suit. It is z¢s prop-
erty which has been misappropriated and lost, and the dam-

 

'State v. Hammer, 42 N. J. Law 183; Smith v. Hurd, 12 Metc. (Mass.)
438; State v. Tolan, 33 N. J. Law 195. 371; Fusz y, Spaunhorst, 67 Mo. 258.

* Matter of St. Lawrence Steamboat But see Bank of Mutual Redemption
Co., 44. N. J. Law 533, per Depue; J. v. Hill, 56 Me. 388. See § 47.

3Smith v. Poor, 40 Me. 415; Faurie Compare Cogswell v. Bull, 39 Cal.
v. Millaudon, 3 Mart. (N. S.) 476; 324; Allen v, Curtis, 26 Conn. 456;
Winter v. Baker, 34 How. Pr. (N. Y.) Zinn v. Mendel, 9 W. Va. 580.
§ 53 REMEDIES. 61

ages to be recovered belong to it,—to be sure in trust for
billholders, depositors and other creditors, if any there be,
and finally for the stockholders, but for all of them and not
for some of them exclusively. The dazé then must sue. It
may compromise, and settle, or release the defendants on
terms mutually satisfactory, which the stockholders cannot
do, and should they do, it, it would be no bar toa suit after-
wards brought by the bank. In this respect the defendants
are liable to the bank as any other agents or persons would
be for robbing or defrauding it, or in any way injuring the
corporate property. Now, to permit the plaintiff to re-
cover for himself, as he does if he recovers at all, to the
extent of the loss which he suffers in his stock, will be the
means of giving him a preference to which he is not en-
titled”? In Branch v. Roberts,’ a case that has been
criticised, the court decided that the holder of bills of -a
banking corporation could not sue the directors for dam-
ages for misconduct rendering the bills valueless. In Penn-
sylvania, however, a creditor’s bill may be maintained
against the directors of an insolvent corporation for mis-
management of its affairs. And by statute in Maine,*a
creditor of a bank who has suffered a loss by official mis-
management, may bring a bill against those directors
through whose official mismanagement it occurred.®

Where money of a corporation has been illegally re-
ceived by a director, the corporation may recover it in as-
sumpsit for money had and received ;* and a liquidator or
assignee of a corporation may sue for a breach of trust by
the directors.’

§ 53. No action at law in Massachusetts.—An action at

 

1 Allen v. Curtis, 26 Conn. 460. 5 Bank of Mutual Redemption v. Hill,
2 50 Barb. (N. Y.) 435. 56 Me. 385.
*Penn Bank v. Hopkins, 111 Pa. St. | § Branch Bank v. Collins, 7 Ala. 95.
2 1 In re National Funds Assurance
#*R. S., c. 47, §§ 43 and 47. Co., L. R. 10 Ch, Div. 118; Alexander
v. Relfe, 74 Mo. 495.
62 REMEDIES. §§ 54, 55

law cannot be maintained in Massachusetts by a creditor of
a corporation against its officers to enforce liabilities im-
posed by the statutes relating to corporations. The only
remedy is in equity.

§ 54. Injunction against directors.—Manifestly, sharehold-
ers may restrain misappropriation of corporate funds by
directors”, In Dodge v. Woolsey,® the court observed :
“Tt is now no longer doubted, either in England or
the United States, that courts of equity, in both, have a
jurisdiction over corporations, at the instance of one or
more of their members; to apply preventive remedies by
injunction, to restrain those who administer them from do-
ing acts which would amount to a violation of charters, or
to prevent any misapplication of their capitals or profits,
which might result in lessening the dividends of stockhold-
ers, or the value of their shares, as either may. be protected
by the franchises of a corporation, if the acts intended to
be done create what is in the law denominated a breach of
trust. And the jurisdiction extends to inquire into, and to
enjoin, as the case may require that to be done, any pro-
ceedings by individuals, in whatever character they may
profess to act, if the subject of complaint is an imputed
violation of a corporate franchise, or the denial of a right
growing out of it, for which there is not an adequate rem-
edy at law.” The corporation must in such cases be made
a party defendant,* and it must appear that the directors
have refused the use of the corporate name in which to
bring the suit.

$ 55. When action for damages will not lie—Where a
party is about to enforce a claim against a corporation by

 

1 McRae v. Locke, 114 Mass. 96. March v. Eastern R.R. Co., 40 N. H.
2 Kean v. Johnson, 9 N. J. Eq. 401; 567. See § 42.
Simpson v. Westminster, etc, Hotel #18 How. 331, 341.
Co., 8 H. L, Cas. 717; Colman v. East- * Davenport v, Dows, 18 Wall. 627.
ern Counties Railway Co., 10 Beav. 1; 5 Allen v. Curtis, 26 Conn, 456; Her-
Ernest v. Nicholls, 6 H, L, Cas. 401; sey v. Veazie, 24 Me. 9.
REMEDIES. 63

§§ 56, 57

attachment, and is persuaded by the false and fraudulent
representations of its treasurer to refrain from so doing, and
all the property of the corporation is subsequently attached
by another person, an action of tort for such fraudulent
_representations will not lie against the treasurer." The
damages are too remote.”

§$ 56. Creditors’ remedies against receivers.—The general
subject of proceedings by and against receivers will be con-
sidered in a later chapter.* We may state that in cases
where a receiver of a corporation has fraudulently procured
an order for a sale of a debt due to the corporation, a court
of equity will entertain a bill to set aside the order and the
sale made under it. The creditor is not restricted to a mo-
tion in the action in which the receiver was appointed,’ but:
has a selection of remedies. The dzc¢um in the opinion in
Libby v. Rosekrans,° to the effect that there is no authority
which will sustain an independent action instituted for the
purpose of setting aside an order giving directions to a re-
ceiver, as to the manner of giving notice and conducting a
sale, is questioned and in effect overruled in the case cited.

§ 57. Nature of quo warranto proceedings.—A corpora-
tion, as we shall presently show, may forfeit its franchises by
misuser or nonuser. The government may resume these
franchises under a judgment upon a guo warranto to as-
certain and enforce the forfeiture. The same remedy may
be invoked to oust an officer.6 The writ of guo warranto

 

? Bradley v. Fuller, 118 Mass. 240.

? Lamb v. Stone, 11 Pick. (Mass.)
527; Wellington v. Small, 3 Cush.
(Mass.) 145; Randall v. Hazelton, 12
Allen (Mass.) 412; Adler v. Fenton, 24
How. 412; Austin v. Barrows, 41
Conn. 287; Moody v. Burton, 27
Maine, 427; Kloys v. Hennessey, 13
R. I. 335. See Quinby v. Strauss, go
N.Y. 664; Wait on Fraud. Conv. § 62.

3 See Chap. XI.

4 Hackley v. Draper, 60 N. Y. 88,

See Wright v. Miller, 8 N. Y. 9; Tier-
nan v. Wilson, 6 Johns. Ch. (N. Y.)
All.

5 §5 Barb. (N. Y.) 219, 220.

6 See Terrett v. Taylor, 9 Cranch 51;
People v. Bank of Hudson, 6 Cow. (N.
Y.) 217. Compare State v. Johnson,
26 Ark, 281; State v. Stewart, 32 Mo.
379; Atty. Genl. v. Barstow, 4 Wis.
567; State v. Price, 50 Ala, 568;
State v. De Gress, 53 Tex. 387. See
Chap. XIX,
64 REMEDIES. § 58

was held in Missouri to issue as a matter of course upon
the demand of the proper officer. It may be brought
where a corporation has been quiescent for nineteen
years.” In New York an action in the nature of a guo
warranto must, under the code of that State, be com-
menced and prosecuted like other civil actions, and is to
be governed in respect to the pleadings and proceedings by
the same rules ;* and it is now practically regarded as a
civil action. The issues therein are strictly legal, and a
trial by jury is a constitutional right. If other equitable
causes are united with such a cause of action, all must be
tried by jury unless a’jury is waived.® The title to an of-
fice can only be tried in a proceeding in the nature of a guo
warranto.© At common law private individuals, without
the intervention of the attorney-general, could not, either
as of right or by leave of the court, file an information in
the nature of a guo warranto.". And in New York, an ac-
tion to try the title to an office can only be brought by the
attorney-general, in an action in the name of the people,
upon his own information or upon the complaint of a pri-
vate party.®

§ 58. No injunction pending quo warranto.—It seems to be
perfectly well settled that, in an action in the nature of a
guo warranto, an injunction will never be issued in New
York State, pexdente (te, restraining the party in posses-
sion of the office from exercising its functions.’ Thus, in

 

1 State v. Stone, 25 Mo. 555. S. (N. Y.) 129; 8S. C.4 Daly (N. Y.)

* State v. Pipher, 28 Kans, 128, 51r.

* People v. Albany & S. R.R. Co, —" Goddard v. Smithett, 3 Gray (Mass.)
7 Abb. Pr. N.S. (N. Y.) 275; S.C. 55 116; Rice v. National Bank of Common-
Barb. (N. Y.) 355. See S.C. 57 N.Y. wealth, 126 Mass. 303.
162, * Mott v.Connolly,50 Barb, (N.Y.)518.

‘People v. Clute, 52 N. Y. 577. * The People v. Farley, 1 How. Pr.
Compare People v. Livingston, 80 N. N.S. (N. Y.) 74; The People v. Mat-
Y. 66; People v. Hall, 80 N. Y. 117. tier, 2 Abb, Pr. N. S. (N. Y,) 289;

® People v. Albany & S. R.R. Co,, Lewis v. Oliver, 4 Abb. Pr. (N. Y.) 121;
57 N. Y. 162. The People v. Draper, 14 How. Pr. (N.

* Coulter v. Murray, 15 Abb, Pr. N.Y.) 233.
REMEDIES. 65

§§ 59, 60
Morris v. Whelan,’ an application was made for an injunc-
tion to restrain the defendant from acting as president of
the common council of Troy, and the court decided that
where a person usurped and intruded into a public office,
civil or military, and the attorney-general brought an action
to oust him, no injunction could be obtained pendente Lite.*

$ 59. Information in equity not a substitute—An informa-
tion in equity will not lie against a private trading corpo-
ration where the acts complained of are not shown to have
endangered either public or private interests, and where the
only objection urged against the acts is that they were not
authorized by the charter. The proper remedy in such a
case is said to be by guo warranto.*

§ 60. Concerning mandamus.—Mandamus is an appro-
priate remedy to enforce the performance of an official
duty ;° but it is not to be employed as a preventive remedy.°
This form of procedure is intended to enforce the exercise
of power already existing when the exercise of this power

is a duty.

not confer power upon those to whom it is directed.
is an executive rather than a creative remedy.®

laid down as a general rule

“A mandamus,” said Mr. Justice Strong, ‘does

cad

ig
It may be
that where a specific duty is

 

164 How. Pr. (N. Y.) 109.

* See Thompson v. Commissioners
of the Canal Fund, 2 Abb. Pr. (N. Y.)
248; The Mayor, etc. of New York v.
Conover, 5 Abb. Pr. (N. Y.) 171; Tap-
pan v. Gray, 9 Paige (N. Y.) 507,
affi'd 7 Hill (N. Y.) 259. But compare
Kerr v. Trego, 47 Pa. St. 292; People
v. Draper, 24 Barb. (N. Y.) 265; People
v. Conklin, 5 Hun (N. Y.) 452.

3 Atty. Genl. v. Tudor Ice Co., 104
Mass. 239; S.C. 6 Am. Rep. 227, and
cases cited; Atty. Genl. v. Reynolds,
1 Eq. Cas. Abr. 131.

4 Atty. Genl. v. Utica Ins, Co., 2
Johns. Ch. (N. Y.) 371; People v.
Utica Ins. Co., 15 Johns. (N. Y.) 358.

5 City of Keokuk v. Merriam, 44 Iowa

5

432; Dunklin County v. District Co.
Court, 23 Mo. 449; Rainey v. Ayde-
lette, 4 Heisk. (Tenn.) 122.

5 Legg v. Mayor, etc. of Annapolis, 42
Md. 203.

7United States v. County of Clark,
95 U.S. 773.

®In Commonwealth v. Dennison, 24
How. 66, Chief Justice Taney said, in
speaking of the prerogative features of
the writ (p. 97): “It is equally well-
settled, that a mandamus in modern
practice is nothing more than an action
at law between the parties, and is not
now regarded as a prerogative writ. It
undoubtedly came into use by virtue of
the prerogative power of the English
crown, and was subject to regulations
66 REMEDIES. § 60
imposed by law upon a private corporation, and no other
adequate or specific remedy is provided for its enforcement,
the writ of mandamus will be granted. By reason of the
high and important nature of this writ, it is never issued in
doubtful cases.2 The discretion with which the courts are
clothed in passing upon applications for mandamus is not,
however, arbitrary, but is to be exercised pursuant to es-
tablished rules of law, and in accordance with settled prin-
ciples? The writ may be invoked against either municipal,’
public,® or private ® corporations to enforce the performance
of a legal duty in a variety of instances. Corporations may
themselves employ the remedy in cases where an individual

would be entitled to enforce it.”

Mandamus may be al-

 

and rules which have long since been
disused. But the right to the writ, and
the power to issue it, has ceased to de-
pend upon any prerogative power, and
it is now regarded as an ordinary pro-
cess in cases to which it is applicable.”
See Gilman v. Bassett, 33 Conn. 298.
But compare City of Ottawa v. The
People, 48 Ill.240; People v. Board of
Metropolitan Police, 26 N. Y. 316.

1State v. Wright, 10 Nev. 167;
Mount Moriah Cem. Assn. v. Com-
monwealth, 81 Pa. St. 235; People v.
Cummings, 72 N. Y. 433; State v.
Lady Bryan Min. Co., 4 Nev. 400; Peo-
ple v. State Ins. Co., 19 Mich. 392;
Firemen’s Ins. Co. v. Mayor, etc. of
Baltimore, 23 Md. 297.

* People v. Salomon, 46 Ill. 419 ; Peo-
ple v. Trustees of Schools, 86 Ill. 613 ;
State Board of Education v. West
Point, 50 Miss. 638; Milliner’s Admr.
v. Harrison, 32 Gratt. (Va.) 422; Cook
v. Town of Peacham, 50 Vt. 231;
Borough of Easton v. Lehigh Water
Co., 97 Pa. St. 554; People v. Auditor
General, 36 Mich. 271; Townes v.
Nichols, 73 Me. 515; People v. Super-
visors of Greene Co., 64 N. Y. 600;
People v. Wendell, 71 N. Y. 171.

® Brooke v. Widdicombe, 39 Md. 386.
When opposing affidavits are read, and
the relator demands a peremptory writ,
this is equivalent to a demurrer, and
the right to the writ must be deter-
mined on the assumption that the op-
posing affidavits are true. People v.
Cromwell, 102 N. Y. 477. See People
v. Richards, 99 N. Y. 620; People v.
Rome, etc. R.R. Co., 103 N. Y. 95.
And when the defendant proceeds to a
hearing without traversing the relator’s
affidavits, it is equivalent to a demurrer,
and the truth of the allegations of the
relator’s papers is admitted. People v.
Supervisors of St. Lawrence Co., 103
N. Y. 541.

+'Walkley v. Muscatine, 6 Wall. 481 ;
Coy v. Lyons City,17 lowa1; Stock-
ton & V. R.R. Co. v. Stockton, 51 Cal.
328.

5 Hall v. Selectmen of Somersworth,
39 N. H.511; Pumphrey v. Mayor, etc.
of Baltimore, 47 Md. 145,

‘People v. Pacific Mail Steamship
Co., 50 Barb. (N. Y.) 280; Norris v.
Irish Land Co., 8 El. & Bl. 525.

7State v. Southern Minn. R.R. Co.,
18 Minn. 40; Houston & G. N.R.R.
Co, v. Kuechler, 36 Texas 382; Fire-
§ 60 REMEDIES, 67
lowed to compel the inspection or delivery of the books of
a‘corporation ;' to compel the holding of an election;? to
compel the surrender of books and papers to a successor in
office ;* to compel the admission of members ;* to restore
a member of a corporation ejected without notice ;> to re-
instate a teacher in a school district ;* or a minister in his
pulpit ;* to restore directors to the exercise of their rights ; ®
to compel the replacement of a track wrongfully taken up
by a railway company ;° and to compel the construction of
bridges and crossings.” A writ of mandamus will not, how-
ever, be granted for the purpose of determining the validity
of a claim to an office the title to which is in serious dis-
pute, and while another person is holding and exercising the
functions of the office. This rule will not be departed from
even though the attorney-general declines to institute a guo
warranto." Nor will the writ usually lie to examine into
the merits of an expulsion of a member; nor against a rail-
road and its receiver to control their-conduct in the manage-
ment of a road.¥ The jurisdiction will not be exercised to
determine fanciful questions ;“ nor in anticipation of an

 

men’s Insurance Co. v. Mayor, etc. of 608; Commonwealth v. St. Patrick

Baltimore, 23 Md. 296.

1 Matter of Sage, 70 N. Y. 223; Amer-
ican Railway Frog Co. v. Haven, 101
Mass. 398; State v. Goll, 32 N.J. Law
285; St. Luke’s Church v. Slack, 7
Cush. (Mass.) 226. See § 516. City
of Keokuk v. Merriam, 44 Iowa 432.

2People v. Cummings, 72 N. Y.
433.

8 St. Luke’s Church v. Slack, 7 Cush.
(Mass.) 226.

4 People v. Medical Society of Erie
Co., 25 How. Pr. (N. Y.) 333, aff'd
32 N. Y..187,

5 Commonwealth v. German Soc., 15
Pa. St. 251; People v. Mechanics’ Aid
Soc., 22 Mich. 86. See State v. Car-
teret Club, 40 N. J. Law 295; Evans v.
Philadelphia Club, 50 Pa. St. 107; State
v. Georgia Medical Society, 38 Ga,

Ben. Soc., 2 Binn. (Pa.) 442.

§ Gilman v. Bassett, 33 Conn. 298.

” People v. Steele, 2 Barb. (N. Y.) 397.

® Prieur v.Commercial Bank, 7 La.s5og.

°The King v. Severn, etc. Railway
Co., 2 Barn. & Ald. 646.

10 State v. Gorham, 37 Me. 461. Com-
pare Rogers Locomotive, etc. Works v.
Erie Ry. Co., 20 N. J. Eq. 379.

1 Matter of Gardner, 68 N. Y. 467.

12 See Society for Visitation of Sickv.
Commonwealth, 52 Pa. St. 125; People
v. Board of Trade of Chicago, 80 II].
134; State v. Milwaukee Chamber of
Commerce, 47 Wis. 670; State v. He-
brew Congregation, 31 La, Ann. 205.

18 State v. Marietta & C. R.R. Co.,
35 Ohio St. 154.

14 People v.Masonic Benevolent Assn.,
98 Ill. 635. ‘
68 §$§ 61, 62

REMEDIES.
omission of public duty.!. There would be no end of appli-
cations to the court were cases of this character entertained.

A judgment in a mandamus proceeding is subject to re-
view by writ of error or appeal upon like conditions as in
other cases.*

§$ 61. Mandamus to enforce performance of public duty.—
The State or people may compel a railroad company, by
mandamus proceedings, to perform its public duties asa
common carrier, and the corporation will not be allowed to
neglect or refuse to perform such duties by reason of the
existence of a controversy between it and its employés, or
of a “strike.”* Indeed, in New York it is expressly held
that any remedy which the public may have for a breach or
neglect of duty imposed by the railroad act must be by
mandamus, guo warrantéo, or indictment; and the perform-
ance of such duty cannot be specifically enforced in equity
at the suit of the attorney-general.*

But the subject of -remedies, even as affecting corpora-
tions, might fill a volume, and for this reason we must end
this rapid review, and proceed to consider certain other im-
portant phases of our subject. It has appeared that juris-
diction over corporations is usually acquired by service of
process upon an officer or agent.®

$ 62. Service of process upon foreign corporations. — The
general rights and remedies affecting foreign corporations
will be presently discussed. Concerning jurisdiction over
foreign corporations, the Supreme Court of the United

 

1State v. Dubuclet, 24 La. Ann. cases cited in the opinion of Davis,
16; State v. Board of County Comrs., P.J

17 Fla. 707; Commissioners of Public
Schools, etc. v. County Comrs., 20 Md.
449; State v. Carney, 3 Kan. 88;
State v. Rising, 15 Nev. 164.

2 Hartman v. Greenhow, 102 U.S.
672,

’ People v. N. Y. Central & H.R.
R.R. Co., 28 Hun (N. Y.) 543, and

‘The People v. Albany & Vermont
R.R. Co., 24 N. Y. 268.

° Hiller v. Burlington & M. R. R.R.
Co., 70 N.Y. 227. See Harris y. Som-
erset & K. R.R. Co., 47 Me. 298;
Clark v. Chapman, 45 Ga. 486. See
§ 38.

® See Chap. XVI.
§ 62 REMEDIES. 69

States observe: ‘“‘We are of opinion that when service is
made within the State upon an agent of a foreign corpora-
tion, it is essential, in order to support the jurisdiction of
the court to render a personal judgment, that it should ap-
pear somewhere in the record—either in the application
for the writ, or accompanying its service, or in the plead-
ings or the finding of the court—that the corporation was
engaged in business in the State. The transaction.of busi-
ness by the corporation in the State, general or special, ap-
pearing, a certificate of service by the proper officer on a
person who is its agent there would, in our opinion, be suf-
ficient przma facze evidence that the agent represented the
company in the business. It would then be open, when
the record is offered as evidence in another State, to show
that the agent stood in no representative character to the
company, that his duties were limited to those of a subor-
dinate employé, or to a particular transaction, or that his
agency had ceased when the matter in suit arose.”* It is
within the power of the legislature to determine and de-
clare what shall constitute sufficient service either upon a
foreign or a domestic corporation,” subject only to the lim-
itation that the service prescribed must be such as is rea-
sonably calculated to give notice of the claim and an op-
portunity to defend. In making effectual service upon an
officer of a foreign corporation in New York, it is not
needful that the officer should be within the State in his
official capacity, or engaged in the business of the corpora-
tion, or that the corporation should have any property
within the State, or that the cause of action arose therein.*
In Massachusetts, jurisdiction can be acquired over a for-
eign corporation only by attaching its property.‘

 

1 St. Clair v. Cox, 106 U.S. 350, 359. * Pope v. Terre Haute Car Manf.
Compare Hiller v. Burlington & M. R. Co., 87 N. Y. 137.
RR. Co., 7o N. Y. 223. See § 39. 4 Andrews v. Michigan Central R.R.
2 Pope v. Terre Haute Car Manf. Co., 99 Mass. 534.
Co., 87 N. Y. 137.
70 REMEDIES. § 63

§ 63. Process against public corporations.—Property held
by municipal corporations for public purposes is not sub-
ject to seizure by creditors. These corporations are con-
sidered to be the local agencies of the government creating
them, and their powers as such belong to the sovereignty.
Property and revenue necessary for the exercise of these
powers become a part of the machinery of government, and
to permit a creditor to seize and sell them to collect his
debt would be to permit him in some degree to destroy the
government itself! It would seriously interfere with, and
impair the practical workings of, the municipal government
in the discharge of its legitimate functions. The test in
such cases is as to the necessity of the property for the due
exercise of the functions of the municipality. Hence, in a
city where business is carried on by water, a public wharf
is as much a necessity as a public street or highway.? It
would seem to be clear that the instruments of government
cannot be seized to pay a debt either before or after judg-
ment. Hence a steam-tug, the property of a municipal
corporation, used exclusively by an executive department
of the municipal government in performing the duties im-
posed upon it by law, cannot be seized in a suit zz vem in
Admiralty.4 In Darlington v. Mayor of New York, Chief
Justice Denio used these words: “I am far from suppos-
ing, however, that such estate, real or personal, as may by
law, or by authorized acts of the city government, be de-
voted to public use, such as the public edifices, or their furni-
ture or ornaments, or the public parks or grounds, or such as
may be legally pledged for the payment of its debt, can be
seized to satisfy a judgment. Such, clearly, cannot be the

 

1Chief Justice Waite, in Klein v. ze Poillon v, Mayor, etc. of N. Y., 47
New Orleans, 99 U. S. 150; The N. Y. 666,
Fidelity, 16 Blatchf. 571; Brinckerhoff > Klein v. New Orleans, 99 U. S. 151.
v. Board of Education, N. Y. City, 2 8 The Fidelity, 16 Blatchf. 571.
Daly 443, said to be affirmed sub zom- 4 Id. 569.
°31 N. Y. 193.
$ 64 REMEDIES. Ft

case, for these structures are public property, devoted to
specific public uses, in the same sense as similar subjects in
the use of the State government.” So, a mechanic’s lien
for labor and material in the erection of a fire-bell tower
cannot be enforced against the real estate of a municipal
corporation held for public use.’ The same principle was
extended to water-works.’ Lands of a public corporation
not actually dedicated to corporate purposes are bound by
the lien of a judgment, and may be sold on execution with
the same effect as the lands of any other debtor. The ex-
emption is not rested upon any ground of prerogative or
corporate immunity. It is said that though the corporation
in respect to its capital may be private, yet, if it was created
to accomplish objects in which the public have a direct in-
terest, and its authority to hold lands was conferred to the
end that these objects might be worked out, then whatever
is essential to the corporate functions shall be retained in-
tact by the corporation,® and cannot be taken by judicial
process. But this we regard as too broad and general a
statement of the rule.

§ 64. Suits in Federal courts.—The right of a stockholder
who is a resident of another State, to sue the corporation
in the Federal courts, though questioned, seems to be up-
held,t but the practitioner must be. careful to ascertain
whether or not a transfer of ownership of the stock was made
to confer jurisdiction on the Federal courts,® or for the pur-
pose of bringing suit.° The reader should be careful to re-

 

1 Leonard v. City of Brooklyn, 71 N. 4Pond v. Vermont Valley R.R. Co.,
Y. 500. 12 Blatchf. 280; Dodge v. Woolsey, 18

® City of Rochester v. Town of Rush, How. 331.
80 N. Y. 308. Compare in this general 5 See Hawes v.Oakland,104 U.S. 450.
connection The Davis, ro Wall. 15; 6 See oth Rule in 104. U. S. ix. ; Foote
The Siren, 7 Wall. 152; United States v. Cunard Mining Co., 17 Fed. Rep.
v. Lee, 106 U. S.196, and cases cited 46; Dannmeyer v. Coleman, 11 Fed.
in prevailing and dissenting opinions. Rep. 97; Detroit v. Dean, 106 U. S.

’ Plymouth R.R. Co. v. Colwell, 39 537; McHenry v. New York, etc. R.R.
Pa, St. 339. Co., 22 Fed. Rep. 130.
72 REMEDIES. § 64

member that the equity jurisdiction of the courts of the
United States is subject to neither limitation nor restraint
by the State authorities, and is uniform throughout the
different States of the Union.*

 

1 Gamewell Fire-Alarm Tel. Co. v. Wheat. 108, 115; Payne v. Hook, 7
The Mayor, etc., 31 Fed. Rep. 312, Wall. 430; Green v. Creighton, 23
citing United States v. Howland, 4 How. Io5.
§ 65.
66.

67.
68.
69.
70.

71,
72.

73:

74.
75.

76.

77:
78.

79.

80,

CHAPTER III.

COMPLAINANTS.

Concerning complainants.

The people as complainants in
forfeiture proceedings.

Right of the people to sue.

Sovereign States,

Plaintiffs in foreclosure.

Complainants in dissolution pro-
ceedings.

Claims created by promoters.

Actions by corporations against
trustees and officers.

Stockholders suing corporation
for damages,

Suits by stockholders,

Views of the United States Su-
preme Court.

Reimbursement of successful com-
plainant.

Success of the wrongful act.

Judgment creditors as complain-
ants—Suing for unpaid sub-
scriptions. ;

Joinder of complainants.

Uniting claims.

 

96.

. Equity restraining multiplicity of

suits,

. One suing on behalf of all.
. Suing stockholders for corporate

assets wrongfully received.

. Cases to be distinguished.
. Creditors enforcing statutory lia-

bility.

. General creditor cannot secure

receiver,

. Existing and subsequent credit-

ors.

. Volunteer not a creditor.
. Status of depositors,
. Receiver of a corporation as

complainant.

. Committee suing in corporate

name.

. Organization under void law.

. Foreign corporation as plaintiff.

. Action after expiration of charter.
. Right of creditor member to

sue.
Bondholder as complainant.

§ 65. Concerning complainants.—It is important to consider
what persons may become complainants or actors in any of
the various legal, statutory or equitable actions or proceed-
ings usually resorted to in cases where a corporation has
become financially involved or insolvent, or dissensions
have arisen in the management, or between the officers
and stockholders, or the corporation has incurred a lia-

bility to forfeiture, or dissolution proceedings,

The diffi-

culty of classifying the cases upon this branch of our
subject, and of formulating rules which the profession
74 COMPLAINANTS. $ 66

may safely follow in all cases, is manifest. The effort will
be made in this chapter to gather and arrange the authori-
ties in an accessible form as regards the gravamen of the
action or proceeding affecting the corporation and the na-
ture of the particular relief sought.

$ 66. The people as complainants in forfeiture proceedings.
—When the object of a legal proceeding is to declare a for-
feiture of a charter of incorporation, the people or govern-
ment alone can institute the action.’ The government hay-
ing created the corporation for the purposes declared in the
charter, is clearly entitled to a voice in its destruction. The
abuse of the franchise, constituting the ground of forfeit-
ure, is a public wrong, which the public, who are the par-
ties injured, must complain of and seek to have redressed.*
The prosecution cannot be set on foot at the instigation of
a citizen seeking to redress a private grievance.*? The pub-
lic may waive the right to claim or enforce a forfeiture, and
may forgive the public wrong. This in itself would be de-
structive of any right on the part of a private party to
prosecute a forfeiture. The rule stated is not limited to
proceedings to secure a forfeiture, for an attorney-general
cannot maintain a bill in equity to prevent or redress a pri-
vate wrong.* The courts are open to suit by any indi-
vidual upon whom a private injury has been inflicted.

 

1 State v. McConnell, 3 Lea (Tenn.)
339; Commonwealth v. Allegheny
Bridge Co., 20 Pa. St. 185; Murphy v.
Farmers’ Bank, 20 Pa. St. 415; State
v. Paterson & Hamburg Turnpike Co.,
21 N. J. Law 9; Whitney v. Wyman,
tor U.S. 392; National Bank v, Mat-
thews, 98 U. S. 628. See § 400 and
Chap. XIX,

2 The people are not proper parties
toa railroad foreclosure suit. Herring
v. New York, L. E, & W.R.R, Co.,
105 N. Y. 340.

3 State v. Moore, 19 Ala. 514; Rice
v. National Bank of the Common-
wealth, 126 Mass. 300; Farnham v,
Delaware & Hudson Canal Co., 61 Pa.
St. 265; Hastings v. Amherst & B. R.R.
Co., 9 Cush. (Mass.) 596; Goddard v.
Smithett, 3 Gray (Mass.) 124; Folger
v. Columbian Ins, Co., 99 Mass. 267;
Charles River Bridge v. Warren Bridge,
7 Pick. (Mass.) 370.

“ Atty. Genl. v. City of Salem, 103
Mass. 138. Compare People v. Clatk,
53 Barb, (N. Y.) 171.
§§ 67, 68 COMPLAINANTS. ns

§ 67. Right of the people to sue.—It results that the people
have no general power to invoke the action of the courts
by suits in their sovereign name for the redress of civil
wrongs sustained by some citizens at the hands of others.
When the people come into court as plaintiffs in a civil
action, it must be to vindicate their own right, and to ob-
tain relief to which they themselves are entitled. Thus,
Johnson, C., said: “It is not sufficient for the people to
show that wrong has been done to some one; the wrong
must appear to be done to the people, in order to sup-
port an action by the people for its redress.” *

§ 68. Sovereign States—A State cannot enter into a con-
troversy with another State within the meaning of the
Constitution, by assuming the function of a trustee in the
prosecution of claims against the other States owed to its
citizens.” Chief Justice Waite said in the case cited:
“There is no doubt but one nation may, if it sees fit, de-
mand of another nation the payment of a debt owing by
the latter to a citizen of the former. Such power is well
recognized as an incident of national sovereignty, but it in-
volves also the national powers of levying war and making
treaties. As was said in the United States v. Diekelman,?
if a sovereign assumes the responsibility of presenting the
claim of one of his subjects against another sovereign, the
prosecution will be ‘as one nation proceeds against another,
not by suit in the courts, as of right, but by diplomatic ne-
gotiation, or, if need be, by war.’ All the rights of the
States as independent nations were surrendered to the
United States. The States are not nations, either as be-
tween themselves or toward foreign nations. They are
sovereign within their spheres, but their sovereignty stops
short of nationality. Their political status at home and

 

1 People v. Albany & S. R.R. Co., 57 2 New Hampshire v. Louisiana, 108
N.Y. 168, ; U.S. 76, 90.
%92 U.S. 520.
_ §§ 69, 70

abroad is that of States in the United States. They can
neither make war nor peace without the consent of the na-
tional government. Neither can they, except with like
consent, ‘enter into any agreement or compact with an-
other State.’ ”*

§ 69. Plaintiffs in foreclosure.—A mortgagee, though he has
no personal beneficial interest, and is merely a trustee for
others, is entitled to bring foreclosure against the corpora-
tion mortgagor.” It is the usual practice for the trustee to
file the bill, though bondholders are in some cases expressly
authorized to do so by the terms of the securities, or may
bring the suit in cases where the trustee has been unfaith-
ful or negligent.*

COMPLAINANTS.

76

$ 70. Complainants in dissolution proceedings,— In New
York, as will presently appear, a creditor or a stockholder
may, by statute, proceed to have the dissolution of an in-
solvent company judicially declared, and to wind up its.
affairs. This rule applies to a life insurance company, or-
ganized under the laws of that State.° The neglect of a
corporation for more than a year to pay its debts is suffi-
cient to justify proceedings for its dissolution in New
York.® It has been said that a corporation can be judicially

 

1The difficulties incident to suit
against the sovereign have been a sub-
ject of allusion. See Board of Public
Works v. Gannt, 76 Va. 455; United
States v. Lee, 106 U.S. 196; Louisiana
v. Jumel, 107 U. S. 726,

* Hays v. Galion Gas Light & Coal
Co., 29 O. S. 330. See Coe v. Colum-
bus, Piqua & Ind. R.R. Co., 100. S.372.

3 Compare Richards v. Chesapeake
& Ohio R.R. Co., 1 Hughes 28; Mc-
Curdy’s Appeal, 65 Pa. St. 290; Jesup
v. City Bank of Racine, 14 Wis. 331;
Ackerson v. Lodi Branch R.R. Co., 28
N. J. Eq. 542; but see Railroad Co. v.
Orr, 18 Wall. 471.

4Medbury v. Rochester Frear Stone

Co., 19 Hun (N. Y.) 499; Masters v.
Eclectic Life Ins. Co., 6 Daly (N. Y.)
457; Note to Mickles v. Rochester
City Bank, 42 Am. Dec. 108; S.C. 11
Paige (N. Y.) 118; Ward v. Sea Ins.
Co., 7 Paige (N. Y.) 297; Boisgerard
v. N. Y. Banking Co., 2 Sandf. Ch. (N,
Y.) 23; Van Pelt v. U. S. Metallic
Spring, etc. Co., 13 Abb. N.S. (N. Y.)
325; Ss. Cc. 35 N. Y. Super. Ct. rrr;
Kittredge v. Kellogg Bridge Co., 8
Abb. N, C. (N. Y.) 168. See Chap.
XVIII.

5 Masters v. Eclectic Life Ins. Co., 6
Daly (N. Y.) 455.

® Kittredge v. Kellogg Bridge Co., 8
Abb. N. C. (N. Y.) 168.
$71 COMPLAINANTS, a7

declared to have ceased to exist only in a proceeding to
which the commonwealth is a party. The subject of the
dissolution of corporate bodies will be presently considered
at greater length.?

§ 71. Claims created by promoters.—Manifestly a corpora-
tion has no being, franchises, or faculties until after it is
organized ; nor do those engaged in bringing it into being.
have any power to bind it by contract. Any different rule
would enable private parties to put a corporation upon its
feet without legislative sanction. Thus, a railroad com-
pany is not liable for services ‘rendered prior to its organ-
ization,* or in procuring its charter of incorporation.» The
law raises no implication or presumption on the part of.
the inchoate association to assume such obligations. Mani-
festly, claims of this character can be expressly assumed
by the corporation ° after organization, and liability may be
thus incurred, especially where the corporation accepts the
benefits resulting from the acts in respect of which such
obligations accrued.’ Andrews, J., uses these words: “The

 

! Briggs v. Cape Cod Ship Canal Co.,
137 Mass. 72. See St. Louis Gas Light
Co. v. City of St. Louis, 11 Mo. App.
55
*See Chaps. XVII., XVIII.

?Gent v. Manufacturers’, etc. Ins.
Co., 107 Ill. 659; New York & New
Haven R.R. Co. v. Ketchum, 27 Conn.
170; Hall v. Vermont & Mass. R. Co.,
28 Vt. 401; Bell’s Gap R.R. Co. v.
Christy, 79 Pa. St. 54; Marchand v. The
Loan & Pledge Assn., 26 La. Ann. 389.
In Melhado v. Porto Alegre Railway
Co., L. R. 9C. P. 505, the learned Lord
Coleridge, C. J., said: “It does seem
just, in general, if a company takes the
benefit of the work and expenditure by
which its existence has been rendered
possible, and voluntarily comes into ex-
istence on the terms that it shall be
liable to pay for such work and ex-
penditure, that a cause of action should

be given. I can find, however, no legal
principle upon which such an action
can be maintained.”

* Rockford, R.I. & St. L. R.R. Co. v.
Sage, 65 Ill. 328; s. p. Western Screw
& Mfg. Co. v. Cousley, 72 Ill. 531.

5 Hall v. Vermont & Mass. R. Co.,
28 Vt. 4o1.

*Reichwald v. Commercial Hotel
Co., 106 Ill. 448; Low v. Connecticut,
etc. R.R. Co., 46 N. H. 284.

7 Whitney v. Wyman, Io1 U. S. 392;
Spiller v. Paris Skating Rink Co., 7 Ch.
D. 368. A promoter is not permitted
to make secret profits. Emma Silver
Min. Co. v. Grant, L. R. 11 Ch. D. 918;
New Sombrero Phosphate Co. v. Erlan-
ger, L.R. 5 Ch. D. 73, 103; affi’d 3 App.
Cas. 1218; Simons v. Vulcan Oil, etc.
Co., 61 Pa. St. 202, In McElhenny’s
Appeal, 61 Pa. St. 188, 195, the court
said: “The promoters of such com-
78 § 72
promoters of a corporation are not the corporation. The
legal body is distinct from the individuals who compose it.
The statute confers no authority upon the promoters of a
corporation to enter into preliminary contracts binding the
corporation when it shall come into existence. Such con-
tracts may bind the individuals who make them. If
adopted by the corporation, and they are within the corpo-
rate powers, and are not otherwise subject to objection, they
may become the contracts of the corporation and enforce-
able as Sachi. « 2s But the corporation is at liberty to re-
fuse to sanction them, and if its sanction is obtained by the
act or co-operation of directors who have a private interest,
we perceive no reason why, under the general rule, the cor-
poration may not resist an action for specific performance,
at least in a case where it has not accepted the considera-
tion and taken the benefit.” *

COMPLAINANTS.

§ 72. Actions by corporations against trustees and officers.
—The rule already formulated is of general application,
that an action against the officers or trustees of a corpora-
tion for the misappropriation or waste of its funds must be
brought in the name of the corporation. The assets so mis-
applied are, as we have seen, the property of the corpora-
tion as such: the title to the wasted property and to the
cause of action accruing by reason of its misappropriation,
is vested in the corporation, and the recovery must there-
fore be in its name.” Such acts of misappropriation are
‘‘wrongs done primarily to the corporation ; and therefore

the restitution or redress is

to be secured to the corpora-

 

panies, when they buy to form a com-
pany, and their purchases are taken by
the company .... cannot make profits
on these sales.”

1Munson v. Syracuse, G. & C. R.R.
Co., 103 N. Y.75, 76.

> Cogswell v. Bull, 39 Cal. 320; Rob-
inson v. Smith, 3 Paige (N. Y.) 222;
Dodge v. Woolsey, 18 How. 345;

Greaves v. Gouge, 69 N. Y. 154;
Smith v. Poor, 40 Me. 415; Heath v.
Erie Railway Co., 8 Blatchf. 395 ; Brew-
er v. Boston Theatre, 104 Mass. 378;
Tuscaloosa Mfg. Co. v. Cox, 68 Ala.
71; Memphis City v. Dean, 8 Wall. 73;
Hodges v. New England Screw Co., 1
R. I. 312.
$$ 73, 74 COMPLAINANTS.

79

tion.”? The stockholders in a corporation, as a general
rule, can act only through the corporation, and all causes
of action are to be prosecuted in the name of the corpora-
tion.2 Hence, a stockholder cannot sue in equity for dam-
ages* to the corporation, or appeal a case which the corpo-
ration neglects to carry to a higher court. And a party
who has a contract for the products of a corporation cannot
sue a wrong-doer who prevents the corporation from com-
pleting its contract.®

$ 73. Stockholders suing corporation for damages.-—Stock-
holders cannot sue the corporation for damages resulting
from the negligence of its directors. All the stockholders
are equally injured and equally in a position to complain.®
In Evans v. Brandon,’ the court said: “A fatal defect in the
plaintiff's petition, both original and amended, is, that it
seeks no recovery in behalf of the corporation, but seeks a
direct recovery of damages for the plaintiff individually, the
case stated not entitling him to such a recovery.” This
language is employed in an action on the case brought by
a stockholder against directors charging mismanagement.

$ 74. Suits by stockholders.—It is not intended by the
rules stated in preceding sections to imply that ‘the law will
deprive a stockholder of all remedy or redress for losses
sustained by the fraudulent acts of, and the misapplication
or waste of corporate funds and property by, an officer of

 

the corporation. From the

necessity of the case, and to

 

1Brewer v. Boston Theatre, 104
Mass. 378, 395. See Leslie v. Loril-
lard, 31 Hun (N. Y.) 306.

?Eureka Marble Co. v. Windsor
Mfg. Co., 47 Vt. 447. See §38. Curtiss
v. Murry, 26 Cal. 634; Brinckerhoff v.
Bostwick, 88 N. Y. 52.

8Forbes v. Whitlock, 3 Edw. Ch.
(N. Y.) 446.

4 Silk Mfg. Co. v. Campbell, 27 N. J.

L. 539.

5Dale v. Grant,
142.

§ Oliphant v. Woodburn Coal, etc.
Co., 63 Iowa 332. Compare Forbes v.
Whitlock, 3 Edw. Ch. (N. Y.) 446;
Smith v. Hurd, 12 Met. (53 Mass. 371) ;
Craig v. Gregg, 83 Pa. St. 19; Brinck-
erhoff y. Bostwick, 88 N Y. 52.

753 Texas 60.

® Greaves v. Gouge, 69 N. Y. 157.

34 N. J. Law
§ 74

80 COMPLAINANTS.

prevent a failure of justice, the stockholder is allowed to file
a bill upon showing that suitable redress is not attainable
through the action of the corporation. Unless such an ex-
ception to the usual rule existed, it would be in the power
of a majority to defraud the minority with impunity.’ “The
weight of authority,” say the New York Court of Appeals,”
“is in favor of the doctrine that an action for injuries caused
by such misconduct must be brought in the name of the cor-
poration, unless such corporation or its officers, upon being _
applied to for such a purpose by a stockholder, refuse to
bring such action. In that contingency, and then only, can
a stockholder bring an action for the benefit of himself and
others similarly situated,’ and in such an action the corpora-
tion must necessarily be made a party defendant.” When
a stockholder brings such an action, the complaint should
allege that the corporation on being applied to, refused to
prosecute the action, and as this averment constitutes an
essential element of the cause of action, the complaint is
defective and insufficient without it. Such a bill will be

 

1 Mason y. Harris, L. R. 11 Ch. Div. v. Vermont Valley R.R. Co., 12 Blatchf.
107; Brewer v. Boston Theatre, 104 288; Hazard v. Durant, 11 R. I. 196;
Mass. 386; Mussina v. Goldthwaite, Robinson v. Smith, 3 Paige (N. Y.)

34 Texas 125; Hazard v. Durant, 11 R.
I, 195; Salomons v. Laing, 12 Beav.
339; Memphis City v. Dean, 8 Wall.
73; Foss v. Harbottle, 2 Hare 461.

? Greaves v. Gouge, 69 N. Y. 157.

See Heath v. Erie Railway Com-
pany, 8 Blatchf. 397; Rogers v. Lafay-
ette Agr. Works, 52 Ind. 304; March
v. Eastern Railroad Co., 4o N. H. 548;
Elkins v. Camden, etc. R.R. Co., 36
N. J. Eq. 5,14; Mason v. Harris, L.
R, 11 Ch. Div. 107.

4 Greaves v. Gouge, 69 N. Y. 157.
Compare Brinckerhoff v. Bostwick, 88
N. Y. 56; Currier v. New York, W. S.
& B. R’way, 35 Hun (N. Y.) 355;
Moore v. Schoppert, 22 W. Va. 291;
Dodge v. Woolsey, 18 How. 331; Pond

222; Wilcox v. Bickel, 11 Neb. 156;
Brewer v. Boston Theatre, 104 Mass.
378. In Wilcox vy. Bickel, 11 Neb. 156,
the court say: “Were it not for the
alleged disorganized condition of the
said corporation, it would be necessary
for the petition to state that the plain-
tiff had first applied to the officers or
managing directors of the company and
demanded that proper proceedings be
taken in the name of the corporation
for the protection of the property; but
the allegations of the petition to the
effect that all of the officers of the com-
pany have absconded and their where-
abouts unknown, etc., constitute a suf
ficient showing that it was impossible
for the plaintiff to make such demand.”
COMPLAINANTS. SI

§ 74

deemed insufficient, however, if it does not allege: (1), effort
to set the corporation in motion for the purpose of secur-
ing its own redress; (2), application to the directors to take
action in the matter; (3), a wilful disregard by the direct-
ors of the interests of the corporation.t. The court held,
in a Connecticut case,” that an individual stockholder
may maintain a petition in equity against the directors of a
corporation for misconduct in office, where the corporation
is unable to bring a suit at law, or where, through collusion
or fraud, it neglects to seek redress, and an application has
been made to the directors for the use of the corporate

name to bring suit, which has been refused.*

Tt has been

 

1 Brewer v. Boston Theatre, 104
Mass. 387; Tuscaloosa Mfg. Co. v.
Cox, 68 Ala. 77. In New York a
stockholder of an insolvent corporation
may bring suit for a rescission of an
unlawful contract without first demand-
ing that the corporation shall sue, if it
is apparent that the corporation could
not act because its directors are under
the control of the persons with whom
the contract was made. Currier v.
New York, West Shore, etc. R.R. Co.,
35 Hun (N. Y.) 355. In Barrv.N. Y.,
L. E. & W. R.R. Co., 96 N. Y. 450,
Miller, J., said: “We are referred by
the learned counsel for the appellants
to the case of Hawes v. Oakland (104
U. S. 450), as authority for the doc-
trine that no action can be mairitained
by a stockholder of a corporation under
the allegations contained in the com-
plaint in the action at bar. We do not
think that the case cited sustains the
position contended for. It is there laid
down that where the board of directors
of a corporation is acting in a manner
destructive of the rights of the other
shareholders, or where the majority,
of the shareholders themselves are
oppressively and illegally pursuing a
course in the name of the corporation
which is in violation of the rights of

6

the other shareholders, and which can
only be restrained by the aid of a court
of equity, an action to obtain relief may
be maintained by a stockholder. Such
a case, we think, is presented in the
complaint by the plaintiffs, if the alle~
gations of conspiracy are sufficiently
stated, which allegations will hereafter
be.considered, and brings the plaintiffs
within the rule laid down in the case
cited. It is not necessary, under the
section of the Code presented, to show
an active effort on the part of the plain-
tiffs with the body of the corporation
affected to induce remedial action on
its part, as it is apparent, from the facts
stated, that such effort would have
been of no avail.”

® Allen v. Curtin, 26 Conn. 456.

8s. Pp. Smith v. Poor, 3 Ware 148,
In Western R.R. Co, v. Nolan, 48 N.
Y. 517, the court said: ‘The trustees
are the parties in whom the fund is
vested, and whose duty it is to main-
tain and defend it against wrongful at-
tack or injury tending to impair its
safety) or amount. The title to the
fund being in them, neither the cestuzs
gue trust nor the beneficiaries can
maintain an action in relation to it, as
against third parties, except in case the
trustees refuse to perform their duty in
82

COMPLAINANTS. § 74

even held that a stockholder may proceed by bill to remove
a cloud from the title to corporate real estate, though this
case would seem to be doubtful law ;' and a bill may be
filed by a stockholder to settle a controversy as to how
many directors a municipality owning some of the stock is
entitled to have in the board.? It is not vitally essential to
sustain a stockholder’s bill that the transfer of the stock to
the complainant should have been registered upon the cor-
porate books? Ina New York case, Van Vorst, J., said :*
“That the stock of the plaintiff Griffin has not been regis-
tered, is no reason why |he should not maintain this action.
He is the legal and equitable owner of the stock. The
possession by him of the certificate as owner gives him a
complete title. For certain purposes, and for the enjoy-
ment of specific privileges, such as to vote and receive divi-
dends, it may be necessary, as between him and the corpora-
tion, that he should be registered as astockholder. But as
the absolute owner of the stock, he is, to the exclusion of
every other person, entitled to prosecute an action for in-
jury to it, or to himself as the proprietor thereof.” Mani-
festly, as we have seen, a stockholder’s suit must be in
equity,® and the defendants are not entitled, as a matter of
right, to a trial of the whole issue by jury.®

 

that respect, and then the trustees
should be brought before the court as
parties defendant.”

1 Baldwin v. Canfield, 26 Minn. 56.
In the course of the opinion the court
say that stockholders “have a right to
take legal means to preserve the prop-
erty, to prevent it from being lost to
the corporation, or its value from be-~
ing impaired, If such value is practi-
cally impaired by a cloud upon the title
of the corporation te real property,
they have a right to have the cloud re-
moved, Their ownership of the stock,
either general or special, gives them a
right to defend it, as in case of any
other property.”

* City of Wheeling v. Mayor of Balti-
more, 1 Hughes go,

®See Parrott v. Byers, 40 Cal. 614;
Bagshaw v. Eastern Union Ry. Co.,
7 Hare 114.

‘Ervin v. Oregon Railway & Nav.
Co., 62 How. Pr. (N. Y.) 490, 492.

5 See Craig v. Gregg, 83 Pa. St. 19;
Forbes v, Whitlock, 3 Edw. Ch. (N. Y.)
446; Brinckerhoff v. Bostwick, 99 N.Y.
185; Gardiner v. Pollard, ro Bosw.(N.Y.)
674; Oliphant v. Woodburn Coal, etc.
Co., 63 Ia. 332. See §73 and Chap. II,

6 Brinckerhoff v. Bostwick, ro5 N. Y.
567. Compare Bradley v. Aldrich, 40
N. Y. 504; Davison v. Associates of
the Jersey Co., 71 N. Y. 340.
§$ 75, 76 COMPLAINANTS. 83

$75. Views of the United States Supreme Court.—In Hawes
v. Oakland,’ this subject is ably considered by Mr. Justice
Miller. The court state their conclusion to be, that, to
enable a stockholder in a corporation to sustain a suit in a
court of equity in his own name, founded on a right of ac-
tion existing in the corporation, and in which the corpora-
tion itself is usually the appropriate plaintiff, there must
exist as the foundation of the suit: First, some action, or
threatened action, of the managing board of directors or
trustees of the corporation, which is beyond the authority
conferred on them by their charter, or other source of or-
ganization, Second, such a fraudulent transaction, com-
pleted or contemplated by the acting managers, in connec-
tion with some other party, or among themselves, or with
other shareholders, as will result in serious injury to the
corporation, or to the interests of the other shareholders.
Third, where the board of directors, or a majority of them,
are acting for their own interest, in a manner destructive
of the corporation itself, or of the rights of the other share-
holders. Fourth, where the majority of shareholders them-
selves are oppressively and illegally pursuing a course in
the name of the corporation which is in violation of the
rights of the other shareholders, and which can only be re-
strained by the aid of a court of equity.?

§ 76. Reimbursement of successful complainant.—A princi-
ple to be kept in view in this class of litigation is, that
one jointly interested with others in a common fund, who
institutes a litigation which is necessary to save the fund
from waste, is entitled, in equity, to the reimbursement of
his costs as between solicitor and client, either out of the
fund itself, or by proportionate contributions from those

 

1 yo4 U. S. 450. Woolsey, 18 How. 331; Wilcox v.

? See Foss v. Harbottle, 2 Hare 461; Bickel, 11 Neb. 156; Williams v. Hal-
Mozley v. Alston, r Ph. 790; Gray v. liard, 38 N. J. Eq. 376; Conway v,
Lewis, L. R. 8 Ch. App. 1035; Mac- Halsey, 15 Vr. (N. J.) 462; Ackerman
Dougall v. Gardiner, 1 Ch. D. 13; v. Halsey, 10 Stew. Eq. (N. J.) 356;
Hersey v. Veazie, 24 Me. 9; Samuel v. Shawhan vy. Zinn, 79 Ky. 304.
Holladay, 1 Woolw. 400; Dodge v.
COMPLAINANTS.

§§ 77, 78

who receive the benefit of the litigation.!. A claim, however,
for private expenses, travelling fares, hotel bills, etc., and for
the personal services of the complainant, cannot be allowed.

84

8 77, Success of the wrongful act.—It should be carefully
borne in mind that if the stockholder’s ground of complaint
is one that the law recognizes, the fact that it resulted ad-
vantageously to the public, or to the stockholders, will not
constitute a reason for refusing to entertain jurisdiction,”
or prevent the stockholder from becoming a successful
complainant.?

$ 78. Judgment creditors as complainants—Suing for unpaid
subscriptions.—Creditors of a corporation who have ex-
hausted their remedy at law, may proceed in equity against
a stockholder to compel the payment of an unpaid sub-
scription. The fact that, by the terms of the subscription,
the stockholder was to pay for the shares as called for by
the company, and the latter had not called for more than
thirty per cent. of the subscription, is not regarded as a
defense to the suit. No account need be taken of any
other indebtedness of the company, and the other stock-

holders need not be made parties to the suit.*

In Ogilvie

 

1 Trustees v. Greenough, 105 U. S.
527, and cases cited ; Central Railroad,
etc. Co. v. Pettus, 113 U.S. 116,

See Stevens v. Rutland, etc. R.R.
Co,, 29 Vt. 545; Hoole v. Great West-
ern, etc. Ry. Co., L. R. 3 Ch. 262.

% Lord Cairns, L. J., said, in Hoole
v. Great Western, etc. Ry. Co., L. R.
3, Ch. 262, 268: “I believe that it was
an arrangement which all the parties
to it belleved to be most advantageous
to the company, and to every person
concerned ; and, as far as it is proper
to feel regret, one may feel regret that
the arrangement did not meet with the
unanimous assent of all the sharehold-
ers. With that, however, we have
nothing here to do; if the arrangement

which has been proposed is legal, is
zutra vires, the company, through their
general meetings, have power to carry
it into effect ; if, on the other hand, it
is ultra veres, if it is illegal, any mem-
ber of the company may dissent from
it, and has a right to appeal to this
court to be protected against its ef-
fects.”

4 Hatch v. Dana, ror U.S. 205; The
Dalton & M. R.R. Co. v. McDaniel, 56
Ga. 191. See Pfohl v. Simpson, 74 N.
Y. 141; Mathez v. Neidig, 72 N. Y.
100; Griffith v. Mangam, 73 N. Y. 611;
Miers v. Zanesville, etc. Turnpike Co.,
11 Ohio 273; see S. C. 13 Ohio, 197;
Henry v. Vermillion, etc. R.R. Co., 17
Ohio 187. See § 167.
§ 79 COMPLAINANTS. 85

v. Knox Insurance Company,’ a bill was filed by a number
of judgment creditors of a corporation against the corpora-
tion and thirty-six subscribers to its capital stock. The
prayer of the bill was that the defendant subscribers might
be decreed to pay their subscriptions, and that the com-
plainants’ judgment be satisfied out of the fund so realized.
The objection that the bill was defective for want of par-
ties was held untenable. Grier, J., observed: ‘The cred-
itors of the corporation are seeking satisfaction out of the
assets of the company to which the defendants are debtors.
If the debts attached are sufficient to pay their demands,
the creditors need look no further. They are not bound to
settle up all the affairs of this corporation, and the equities
between its various stockholders or partners, corporators or
debtors.” This feature of the law was tersely stated by Mr.
Justice Bradley in Marsh v. Burroughs.* The bill in that
case was filed by judgment creditors of a bank, to recover
from some stockholders who had not paid their subscrip-
tions in full; and non-joinder of parties was set up asa
defense. This language was used: “ A judgment creditor,
who has exhausted his legal remedy, may pursue, in a court
of equity, any equitable interest, trust or demand of his
debtor, in whosesoever hands it may be. And if the party
thus reached has a remedy over against other parties for
contribution or indemnity, it will be no defense to the pri-
mary suit against him that they are not parties. If a cred-
itor were to be stayed until all such parties could be made
to contribute their proportionate shares of the liability, he
might never get his money.”

§ 79. Joinder of complainants.—Two or more creditors of
an insolvent corporation, having recovered judgments upon
their several demands and secured the return of executions

 

122 How. 380. 587; Pierce v. The Milwaukee Con-
2 Ogilvie v. Knox Ins. Co., 22 How. struction Co., 38 Wis. 253.
391; S. P. Bartlett v. Drew, 57 N. Y. 3 1 Woods, 468,
86 COMPLAINANTS. §§ 80-82

unsatisfied, may unite in filing a creditor’s bill against the
corporation, and its stockholders, to reach unpaid subscrip-
tions! But stockholders have no right to be admitted as
_ plaintiffs in a suit brought by a receiver against directors
for neglect of duty.’

§ 80. Uniting claims.—In Ohio a judgment creditor of an
insolvent railroad may join in the same action a claim to
compel payment of unpaid subscriptions for stock, and a
claim to enforce the individual liability of stockholders for
the satisfaction of his judgment.’

§ 81. Equity restraining multiplicity of suits. — In cases
where many persons have claims, and are prosecuting or
contemplate prosecuting them at law, against a single de-
fendant, or a class of defendants, or to reach a fund liable
in equal degree to all those persons and others, equity, to
forestall a multiplicity of actions, may assume jurisdiction
of an action for a general accounting and adjustment of all
the rights, and restrain individual actions at law, thus bring-
ing ‘all the litigation into one suit. This is especially true
of suits to enforce the liability of stockholders to creditors.®
But in New Yorka receiver appointed in a judgment cred-
itor’s suit may commence separate actions against each
stockholder to recover balances remaining due upon
shares, and is not bound to bring one action making all
the stockholders and creditors parties,®

§ 82. One suing on behalf of all—_Where shareholders are
numerous the suit may be brought by one or more in be-
half of all.’

 

‘Hickling v. Wilson, 104 Ill. 54; Y.6r11, Compare Hatch v. Dana, ror

Ogilvie v. Knox Ins, Co., 22 How. 380.
2 Kimball v. Ives, 30 Hun (N. Y.)
568.
8 Warner v. Callender, 20 O. S, 190.
* Pfohl v. Simpson, 74 N. Y. 141,
® Mathez v. Neidig, 72 N. Y. 100;
Osgood v. Laytin, 3 Keyes (N. Y.)
521. See Griffith v. Mangam, 73 N.

U.S, 205; Bartlett v. Drew, 57 N. Y.
587; Pierce v. Milwaukee Construction
Co., 38 Wis. 253; Adler v. Milwaukee
Pat. Brick Manf, Co., 13 Wis. 57.

®Van Wagenen v. Clark, 22 Hun
(N. Y.) 497.

See Brinckerhoff v. Bostwick, 88
N. Y. 60; Butts v. Wood, 37 N.Y.
$§ 83-85 COMPLAINANTS. 87.

$ 83. Suing stockholders for corporate assets wrongfully
received.—Manifestly the property of a corporation cannot ©
be divided amongst its stockholders to the detriment of
creditors. Where this has been done, a judgment creditor
of the corporation may maintain an action, in the nature of
a creditor’s bill, against any stockholder to reach the assets
so received by him ; it is unnecessary to make all the stock-
holders parties to the action; the judgment creditor has
nothing to do with the equities between the stockholders
unless he chooses to intervene to settle them.’

§ 84. Cases to be distinguished.—Pollard v. Bailey? and
Terry v. Tubman,’ two cases to be distinguished in this con-
nection, arose under statutory provisions imposing upon
the stockholders of banks a liability for the debts of the
corporation “in proportion to their stock held therein.”
It was this liability beyond the stock subscription which
was sought to be enforced, and as it was only a propor-
tional liability, its extent could be ascertained only when
the obligation of the other shareholders was taken into con-
sideration. It must be carefully noted that this individual
liability is statutory, and the court points out the fact in
Pollard v. Bailey that as, by the statute, a receiver was
clothed with authority to enforce the statutory liability im-
posed, that form of remedy should alone be employed, and
a creditor had no standing to sue. Both these latter cases,
it must be remembered, were actions at law.

§ 85. Creditors enforcing statutory liability — Where a statu-
tory liability is created in favor of such creditors as are
within certain prescribed conditions, and no liability exists
in favor of the corporation itself, or for the benefit of all

 

317; Robinson v. Smith, 3 Paige (N. Compare Wood v. Dummer, 3 Mason
Y.) 222; Hichens v. Congreve, 4 Russ. 308.
562; Heath v. Erie Railway Co., 8 2 20 Wall. 520.

Blatchf. 347. *92 U.S. 156.
' Bartlett v. Drew, 57 N. Y. 587; 4See Hatch v. Dana, ror U. S.

s.P. Hatch v. Dana, tor U. S. 212. 213.
88 COMPLAINANTS. $§ 86, 87

its creditors, the right given is not a general one, and does
not rest in a receiver of the corporation, but, on the con-
trary, attaches to the particular creditors specified, who must
enforce it in their own right and for their own special bene-
fit.! The receiver is not a trustee for creditors in relation
to assets which belong to them individually, or as a body.?

§ 86. General creditors cannot secure receiver—A general
creditor cannot apply for the appointment of a receiver
under the Revised Statutes of New York.? <A simple
contract creditor, as we have already shown,‘ cannot inter-
fere with the property of his debtor before judgment.°

§ 87. Existing and subsequent creditors——In Graham v.
Railroad Company,’ will be found an important considera-
tion of the effect of a voluntary alienation of property by
a corporation as affecting subsequent creditors. It was
urged that the property of a corporation was a trust fund
for creditors,’ and that this meant all creditors becoming
such during the life of the corporation. But Justice Brad-
ley could discover no reason why the alienation of assets by
a corporation should be questioned by subsequent credit-
ors of the corporation any more than such a transfer by an
individual could be overturned.* This case effectually places
corporations and individuals upon the same footing as re-
gards the absence of any right of a subsequent creditor to
attack a voluntary transfer, and is another illustration of
the close analogy of the law as regards individual and cor-
porate acts.®

 

? Farnsworth v. Wood, 91 N. Y. 313. 4See § 34.
See Jacobson v. Allen, 12 Fed. Rep. *See Chap. IV.
454; Wincock v. Turpin, 96 Ill. 135; * 102 U.S. 148.
Liberty Female College Assn. v. Wat- 7 See § 105; Railroad Co. v. How-
kins, 70 Mo, 13. ard, 7 Wall. 392; Sawyer v. Hoag, 17
*Jacobson v. Allen, 12 Fed. Rep. Wall. 610; Dayton v. Borst, 31 N. Y.
454; Bristol v, Sanford, 12 Blatchf. 435; Upton v. Tribilcock, 91 U. S.
341. 47; Bartlett v. Drew, 57 N. Y. 587;
*2 R. S. 463, § 36; Bliven v. Peru Wait on Fraud. Conv. § 119.
Steel and Iron Co., 60 How. Pr. (N. * See Wait on Fraud. Conv., chap. vi.
Y.) 280; Ss, Cc. 9 Abb. N.C. (N.Y.) 205. *See § 10.
$§ 88-90 COMPLAINANTS, 89

§ 88. Volunteer not a creditor—A member of a corpora-
tion who is not its financial officer, cannot, without the au-
thority of the corporation, make himself its creditor by the
voluntary payment of its debts.’

$ 89. Status of depositors.—Depositors are creditors of a
bank.” They part with the title to their money and loan it
to the bank. The relation of the trustees of a bank to its
depositors is similar to that of trustee and cestud gue trust,
and the trustees are the agents of the bank. Where a
savings bank has been damaged by the negligence of its
trustees, its receiver may sue them, recovering for the bene-
fit of depositors and creditors. And where an insolvent
national bank is making illegal preferential payments, the
court will appoint a receiver at the suit of a depositor.®

$ 90. Receiver of a corporation as complainant—In New
York an action may be brought by a receiver ofa corporation,
to vacate and set aside a judgment recovered against the
company, upon the ground that the judgment represented no
consideration, and was obtained by collusion, and in fraud
of the rights of creditors. Such an action is properly
brought in the name of the receiver as the representative as
well of the creditors as of the debtor corporation. It is
plainly the duty of the receiver in behalf of the creditors to
resist such a judgment and assert the rights of the creditors
against the fraudulent or illegal acts of the corporation by
which such rights were injuriously affected.” This is, ordi-
narily, the receiver's only course, for a question would arise

 

-1 Blanchard v. First Association, 59 4Hun v. Cary, 82 N. Y. 65; Van
Me. 202, / Dyck v. McQuade, 86 N. Y. 45.

? Hardy v. Chesapeake Bank, 51 Md. 5 Irons v. Manufacturers’ Nat. Bank,
562; Ward v. Johnson, 5 Ill. App. 30; 6 Biss. 301.
Davis v. Smith,29 Minn. 201; Aitna Nat. 6 Whittlesey v. Delaney, 73 N. Y.
Bank v. Fourth Nat. Bank, 46N.Y. 82. 574.

*Thompson v. Riggs, 5 Wall. 678; “Gillet v. Moody, 3 N. Y. 479; Hun
Dabney v. Bank of State of S.C., 3S. v. Cary, 82 N. Y. 65; Van Dyck v.
C. 124. McQuade, 86 N. Y. 45.
COMPLAINANTS. $$ 91, 92

go
concerning his standing to move for relief in the action in
which the judgment was rendered,’ though a receiver may
now move in New York to vacate an attachment.? A re-
ceiver, as will presently appear,’ is now generally made a
trustee not only for stockholders but for creditors,* and,
when suing for portions of the capital, represents creditors °
rather than the corporation, and is clothed with other rights
than those which the corporation possessed. Where cor-
porate funds have been fraudulently misapplied an official
liquidator may, in England, apply for an order for restitu-
tion against the director.?. A receiver may recover of a
director notes transferred to such director contrary to stat-
ute,® and an assignee of an insolvent corporation may file a
bill against directors for confederating together and divert-
ing corporate funds.®

§ 91. Committee suing in corporate name——Where a com-
mittee of a corporation has been authorized to collect all
outstanding amounts due the corporation, it may employ
the corporate name in any suit necessary to effectuate that
object.”

§ 92. Organization under void law.—An association organ-
ized under a void law cannot bring foreclosure upon a

 

1See Tracy v. First Nat. Bank, 37
N. Y. 523.

° People’s Bank v. Mechanics’ Nat.
Bank, 62 How. Pr. (N. Y.) 422. Com-
pare Jacobs v. Hogan, 85 N. Y. 243;
National S. & L. Bank v. Mechanics’
Nat’] Bank, 89 N. Y. 440; Steuben
Co. Bank v. Alberger, 78 N. Y. 252.

3 See Chaps, X., XI.

4 Talmage v. Pell, 7 N. Y. 329, 347.
Compare Leavitt v. Blatchford, 17 N.
Y. 521.

5 Osgood v. Ogden, 4 Keyes (N. Y.)
70; Ruggles v. Brock, 6 Hun (N. Y.)
164; Sawyer v. Hoag, 17 Wall. 619;
Webster v. Upton, 91 U.S. 71; Chubb

v. Upton, 95 U. S. 667; Dayton v.
Borst, 31 N. Y. 435.

® Ruggles v. Brock, 6 Hun (N. Y.)
164; Upton v. Englehart, 3 Dillon 503;
Osgood v. Ogden, 4 Keyes (N. Y.) 88;
Porter v. Williams, 9 N. Y. 149; Os-
good v. Laytin, 3 Keyes (N. Y.) 521;
Gillet v. Moody, 3 N. Y. 479.

‘In re National Funds Assur. Co.,
L. R. 10 Ch. Div, 118. See Evans v.
Coventry, 25 L. J. Ch. 489.

* Gillet v. Phillips, 13 N. Y. 114.

* Gindrat v. Dane, 4 Cliff. 260.

©St. Louis Domicile and Savings
Loan Assn, v. Augustin, 2 Mo. App.
123.
COMPLAINANTS,

§§ 93-95 : gi

mortgage, but a receiver may be appointed and enforce an
accounting for the debt.’

$ 93. Foreign corporation as plaintiff—A foreign corpora-
tion, as already shown,” is permitted to sue in the English
courts,? so a foreign corporation may sue in the Federal
courts of this country ;* and in most of the State courts.°
In the absence of positive direction to the contrary, by a
rule of general comity which prevails throughout the States
and Territories of the United States, corporations created
in one State or Territory are permitted to carry on any law-
ful business in another State or Territory, and to acquire,
hold, and transfer property there on the same basis as indi-
viduals.®

$ 94. Action after expiration of charter.—From the nature
of things, a corporation cannot maintain a suit after its
charter has expired;’? and a judgment rendered against a
corporation after it has ceased to exist is of no validity.®

$ 95. Right of creditor member to sue.—A member of a
corporation, who is a creditor thereof, has the same right
as any other creditor to sue the corporation and attach its
property.® And the general rule is, that an individual cor-
porator may sue his corporation, and the corporation may
in turn prosecute the corporator.® Where an officer of a
corporation has received its securities in good faith as col-

 

1 Burton v. Schildbach, 45 Mich. 504.

2 See § 39.

3 Henriques v. Dutch West India
Co., 2 Ld. Raym. 1532.

4Society for Propagation of Gospel
v. Wheeler, 2 Gall. 105; New York
Dry Dock v. Hicks, 5 McL. 111. See
§ 318,

5 March v. Eastern R.R. Co., 40 N.
H. 579; Mutual Benefit Life Ins. Co.
v. Davis, 12 N. Y. 569; Eslava v. Ames
Plow Co., 47 Ala. 384; Leasure v.
Union Mutual Life Ins. Co., 91 Pa. St.

-491. See Bank of Augusta v. Earle,

13 Pet. 519; Sedg. & Wait on Trial of
Title to Land, 2d ed., § 195.
® Cowell v. Springs Co., 100 U. S.

59. See § 39.

7 Building Asso. v. Anderson,7 Phila.
(Pa.) 106. .See Chaps. XVII., XVIII.

® Dobson v. Simonton, 86 N. C. 492.

" Life Asso, of America v. Levy, 33
La. Ann. 1203.

1 Culbertson v. Wabash Nav. Co., 4
McL. 545; Rogers v. Danby Univer-
salist Soc., 19 Vt. 187; Barnstead v.
Empire Mining Co., 5 Cal. 299; Ex
parte Booker, 18 Ark, 338.
92 A COMPLAINANTS. § 96
lateral to a debt due him from the corporation, it is an es-
sential prerequisite to an avoidance of the transaction that

the indebtedness should be paid.*

§ 96. Bondholder as complainant—One bondholder may,
in Pennsylvania, sue for interest on a bond, though the
principal is not yet due, and even though the trustees are
authorized to proceed to collect it by sczve faczas.? Mort-
gage creditors are within the rule prohibiting legislation
impairing the obligation of a contract.? But the legislature
may require a mortgage creditor to express his dissent from
a scheme deemed essential for the welfare of an embar-
rassed corporation or suffer the penalty of being bound
by it

 

¥

1 See Duncomb v. New York, H. &
N. R.R. Co., 84 N. Y. 190.

® Montgomery Co. Ag. Soc. v. Fran-
cis, 103 Pa. St. 378. As to when
bondholder may foreclose, see Chi-
cago & V.R.R. Co. v. Fosdick, 106 U.
S. 47; Mason v. York & Cumberland
R.R. Co., 52 Me, 82. Compare March
v. Eastern R.R. Co., 40 N. H. 548,

566; Wilmer v. Ailanta & R. Air Line
Ry. Co., 2 Woods 409.

3 Montgomery & W. P. R.R. Co. v.
Branch, 59 Ala. 139. Compare White
Mountains R.R. Co, v. White Mount-
ains (N. H.) R.R. Co., 50 N. H. 50.

4 Union Canal Co. v. Gilfillin, 93 Pa.

St. 95.
CHAPTER IV.

STATUS OF COMPLAINANTS.

§97. Exhausting remedy against cor- | §100. Member or creditor suing in

poration, place of receiver.
98. Suit by stockholder as substitute | 101. Creditor at large.
‘ for corporation. 102, Liability of guarantor.
99. Sufficiency of request that corpo-| 103, Proof of insolvency — Judg-
ration institute suit. ment. .

$ 97. Exhausting remedy against corporation.—The ques-
tion has arisen in many forms whether or not a creditor of
a corporation can proceed, in the first instance, against a
stockholder, to enforce his individual liability, without first
showing that the remedy against the corporation has been
exhausted. The logic of the law seems to deny the cred-
itor’s right so to do. The reasons are numerous, The
contract having been entered into with the corporation,
there is an absence of privity between the creditors and
stockholders, Then, a practical objection to the existence
of this direct remedy is urged—that a stockholder is not
presumed to be familiar with the dealings of the corpora-
tion, and a demand might be presented to him for’ liquida-
tion which had already been paid by the corporation, or
against which the latter had a defense, or was entitled to
credits or offsets. The corporation might also be entirely
solvent, and abundantly able and ready to satisfy the cred-
itor’s demand upon presentation, or might be possessed of
sufficient assets out of which satisfaction could be enforced
by the creditor in the usual manner, without resort to the
stockholder. Chief Justice Waite observed in Terry v.

 

1 Bush v. Cartwright, 7 Oregon 335. 384; Blakev, Hinkle, 10 Yerg. (Tenn.)
See Sturges v. Vanderbilt, 73 N. Y, 218.
STATUS OF COMPLAINANTS. § 98

94

Anderson :! “Ordinarily, a creditor must put his demand
into judgment against his debtor, and exhaust his rem-
edies -at law before he can proceed in equity to subject
choses in action to its payment. To this rule, however,
there are some exceptions; and we are not prepared to say
that a creditor of a dissolved corporation may not, under
certain circumstances, claim to be exempted from its op-
eration. If he can, however, it is upon the ground
that the assets of the corporation constitute a trust fund
which will be administered by a court of equity in the ab-
sence of a trustee; the principle being that equity will not
permit a trust to fail for want of a trustee.” It is said in
Louisiana that ‘‘a corporation is a person, whose possession
and control of its own property and affairs must be re-
spected like the similar rights of individuals. They can-
not be interfered with in preliminary proceedings and in
advance of judgment, except in cases specially provided
by law and on strict compliance with the requirements
thereof,” ®

$ 98. Suit by stockholder as substitute for corporation.—
The right of a stockholder to sue, where the corporation
refuses to be made plaintiff, is elsewhere discussed. We
have shown that it is essential for the stockholder to allege
that the corporation refused to prosecute, or was in the
hands of the guilty parties; but the Supreme Court of
Missouri considers that the objection to the absence of
such allegations must be taken in the court below, and is
waived if raised for the first time in the appellate court.®

 

195 U. S. 636. Compare Manufac-
turing Co. v. Bradley, 105 U. S.
175.

2 In New Hampshire, a creditor of a
corporation is not bound to exhaust
his legal remedies against the corpora-

tion before seeking to enforce in equity ,

the individual liability of the stockhold-
ers imposed by statute. Connecticut

River Savings Bank v. Fiske, 60 N.
H. 363.

8 Baker v. Louisiana Portable R.R.
Co., 34 La, Ann. 754, 758; Matter of
Louisiana Savings Bank, 35 La. Ann.
199. See§ 34. Wait on Fraud. Conv.§ 52.

4 See §§ 74, 75, and Chap. III.

* Bulkley v. The Big Muddy Iron
Co., 77 Mo. 107.
STATUS OF COMPLAINANTS.

$$ 99, 100 95

$ 99. Sufficiency of request that corporation institute suit.—
An allegation in a bill that a request has been made of a
corporation to bring a suit, without particularizing when or
how it was made, is regarded as sufficient to support a
stockholder’s suit.!. The court could discover no sufficient
reason for requiring greater strictness of pleading. The
allegation will be sustained by proof of a request to the
stockholders in corporate meeting, or to the directors in
office, or in any other mode that will constitute, in legal
effect, a request to the corporation.*

§ 100. Member or creditor suing in place of receiver.— W here
a corporation has passed into the hands of a receiver, all
rights of action existing in favor of the corporation are
transferred to him.? In such a case, if a creditor or
member desires to bring action, it is unnecessary to allege
a request to the corporation to institute the suit, and a re-
fusal on its part so to do. But a complaint by a creditor
or member founded on such a state of facts, will be defect-
ive if it fails to allege that the receiver had been requested
to prosecute the action, and had refused to do so. In
Brinckerhoff v. Bostwick,® it was expressly held that, in
case the receiver of the corporation was one of the direct-
ors, chargeable with neglect of duty, the action to recover
damages resulting from the breach of duty could be main-
tained by the stockholders, and that it was not necessary
to allege in the complaint in such an action, a demand upon
the receiver, and his refusal to sue.

 

1 Hazard v. Durant, 11 R. I. 203.

? See §§ 74, 75. Compare Brewer v.
Boston Theatre, 104 Mass. 378, 389, and
the two opinions rendered in that case.

3 See Chap. X. Fisher v. Andrews,
37 Hun (N. Y.) 180; Freeholders of
Middlesex v. State Bank of New Bruns-
wick, 30 N. J. Eq. 311; National Trust
Co. v. Miller, 33 N. J. Eq. 158; At-
torney-General v. Guardian Mut. Life

Ins. Co., 77 N. Y. 272; Second Nat.
Bank v. New York Silk Mfg. Co., 11
Fed. Rep. 535; Gillet v. Fairchild, 4
Denio (N. Y.) 80.

4Compare Hightower v. Thornton,
8 Ga. 487.

5 Fisher v, Andrews, 37 Hun (N. Y.)
180, See Kelsey v. Sargent, 40 Hun
(N. Y.) 150, 153.

6 88 N. Y. 52.
96 STATUS OF COMPLAINANTS. §§ 101-103

§ 101. Creditor at large.—It has been shown that a cred-
itor at large does not possess the right to interfere with the
affairs of a corporation, even though it be insolvent. Nor
has such a creditor the right to maintain a suit to secure
the removal or suspension of a trustee,’ or to have a corpo-
ration dissolved on the ground of insolvency, and to com-
pel its trustees, directors and officers to make good the
losses which it has sustained by reason of their negligence

or misconduct.®

$ 102. Liability of guarantor.— Where the principal debtor
is an insolvent corporation, which has made an assignment,
the creditor is not bound, before resorting to a guarantor
of the claim, to enforce the individual liability of the stock-
holders for the debts of the corporation.*| While possibly
a creditor may be compelled to exhaust the property and
collateral securities within his grasp before seeking payment
from the guarantor, yet he is not compelled to pursue every
contingent and uncertain claim, especially if of a character
that would involve risk, delay and expense, before so
doing.

$ 103. Proof of insolvency—Judgment.—“‘ A judgment and
execution unsatisfied,” says Hunt, J., ‘are evidence of in-
solvency, of inability to collect. They are, however, evi-
dence only; and the fact may be established as well by
other evidence, among other modes, by an assignment and
continued suspension of business, or other notorious indi-
cations.”® The law does not require useless things, and it

 

1See §§ 34, 86. Baker v. Louisiana
Portable R.R. Co.,.34 La. Ann. 754.

* Belknap v. North Am. Life Ins. Co.,
1r Hun (N. Y.) 282. See Cole v.
Knickerbocker Life Ins. Co., 23 Hun
(N. Y.) 255.

®Cole v. Knickerbocker Life Ins.
Co., 23 Hun (N. Y.) 255; appeal dis-
missed, 91 N. Y. 641. See Paulsen v.

Van Steenbergh, 65 How. Pr. (N. Y.)
342.

‘National Loan and Building Assoc.
vy. Lichtenwalner, 100 Pa. St. 104.

* Terry v. Tubman, 92 U.S. 156, 160.
See Camden v. Doremus, 3 How. 533;
Reynolds v. Douglass, 12 Pet. 497;
Hodges vy. Silver Hill Mining Co., 9
Oregon 203.

(i bh be
§ 103 STATUS OF COMPLAINANTS. 97

is not easy to discover any possible object to be accom-
plished by bringing a suit against an insolvent corporation,
except for the purpose of accumulating costs, and increas-
ing the burdens of the stockholders.!| As was said by
Chancellor Kent in Trustees of Huntington v. Nicoll :?
“Tt is one of the maxims of the common law, and which
is a dictate of common sense, that the law will not attempt
to do an act which would be vain, or to enforce an
act which would be frivolous.” In New York, however,
the fact that the judgment debtor is an insolvent cor-
poration, and has alienated its property in contravention
of the statute, will not authorize a resort to equity until the
remedy at law has been exhausted by judgment, and exe-
cution returned unsatisfied? The courts of New York
cling tenaciously to this doctrine in all its phases.*

 

1 Hodges v. Silver Hill Mining Co., 3 Adee v. Bigler, 81 N.Y. 349; Wait on
9 Oregon 203. Compare Terry v. Fraudulent Conveyances,§75. Compare
Anderson, 95 U.S. 632. Sturges v. Vanderbilt, 73 N. Y. 384.

23 Johns. (N. Y.) 566, 598. 4 See Estes v. Wilcox, 67 N. Y. 264.
CHAPTER V.

PARTIES DEFENDANT.

§ 104. Parties defendant. § 113. Trustees of foreign corporation.
105. Corporation, when necessary 114. Administrator of decedent.
defendant. 115. Stockholders and bondholders.
106, Directors as defendants. 116, Creditors in dissolution pro-
107. Defendants in forfeiture and in- ceedings.
solvency proceedings. 117. Defendants in foreclosure.
108. In bill of discovery. 118. Unsecured creditors in fore-
109. Suing corporation after appoint- closure.
ment of receiver. 119. Officers of consolidated corpo-
110, Joining stockholders. ration.
111. Creditor’s bill against county. 120. Interpleading third parties.
112, Remedy against insolvent city. 121, Answer by party not sued.

§ 104. Parties defendant.—Parties whom it is sought to
bind or conclude by the result of an action or proceeding,
should be joined or made defendants or served with process.
But the practitioner cannot always readily determine who
are necessary or proper parties to be summoned into court
in actions affecting an insolvent corporation, or in proceed-
ings to effect a dissolution,’ or declare a forfeiture of the
franchises of a corporation, or to discover assets or enforce
stockholders’ liabilities. We will glance briefly at the rules
and authorities governing this subject in a few of its im-
portant phases.”

$ 105. Corporation, when necessary defendant.—A _ cor-
poration must necessarily be made a party defendant in

 

1 See Briggs v. Cape Cod Ship Canal otherwise the receiver cannot molest
Co., 137 Mass. 72. him. See Keep v. Michigan L. S. R.R.
? A tenant in possession should be Co., 6 Chicago Legal News, 101. Sea
made a defendant in foreclosure pro- Ins. Co. v. Stebbins, 8 Paige (N. Y.) 565.
ceedings where a receiver is sought, The tenant may be required to attorn.,
§ 105 PARTIES DEFENDANT. 99
cases where a money judgment is sought against it, or a
decree of dissolution or forfeiture is asked, Like a natural
person, it is entitled to its day in court, and to an oppor-
tunity to be heard, and to interpose any defense it may
have to such actions or proceedings.’ The corporation
is a necessary party defendant to a bill in equity brought
against any of its officers or stockholders who have divided
its property among themselves for the purpose of evading
its liabilities.2 The funds alleged to have been misappro-
priated are the funds of the corporation, and the wrongful
action of the defendants is, in such a case, professedly as
officers of the corporation.? Manifestly, it is error to ap-
point a receiver of a corporation where such corporation is
not a party to the bill* And a complaint is defective
which is framed to establish a recovery against certain in-
dividuals, charging that they acted as agents of “a regu-
larly organized religious society, viz. : an ecclesiastical cor-
poration,” in that it fails to make the church a defendant,
or, omitting this, does not set forth facts showing that the
agents failed to bind their principal.> The corporation, as
we have seen,° is also a necessary party defendant in a suit
brought by a stockholder upon the neglect or refusal of the
corporation to sue.” In suits to restrain acts or proceed-
ings which are claimed to be wtra vires, the corporation
must be made defendant,® and where suit is brought by a
shareholder of one of the offending corporations to restrain

 

See § 38.

* Deerfield v. Nims, 110 Mass, 115,

3 Lyman v. Bonney, 1o1 Mass. 562.

“Gravenstine’s Appeal, 49 Pa. St.
321. See $175.

v. Dows, 18 Wall. 626; Hersey v.
Veazie, 24 Me. 9; Samuel v. Holladay,
1 Woolw. 414; Cunningham v. Pell, 5
Paige (N. Y.) 613.

*See Gregory v. Patchett, 33 Beav.

5 Charboneau v. Henni, 24 Wis. 250,

*See §74. Greaves v. Gouge, 69 N.
Y. 157. See Brinckerhoff v. Bostwick,
88 N. Y. 52.

7 Compare Bagshaw v. Eastern Union
Railway Co., 7 Hare 114; Davenport

595; Heath v. Erie Railway Co., 8
Blatchf. 347; Greaves v. Gouge, 69 N,
Y. 154; Tyson v. Virginia & Tenn,
R.R. Co., 1 Hughes 80; Coxe v. Hart,
53 Mich. 557; Davenport v. Dows, 18
Wall. 626.
100 PARTIES DEFENDANT. §§ 106-108

the performance of an agreement, both corporations are
necessary defendants.! In suits by stockholders for breaches
of trust against directors, the corporation must be joined,”
and in a proceeding by the people to declare a usurpation
by a corporation, and to restrain it, the alleged usurping
corporation is a necessary defendant.’

§ 106, Directors as defendants,— Directors and trustees are
proper parties defendant, where the object of the action or
bill is to hold them personally liable ;* and they may be
joined where they participated in the fraudulent act which
is the subject of attack.®

$ 107, Defendants in forfeiture and insolvency proceedings.—
In a proceeding for the dissolution of a corporation and a
forfeiture of its franchises, one to whom it has leased prop-
erty to be held during the term of its corporate existence,
has a right to be made a party defendant, in order to con-
test the forfeiture.6 And in proceedings in New York
State brought by the attorney-general for the appointment.
of a receiver of a life insurance company, the court has
jurisdiction to permit parties interested in the administra-
tion of the assets of the corporation to appear and represent
their own interests, and to be made parties to all proceed-
ings taken by or against the receiver, by which their rights
may be affected.”

§ 108. In bill of discovery.—Formerly where it was desired
to obtain a discovery from a corporation in a bill filed against

 

' Winch v. Birkenhead, etc. Ry. Co.,
5 De Gex & S. 562.

‘See Ferris v. Strong, 3 Edw. Ch.
(N Y.) 127.

2 People v. Flint, 64 Cal. 49. An in-
dividual may be prosecuted for criminal
libel upon a corporation. State v.
Boogher, 3 Mo. App. 442.

‘See Hun v. Cary, 82 N. Y. 65..

5See Mason v. Harris, L. R. 11
Ch. D. 97; Duckett v. Gover, L. R. 6

Ch. D. 82, Compare Brewer v. Boston
Theatre, 104 Mass. 378; Preston v.
Grand Collier Dock Co., 11 Sim. 327.

® People v. Albany & Vermont R.R.
Co., 77 N. Y. 232. See § 402. See
Mickles v. Rochester City Bank, 11
Paige (N. Y.) 118,

"Atty. General v. North Am. Life
Ins, Co, 77 N. Y. 297; People v,
Globe Mut. Ins. Co., 27 Hun (N,. Y.)
539.
PARTIES DEFENDANT,

$ 109 101

it for that purpose, it was the established practice to join, as
a co-defendant, the secretary or some other officer, from
whom the discovery could be obtained by his answer under
oath. This procedure was based upon considerations of
expediency, since it was asserted that a corporation could
not make an answer on oath, or be held liable for perjury.’
This practice was considered to be well established,’ but
the subject of discovery and inspection of corporate books
is now so largely regulated by statute,’ that general com-
ments upon the present procedure might prove misleading.

§ 109. Suing corporation after appointment of receiver.—The
discussion will presently reveal the fact that the appoint-
ment of a receiver for a corporation does not effect an
absolute dissolution; the corporate body may still be
joined as a party defendant in an action.* In National
Pahquioque Bank v, First National Bank of Bethel,®
Butler, J., said: ‘For the protection of creditors it
is also a well-settled rule that a dissolution of a corpora-
tion by winding up, or other act of its stockholders,
or by limitation, or in any mode except legislative repeal
or judicial decree, does not affect the rights of creditors;
and that as to them, and their right to enforce their claims,
or determine their validity, by suit or otherwise, the corpo-
ration will be deemed to continue in existence.” As to
future liabilities, however, resulting from the use of the

 

1See 1 Pom. Eq. Jur. § 199; Wych
v. Meal, 3 P. Wms, 311, 312, per Chan-
cellor Talbot; French v. First Nat.
Bank, 7 Ben. 488 ; Fenton v. Hughes,
7 Ves. 288, 291 ; Dummer v. Corp’n of
Chippenham, 14 Ves. 252; Glasscott v.
Copper Miners’ Co,, 11 Sim. 305 ; Many
v. Beekman Iron Co., 9 Paige (N. Y.)
188. Jn re Barned’s Banking Co. Ex
parte The Contract Co., L. R. 2 Ch.
350. See § 518.

? Masters v. Rossie Lead Mining Co.,
2 Sandf. Ch. (N. Y.) 301; McIntyre

v. Union College, 6 Paige (N. Y.) -
239; Many v. Beekman Iron Co,, 9
Paige (N. Y.) 188; Glasscott v. Copper
Miners’ Co., 11 Sim. 305; Bevans
v. Dingman’s Choice Turnpike, 10 Pa,
St.174; McKim v. Odom, 3 Bland Ch.
(Md.) 421.

3 See § 518.

4Green v. Walkill National Bank, 7
Hun (N. Y.) 63; National Pahquioque
Bank y. First Nat. Bank, 36 Conn.
325.

‘5 36 Conn. 334.
102 PARTIES DEFENDANT. § 110

property by a purchaser, the rule would clearly be different.
Thus, a railroad company, whose road has been sold out
under foreclosure, is not liable for injuries received on the
road after it had passed from the control of the company.’

§ 110. Joining stockholders—Where the liability sought
to be enforced is statutory and not a common-law liability,”
it may be seriously questioned whether it is not the safer
course for the creditor to bring an omnibus bill joining all
the stockholders and looking to an adjustment of the rights
between them.? The stockholder may be a creditor to the
amount of his stock, or other circumstances may compel the
taking of an account between the stockholders and the cor-
poration before a recovery could be allowed, and this might
defeat a common-law action against one stockholder.* All
the stockholders need not necessarily be joined as defend-
ants in a suit in equity brought by a creditor to enforce
payment of the balance of a subscription.® In Ogilvie v.
Knox Insurance Company,® Grier, J., said: ‘“‘ The creditors
of the corporation are seeking satisfaction out of the assets
of the company to which the defendants are debtors, If the
debts attached are sufficient to pay their demands, the cred-
itors need look no further. They are not bound to settle
up all the affairs of this corporation, and the equities be-
tween its various stockholders or partners, corporators or
debtors.”” Where stockholders are by law made jointly
and severally liable for a debt, and their property declared

 

‘ Western R.R. Co. v. Davis, 66Ala, N.Y. 227; Mathez v. Neidig, 72 N.

578. Y. 106; Mann v. Pentz, 3 N. Y. 415;
. *See Bartlett v. Drew, 57 N. Y. Weeks v. Love, 50 N. Y. 568.
587. * Hatch v, Dana, ror U. S. 205.

2See Griffith v. Mangam, 73 N.Y.  *22 How. 380, 391.
611; Garrison v. Howe, 17 N. Y. 458; ™See Pierce v. The Milwaukee Con-
Morgan v. New York & Alb. R.R.Co., struction Co., 38 Wis. 253; Marsh
10 Paige (N. Y.) 290. Statutes regu- v. Burroughs, 1 Woods 468. A re-
lating this subject may be found in ceiver may commence separate actions
many States. against each stockholder. Van Wag-

“See Matter of Empire City Bank, 18 enen v. Clark, 22 Hun (N. Y.) 497.

—
§§ 117, 112 PARTIES DEFENDANT. 103
subject to seizure on an execution against the corporation,
it was held by the United States Supreme Court that, in a
suit in equity, seeking a decree for the debt, the stockhold-
ers are proper parties defendant.’

A shareholder, however, cannot usually defend in the

name of the corporation.”

§ x11. Creditor’s bill against county—Under a statute in
‘Michigan a creditor’s bill may be filed against the super-
visors of a county.2 The common-law rule seems to have
been that that the inhabitants of a county were not liable to
an action for damages. In New York a claim against a
county should be prosecuted against the Board of Super-
visors.®

§ 112. Remedy against insolvent city——Where a city makes
default in its obligations, creditors are often embarrassed in
enforcing their rights, since, as elsewhere shown,*® municipal
property, devoted to public uses, cannot be taken on execu-
tion.” Usually recourse is had by municipal creditors to the
remedy of mandamus to enforce the levying of taxes. It
would scarcely seem to be just or legal to hold the private
property of individuals dwelling within the municipal limits
liable for the debts of the city ;* but a principle embodying
such a liability has been recognized in a limited number of
cases* as applied to towns, school districts, and the like.

 

' Manufacturing Co. v. Bradley, 105
U.S. 175.

*Bronson v. La Crosse, etc. R.R.
Co., 2 Wall. 283, 301; Park v. Pe-
troleum Co., 25 W. Va. 108.

§Lyell v. Supervisors of St. Clair
Co., 3 McL. 580. Compare Hawkes
v. Inhabitants of Kennebeck County,
7 Mass, 461.

4 Russell v. Men of Devon, 2 T.R. 667.

* Hill v. Supervisors of Livingston
Co., 12 N. Y. 52.

6 See §§ 63, 300.

7 Brinckerhoff v. Board of Education
of N.Y. City, 2 Daly (N. Y.) 443; Dar-
lington v. Mayor, etc. New York, 31 N.
Y.193; The Fidelity, 16 Blatchf. 571;
Klein v. New Orleans, 99 U.S. 150;
City of Rochester v. Town of Rush, 80
N. Y. 308; Egerton v. Third Munici-
pality of New Orleans, 1 La. Ann. 435.

®See Horner v. Coffey, 25 Miss. 434.

®*See Merchants’ Bank v. Cook, 4
Pick. (Mass.) 414; Beardsley v. Smith,
16 Conn. 368; Chase v. Merrimack
Bank, 19 Pick. (Mass.) 564.
104 PARTIES DEFENDANT. §§ 113-117

§ 113. Trustees of foreign corporation—Where a foreign
corporation is dissolved pending suit, its trustees may be
substituted as plaintiffs in its stead.’ This being the pro-
cedure where the corporation is plaintiff, no good reason is
suggested why the same rule should not apply in the case of

a defendant corporation.

$ 114. Administrator of decedent——The administrator is a
necessary party to a proceeding instituted against a corpora-
tion to compel the transfer of stock standing upon its books
in the name of the decedent.? Were the rule otherwise,
the danger would arise that the corporation might be
ordered to make a wrongful transfer. The proceeding
should be so framed as to bind the estate of the decedent.

§$ 115. Bondholders and stockholders.—Neither the bond-
holders nor the stockholders of a corporation are necessary
parties to a creditor’s bill seeking to subject assets of the
corporation to the payment of debts where they are repre-
sented by other parties before the court. A trustee for
bondholders represents their interests.*

§ 116. Creditors in dissolution proceedings——A decree dis-
solving a corporation and appointing a receiver is regarded,
in New York, as in the nature of a decree in favor of all
the creditors, and they are entitled to come in on the dis-
tribution, and be heard in respect to their claims.’

§$ 117. Defendants in foreclosure.—As will appear, bond-

 

1 New Jersey P. & L. Bank v. Thorp,
6 Cow. 47.

2 Baltimore Retort and Fire Brick
Co. v. Mali, 65 Md. 93, 94.

3 The Chicago, etc. R.R. Co. v. How-
ard, 7 Wall. 392; S. C. 1 Amer. Corp.
Cas. 1.

4Corcoran v. Chesapeake & Ohio
Canal Co., 94 U.S. 741. In this case
Miller, J., said (p. 745) : “ It would be a
new and very dangerous doctrine in the

equity practice to hold that the cestuz
gue trust is not bound by the decree
against his trustee in the very mat-
ter of the trust for which he was ap-
pointed.” See Kerrison v. Stewart, 93
U.S. 155; Shaw v. Norfolk Co. R.R.
Co., 5 Gray (Mass.) 171; Campbell v.
Railroad Co., 1 Woods 376; Ashton
vy. Atlantic Bank, 3 Allen (Mass.) 220.

5 Attorney General v. Guardian Mut.
Life Ins. Co., 77 N. Y. 277.
§$§ 118-120 PARTIES DEFENDANT. 105

holders are bound by a decree against their trustee.!
Though a sovereign State be interested, it may be omitted
as a party by reason of the difficulty incident to summon-
ing the sovereign into court.2, A second mortgagee’s right
-of redemption will not be cut off unless he is joined as a
defendant.2 These principles are elementary. No person
can be bound or concluded by a decree without being ac-
corded his day in court. Manifestly, disputes as to priority
should be determined before sale,* so that the party having
the first incumbrance may not be deprived of his right of
bidding on the property up to the amount of his claim.

$118. Unsecured creditors in foreclosure.— Unsecured
creditors of a railroad corporation are not necessary or
proper parties to, and have no right to intervene in, an
action to foreclose a mortgage upon its property and fran-
chises; any adjudication made therein against the mort-
gagor is binding upon them.®

§ 119. Officers of consolidated corporation—Where two
or more corporations are consolidated, and the new corpo-
ration assumes the obligations of the original companies,
the directors or officers of the new organization are not
necessary or proper parties to an action brought by a holder
of preferred stock of the old company, to enforce an alleged
contract to pay specified dividends.®

§ 120. Interpleading third parties—As will presently ap-
pear,’ a corporation may interplead opposing claimants of
stock or dividends,’ and, where a stockholder sues a corpo-

 

1Corcoran v. Chesapeake & Ohio 5 Herring v. New York, L. E. & W.
Canal Co., 94 U.S. 741. SeeKerrison R.R. Co., 105 N. Y. 340, Compare
v. Stewart, 93 U.S. 155,and cases cited. Stout v. Lye, 103 U. S. 66; Bronson

2 Davis v. Gray, 16 Wall. 203, 220. v. Railroad Co., 2 Black 524.

3 Compare Howard v. Milwaukee & ® Chase v. Vanderbilt, 62 N. Y. 307.
St. P. Ry. Co., 7 Biss. 73; Pittsburgh, ™See § 135.. .
C. & St. L. Ry. Co. v. Marshall, 85 Pa. "Providence Bank v. Wilkinson, 4
St. 187, ; R. I. 507; Cady v. Potter, 55 Barb.

4Campbell v. Texas & N. O. R.R. (N. Y.) 463; Salisbury Mills v, Town-
Co., 2 Woods 263. send, 109 Mass, 115.
106 PARTIES DEFENDANT. § 121

ration for entering into an wtra vires agreement with
other corporations, all the companies are necessary parties
to the bill, and may be brought in by amendment.’ But a
stockholder seeking to charge directors, as trustees, for mis-
management, cannot join a third person who, it is alleged,
combined with them in the wrongful acts of which com-
plaint is made.”

§ 121. Answer by party not sued.—In California, a cor-
poration not joined or sued as a defendant, is not subject
to a valid judgment, even though it may interpose an
answer.®

 

‘Hare v. London & N. W. Ry. Co., *Bolen v. San Gorgonio Fluming
1 J. & H. 252. Co., 55 Cal. 164.

? Gardiner v. Pollard, 10 Bosw. (N.
Y.) 674.
CHAPTER VI.

PLEADINGS,

§122. Pleadings in corporation cases | § 130. Alleging dissolution.

—Particularity. 131. Answer, when demurrable.
123. Corporate name. 132. Multifarious bills.
124. Pleading ground of forfeiture. 133. When bill is not multifarious.
125. Alleging appointment of re-| 134, Joinder of causes of action.

ceiver, ane 135. Interpleader.
126, Setting forth permission to 136. Pleading general issue.

sue ae 3
M . Proot of ‘
127. Pleading refusal of corporation Es Pc oe

to prosecute. Verificati
128. Ultra vzres act. 199 Verineauion.

129. Pleading fraud. 140. Insufficient affidavit.

§ 122. Pleadings in corporation cases—Particularity.—Cor-
porations, as has been shown, are subject to the same gen-
eral rules of pleading as natural persons. Concerning ques-
tions of particularity in pleading in corporate litigations,
we may observe that, in a suit in equity by a stockholder
and creditor, against the directors of a corporation, founded
upon alleged negligence, the bill will not be demurrable if
it sets out particular acts of gross negligence, although the
facts are stated in a general form.» Where most of the
charges are of a nature that their full development would
necessitate great prolixity of narration, in such instances
particularity of statement is, under a well-known rule, dis-
pensed with. Furthermore, a requirement that a creditor
or stockholder must show in detail the various neglects and
misfeasances of the officers of the corporation, when the
books and papers appertaining to such affairs are beyond

 

1See $40, Hunt v. City of San 7?Halsey v. Ackerman, 38 N. J. Eq.
Francisco, 11 Cal. 250, 501.
108 PLEADINGS. § 123

his control, would be, for the most part, to leave him
remediless. .

The complaint need not fully set out the powers of the
corporation.’ Alleging generally that the plaintiff is a cor-
poration created under the laws of the State, establishes a

legal capacity to sue. And a complaint against a corpo-
ration should aver its corporate existence in each count.®

§ 123. Corporate name.—A corporation must sue and be
sued by its corporate name.*’ In New York, prior to the
present Code,’ a corporation could be declared against by
its known name, without alleging it to be chartered or in-
corporated, if the description impliedly amounted to an
allegation that the defendants were a corporate body.° We
may observe that where the plaintiff sues as receiver, on a
note payable to the order of a corporation of a different
name from that of which he is receiver, it is necessary that
he should show, by proper averments, that the note is part
of the assets of the company of which he was appointed
receiver.” If the corporate name was changed, that fact
should be averred. If a company is sued by a wrong name,
but answers by its correct name, and judgment is rendered

 

1Feeny v. People’s Fire Ins. Co., 2
Rob. (N. Y.) 599.

° California Steam Navigation Co, v.
Wright, 6 Cal. 258. See The Phoenix
Bank v. Donnell, 40 N. Y. 410. If an
indictment avers that a company is a
corporation, proof of the existence of a
corporation de facto will support the
averment. People v. Schwartz, 32 Cal.
160,

3Loup v. California S. R.R. Co., 63
Cal. 97.

*See § 25.

5 See Code Civ. Pro. § 1775.

® Roberts v. National Ice Co., 6 Daly
(N. Y.) 426. See Acome v. American
Mineral Co., 11 How. Pr. (N. Y.) 26;
Lighte v. Everett Fire Ins. Co, 5

Bosw. (N. Y.) 716. See §§ 25,137. The
present Code of New York provides
as follows in $1775: “In an action
brought by or against a corporation,
the complaint must aver that the plain-
tiff, or the defendant, as the case may
be, isacorporation; must state whether
it is a domestic corporation or a foreign
corporation ; and, if the latter, the State,
country, or government by or under
whose laws it was created. But the
plaintiff need not set forth, or specially
refer to, any act or proceeding, by or
under which the corporation was
created.” See Gorton Steamer Co. v.
Spofford, 5 Civ. Pro. (N. Y.) 116.

" Hyatt v. McMahon, 25 Barb. (N. Y.)
457-
$§ 124, 125 PLEADINGS. 109

against it by its true name, the court may substitute the
correct name in the complaint, and the judgment is not
rendered void.

§ 124. Pleading ground of forfeiture—A forfeiture is never
favored or implied, and, consequently, a pleading setting
forth grounds for forfeiture must be specific? A count
in the petition setting up as a ground of forfeiture, the in-
solvency of the corporation, and its inability to perform the
trust, must give the da/a from which the conclusion can be
drawn that the company is certainly unable to carry out
the objects of its charter? An information to forfeit the
charter of a railroad, on the ground that a loan made to it
by the State to aid in its construction was not so used,
should so state, specifically, and point out the misappropria-
tion complained of. The information must allege that the
misfeasance, malfeasance, or nonfeasance was wilful.®

§$ 125. Alleging appointment of receiver.— The general
rights of receivers as litigants will be adverted to pres-
ently.6 The rule as to alleging the appointment of a
receiver is, that the facts must be set forth in traversable
form.’ The time and place of the appointment, and the
fact that it was made by order of the court, should dis-
tinctly appear. In New York it is sufficient to aver the
appointment in general terms.’ It is considered unneces-
sary to encumber the pleading with a recital of the details,

 

1 Mahon v, San Rafael Turnpike Road
Co., 49 Cal. 269.

* Harris v. Mississippi Valley, etc.
R.R. Co., 51 Miss. 602.

3 State v. Southern Pacific R.R. Co.,
24 Texas 80. See Chap. XIX.

‘Harris v. Mississippi Valley, etc,
R.R. Co., 51 Miss. 602. See Chap.
XIX.

5 State v. Columbia & H. T. P. Co.,
2 Sneed (Tenn.) 255. See State v.
Merchants’ Ins. & Trust Co., 8 Humph,
(Tenn.) 254.

6 See Chap. XI.

"Bangs v. McIntosh, 23 Barb. (N.
Y.) 591. Compare Cheney v. Fisk, 22
How. Pr. (N. Y.) 236; Boland v. Whit-
man, 33 Ind. 64; White v. Low, 7
Barb. (N. Y.) 204; Platt v. Crawford,
8 Abb. Pr. N. S. (N. Y.) 297.

* White v. Low, 7 Barb. (N. Y.) 204;
Gillet v. Fairchild, 4 Denio (N. Y.)
83; Bangs v. McIntosh, 23 Barb. (N.
¥.) 598.

* Rockwell v. Merwin, 45 N. Y. 166;
Stewart v. Beebe, 28 Barb. (N. Y.) 34.
110 PLEADINGS. §§ 126, 127
or by setting out all the proceedings,’ but sufficient should
appear to enable the court to see that the appointment was
legal, for where the receiver sues, proof of the appointment
is a part of his title.”

§ 126. Setting forth permission to sue.—It will presently
be shown that the courts will not tolerate any interference
with the rightful possession of its receiver.’ It results from
this rule that, in a complaint against a receiver, an averment
may properly be embodied to the effect that leave of the
court has been granted to bring the suit ; otherwise, in In-
diana, the bill will be considered defective on demurrer.‘
It would seem, however, that where the permission to sue
had been in fact obtained, the omission to plead it ought
not to defeat the action.

§ 127. Pleading refusal of corporation to prosecute.—As
elsewhere stated,> a stockholder who brings suit in the
right of the corporation must allege in his bill that a re-
quest has been made upon the corporation to institute the
suit which the stockholder brings, and that the request has
been disregarded. The 94th Rule regulates the subject in
the Federal courts.*. This allegation as to demand upon the
corporation, and refusal to bring suit, may be omitted where
it manifestly appears from the facts recited that the corpo-
ration is under the control and in the grasp of the guilty
parties, who, of course, would not be expected to prosecute
themselves in good faith.®

 

1 Boland v. Whitman, 33 Ind. 64.

3 White v. Joy, 13 N. Y. 86.

3 See §§ 170, 237, 258. Palys v.
Jewett, 32 N. J. Eq. 302; Atty. Genl.
v. North America Life Ins. Co.,6 Abb,
N.C. (N. Y.) 293, 302; reversed, 77 N.
Y. 297; Barton v. Barbour, 104 U.S.
126; affi'g 3 MacA. (D.C.) 212; De
Groot v. Jay, 30 Barb. (N. Y.) 483;
Kennedy v. Indianapolis, C. & L. R.R.
Co., 3 Fed. Rep. 97; S. C. 2 Flip. 704;
Thompson v. Scott, 4 Dill. 508.

4 Keen v. Breckenridge, 96 Ind. 69.

5 See §§ 74, 75, 98. Brewer v. Bos-
ton Theatre, 104 Mass. 389.

*See Talbot v. Scripps, 31 Mich.
268; Hazard v. Durant, 11 R. I. 195;
Cogswell v. Bull, 39 Cal. 320.

™See 104 U. S. ix. See § 64, De-
troit v. Dean, 106 U.S. 537.

* Examine, Heath v. Erie Railway
Co., 8 Blatchf. 347; Parrott v. Byers,
4o Cal. 614; Kelsey v. Sargent, 40
Hun (N. Y.) 150; Currier v, N. Y., W.S.
§§ 128, 129 PLEADINGS, IT

§$ 128, Ultra vires act—Where a bill is filed to restrain
the use of corporate assets for purposes in excess of corpo-
rate powers, the allegations in the pleadings should be specific.
Speaking of the bill in the case of Leo v. Union Pacific
Railway Company,’ Wheeler, J., said that the statements
and allegations were in very general terms: ‘ Excess of
chartered powers, in progress or intended, is in no particular
pointed out. A decree according to the prayer of the bill
would be scarcely, if any, more than a general injunction
against going outside of the charters. Something more
specific, and so specific that the court can see that it is un-*
warranted by the law of the existence of the corporation,
and wrongful to the orator as a member of it, should be
pointed out distinctly.”

§ 129. Pleading fraud.—As an issue of fraud is frequently
raised in corporate litigations, the question comes up as to
the proper manner of pleading it. A general averment of
fraud is not usually sufficient. There must be allegations
of facts which constitute the fraud, or which tend to sup-
port the conclusion.? Relief will not be afforded upon the
ground of fraud, unless it be made a distinct allegation in
the bill, so that it may be put in issue by the pleadings.®
It may not be vitally essential to employ the words “fraud”
or “ fraudulent ” in order to characterize the transaction,* but
the facts recited should show distinctly that fraud is charged.°

‘

 

& B.R.R. Co., 35 Hun (N. Y.) 355;
Brinckerhoff v. Bostwick, 88 N. Y. 52;
Wilcox v. Bickel, 11 Neb. 154; County
of Tazewell v. Farmers’ Loan & Trust
Co., 12 Fed. Rep. 752.

1 19 Fed. Rep. 283, 286.

2 Pickett v. Pipkin, 64 Ala. 523;
Rhead v. Hounson, 46 Mich. 246;
Flewellen v. Crane, 58 Ala. 627; My-
ers v. Sheriff, 21 La. Ann. 172; Gil-
bert v. Lewis, 1 De G. J. & S. 49.

* Patton v. Taylor, 7 How. 159;

Noonan v. Lee, 2 Black 508; Voor-
hees v. Bonesteel, 16 Wall. 29; Beau-
bien v. Beaubien, 23 How. 190; Wait
on Fraud. Conv, § 141.

4 Whittlesey v. Delaney, 73 N. Y.
575; Warner v. Blakeman, 4 Abb. Ct.
Ap. Dec. (N. Y.) 530; S. C. 4 Keyes
(N. Y.) 487; Maher v. Hibernia Ins.
Co., 67 N.Y. 283.

5 See Davy v. Garrett, L. R. 7 Ch.
D. 489; Smith v. Kay, 7 H. L. Cas.

763.
112 PLEADINGS. §$ 130-132

The use of the word “corrupt” has been considered an
insufficient allegation of fraud.'

$ 130. Alleging dissolution—Statements in a pleading
that an incorporated bank has long since ceased to trans-
act business, that it is insolvent, and has no assets out of
which the claim sued upon can be collected by process of
law, are not equivalent to an allegation that the corpora-
tion is dissolved.*

§ 131. Answer, when demurrable—An answer to a suit
, brought by a corporation, alleging that it had forfeited its
charter by nonuser, without averring that a forfeiture had
been declared by judicial proceedings for that purpose, is
demurrable.®

§ 132. Multifarious bills—Questions growing out of cor-
porate entanglements, as to when bills are multifarious, are
frequently before the courts. A bill brought by certain
stockholders, charging illegal and fraudulent payment of
dividends to a part of the stockholders, asking for a restora-
tion of such moneys, and also charging fraud against a
treasurer, and seeking an injunction restraining him from
further performance of the duties of the office, was con-
sidered bad on demurrer. In a case in England, this lan-
guage is employed by the Master of the Rolls: ‘‘ The two
transactions are, as I think, both of them illegal, for the
same reasons, that they alike involve illegal applications of
the funds of the South Coast Company. But they are not
alike, either as to the persons affected by them, or as to the
relief which may ultimately be given in respect of them ;
and unless they are connected in a way which does not ap-
pear by this bill, I think relief cannot be given upon them
both in one bill.” ®

 

1 Russell v. Wakefield Waterworks *West v. Carolina Life Ins. Co., 31
Co., L. R. 20 Eq. 474. Ark. 476. See Chap. XIX.

2Valley Bank, & S. Inst. v. Ladies’, 4 Winsor v. Bailey, 55 N. H. 218.
etc. Sewing Society, 28 Kans, 423. * Salomons v, Laing, 12 Beav. 354.
§§ 133, 134 PLEADINGS. 113

§ 133. When bill is not multifarious—A bill by a stock-
holder against a corporation, and its directors and treasurer,
alleging various fraudulent transactions between various
directors, and between directors and the treasurer, and
directors and the board, out of which the treasurer and
directors made gains at the expense of the corporation, and
praying for discovery and restitution, is not multifarious;
though distinct defenses may exist, only one general right
is asserted by the orator.1| Wild, J., said, in Dimmock v.
Bixby,® that a demurrer for multifariousness will hold only
when the plaintiff claims several matters of a different
nature ; and not when one general right is claimed by the
plaintiff, although the defendants may have several and dis-
tinct rights. Where a complaint was framed against
directors, to recover for damages occasioned by the presi-
dent’s making improper loans, and appropriating money to
his own use, which acts it was charged the defendants
negligently permitted and aided and countenanced, and a
demurrer was interposed on the ground that two causes of
action were improperly joined, viz., one for negligence and
the other for malfeasance, it was held that the demurrer
was properly overruled, as the complaint stated but one
cause of action.* :

§ 134. Joinder of causes of action.—Under the New York
Code a complaint is bad which sets forth facts sufficient to
charge. the defendant as a stockholder of a manufacturing
corporation because of a failure to file a certificate of paid-
up stock, and also alleges the requisite facts to charge him
as trustee with the debts of the corporation, because of a
failure to file an annual report. The first cause of action is
founded upon contract ; the second is for the enforcement

 

1 Lewis v. St. Albans Iron & Steel *Quoted from Mitford’s Chancery
Works, 50 Vt. 477. Pleadings, 181. See Gaines v. Chew,
*20 Pick. (Mass,) 377. See New 2 How. 619; Merchants’ & Planters’
York & N. H. R.R. Co. v. Schuyler, Line v. Waganer, 71 Ala. 582.
17 N. Y. 592. 4 Smith v.Rathbun,22 Hun (N.Y,)150.

8
114 PLEADINGS. §§ 135, 136

of a penalty or forfeiture: and the two causes of action do
not arise out of the same transaction, or transactions con-
nected with the same subject of action.’

§ 135. Interpleader—A corporation, as we have seen,”
may interplead opposing claimants of stock or dividends,
whose titles are derivative from a stockholder, by assign-
ment, execution, attachment, trust, etc.2 An interpleader
will be sustained where it is necessary for the protection of
a person from whom several others claim, legally or equit-
ably, the same thing, debt, or duty, but who has incurred
no independent liability to any of them, and does not him-
self claim an interest in the matter. The fact that a bank
has paid dividends to one of several conflicting claimants to
stock does not estop it from claiming an interpleader, or
deprive it of the character of a party who is indifferent con-
cerning the result of the controversy.*

§$ 136. Pleading general issue—By pleading the general
issue, the defendant admits the corporate existence of the
plaintiff, and will not afterward be permitted to contest it.>
This rule is of very general application. The question of
the plaintiff's capacity to sue must be specially raised. In
Massachusetts, however, a denial of each and every allega-
tion of the plaintiff's declaration is sufficient to put a plain-
tiff association to proof of its incorporation ;® and the ques-

 

1 Wiles v. Suydam, 64 N. Y. 173.
Compare Jessup v. Carnegie, 80 N. Y.

Beach v, Rogers, 1 Mass. 159; Litch-
field Bank v. Church, 29 Conn. 148;

457; Smith v. Rathbun, 22 Hun (N.
Y.) 157.

2 See § 120,

Salisbury Mills v. Townsend, 109
Mass. 115; Providence Bank v. Wil-
kinson, 4 R. I. 507; Cady v. Potter, 55
Barb. (N. Y.) 463. Compare Hare v.
London, etc. Railway Co., 1 J, & H.
252.

4 Cady v. Potter, 55 Barb. (N. Y.) 463.

5 Inhabitants of Orono v. Wedge-
wood, 44 Me. 50; Monumoi Great

California Steam Nav. Co. v. Wright,
8 Cal. 585; Pullman v. Upton, 96 U.
S. 328; United States v. Insurance
Companies, 22 Wall. 99; West Win-
sted Sav. Bank, etc. Assn. v. Ford, 27
Conn, 282; Methodist Episc. Church
of Cincinnati v. Wood, 5 Ohio 286;
Society for Propagation of Gospel v.
Town of Pawlet, 4 Peters 480.

6 Hungerford Nat. Bank v. Van Nos-
trand, 106 Mass, 559; Mosler v. Pot-
ter, 121 Mass, 89.
§§ 137-139 PLEADINGS. 115

tion has been more or less affected by the introduction of
codes regulating the subject.

$ 137. Proof of incorporation.—Where a foreign corpora-
tion appears and answers, the plaintiff need not prove the in-
corporation of the defendant.!. And under the former prac-
tice in New York an association plaintiff was not required
to prove its corporate existence upon the trial, unless it
was expressly pleaded that it was not a corporation ;* but,
as We have seen, the code of that State now requires an al-
legation of incorporation in the complaint, and a denial of
this allegation would clearly put the plaintiff to his proof.’

§ 138. Prayer of complaint.—The relief extended to the
complainant by the court must conform to the general pur-
poses of the bill The prayer may be in the alternative,®
provided the plaintiff retains the same character through-
out. Should the bill fail to pray for the relief sought, it
may be amended on motion." And a receiver may be se-
lected on final hearing, though not prayed for in the bill ;°
and it seems a receiver may be appointed where only an
injunction is asked.°

§ 139. Verification.—The early doctrine was that a corpo-
ration had no soul, and therefore could not be called upon
to answer under the obligation of an oath, by which a nat-
ural person may be bound.” To avoid this difficulty the
court of chancery had recourse to a singular shift, which it
was admitted rested on very questionable principles, that

 

" Root v. Great Western Ry. Co., 65 6 Thomas v. Hobler, 4 De Gex, F. &

Barb. (N. Y.) 619. J. 199.

2 La Fayette Ins. Co. v. Rogers, 30 7 See Hardon v. Newton, 14 Blatchf.
Barb. (N. Y.) 491. 376. *

3 See § 123. ® Merrill v. Elam, 2 Tenn. Ch..513;

4 Hardon v. Newton, 14 Blatchf. 376. Bowmanv. Bell, 14 Sim. 392; Osborne
See Latimer v. Eddy, 46 Barb. (N. v. Harvey, 1 Y. & Coll. N. R. 116,
Y.) 61. ° Whitney v. Buckman, 26 Cal. 447.

5 Colton v. Ross, 2 Paige (N. Y.) ” Sutton’s Hospital Case, 10 Co. 33;
396. McKim v. Odom,3 Bland Ch. (Md.) 420.
116 PLEADINGS. § 140
of allowing the secretary, book-keeper, or some one or
more of the chief members of the body politic to be made
co-defendants for the express purpose of obtaining an an-
swer under oath, which answer, contrary to the general rule
in other cases, was received in evidence against the corpo-
ration itself.1 There can be no doubt, however, that, al-
though a corporation cannot be compelled to answer a bill
in equity under oath, it can be required to answer, and
must fully answer.* The verification is now usually made
by an officer. A treasurer of a corporation may in New
York verify an answer upon information and belief. A
director of a domestic corporation may verify a pleading,‘
and an agent may swear to a reply where he could have
verified the complaint.” In New York State the verifica-
tion may be omitted where the suit is instituted against
a director to recover a penalty.®

§ 140. Insufficient affidavit—An affidavit alleging insol-
vency upon information and belief, will not justify the ap-
pointment of a receiver if contradicted by official reports,”
though it may be otherwise if left uncontradicted.®

 

‘McKim v. Odom, 3 Bland Ch.  § Kirkland v. Aiken, 66 Barb, (N. Y.)

(Md.) 420; Fenton v. Hughes, 7 Ves.
289; Dummer v. Corporation of Chip-
penham, 14 Ves, 253; Wych v. Meal,
3 P.Wms, 311, 312; French y.First Nat.
Bank, 7 Ben. 488; Many v. Beekman,
Iron Co., 9 Paige (N.Y.) 188. See § 108,

? Gamewell Fire-Alarm Tel. Co. v.
The Mayor, etc,, 31 Fed, Rep.. 312;
citing Colgate v. Compagnie Francaise,
23 Blatchf. 88 ; Kittredge v. Claremont
Bank,. 1 Woodb, & M. 244; Reed.v.
Cumberland Mut. Fire Ins. Co., 36 N.
J. Eq. 393.

® Macauley v. Bromell & B. Printing
Co., 14 Abb. N. C. (N. Y.) 316.

4 Bigelow v. Whitehall Manf, ~
City Ct. Rep. (N. Y.) 138.

2ui,

6 Gadsden v. Woodward, 103 N. Y.
242. Under an early case in the New
York. Court of Appeals, it was held
that-where a receiver applied for a
warrant or order requiring a person
indebted to, or having property of an
insolvent corporation, to appear for ex-
amination, the receiver might on such
application swear to the facts on in-
formation and belief. Noble.v. Halli-
day, 1 N. Y. 330.

" Livingston v. Bank of New York, 26
Barb. (N. Y.) 304.

* Attorney General v. Bank of Co-
CHAPTER VII.

ASSETS—TRUST FUND—CREDITORS RIGHTS.

§ 141, What is capital stock. § 150. Property liable for debts.
142, Assets a trust fund, 151. Trade-mark.
143. Partnership assets. 152, What are not assets.
144. Professor Pomeroy’s views. 153. Property in foreign jurisdiction.
145. Trust fund after insolvency. 154. Power of corporation to hold
-146, Scope of the rule. real estate.
147. Assets of charitablecorporation. 155. Tenant in common.

148. Property exchanged for stock. - 156. Assertion of creditors’ rights.
149. Purchase ofstockbycorporation."' 157. What creditors cannot do.

$ 141. What is capital stock.—Before passing to the
special subdivisions of our subject, or considermg more in
detail the remedies and agencies by means of which insol-
vent corporations are proceeded against, reorganized, con-
solidated, or wound up, or the charters of offending associa-
tions are forfeited, or the corporations dissolved, let us dis-
cuss, briefly, the nature of the corporate property to which
creditors and stockholders resort in these proceedings, and
the important rule pursuant to which corporate assets are
treated as a trust fund. A brief general outline of the
rights of creditors will follow. The inquiry will first be di-
rected to an ascertainment of the meaning of the terms
“ capital,” or “capital stock.” The word “ capital,” as used
in respect to corporations, primarily, signifies the aggregate
‘of the sums subscribed, and either actually contributed or
agreed to be paid in by the stockholders,’ ‘ The capital
stock,” says Folger, J., ‘is that money or property which

 

1 -Wetherbee v. Baker,35 N.J.Eq.505. N. Y. 211, 216; s. P. Christensen v.
2 Burrall v. Bushwick R.R. Co., 75 Eno, 106 N, Y. 100,
118 ASSETS, § 141

is put into a single corporate fund, by those, who by sub-
scription therefor, become members of the corporate body..
That fund becomes the property of the aggregate body
only. A share of the capital stock is the right to partake,
according to the amount put into the fund, of the surplus
profits of the corporation ; and ultimately on the dissolution
of it, of so much of the fund thus created as remains un-
impaired, and is not liable for debts of the corporation.” *
In New Jersey,” the phrase “capital stock” is not used to
indicate the value of the property, but, on the contrary,
merely to designate the amount of capital paid in or agreed
to be contributed by the stockholders for the purposes of
the corporation. The Chief Justice said: “ The funds of
the company may fluctuate. Its capital stock remains in-
variable, save by legislative enactment. This distinction
‘between the value of the property of incorporated com-
panies and their capztal stock is perfectly familiar.” Yet
the word “capital” has been said to possess a broader mean-
ing than some of the cases seem to indicate. Chief Justice
Comstock, in a dissenting opinion in the New York Court
of Appeals, argues that the word “capital” is unambigu-
ous; it signifies the actual estate, whether in money or
property, which is owned by an individual or a corporation.
“In reference to a corporation, it is the aggregate of the
sum subscribed and paid in, or secured to be paid in, by the
shareholders, with the addition of all gains or profits realized
in the use and investment of those sums, or, if losses have
been incurred, then it is the residue after deducting such
losses.”? In this latter sense the capital of a corporation is
the fund with which it transacts its business, and embraces
all its property, real and personal, constituting the assets of

 

1See Union Mutual Life Ins. Co. v. * State v. Morristown Fire Assoc., 23
Frear Stone Manufacturing Co. 97 N. J. Law 196.
Ill. 437; 8. Cc. 37 Am. Rep. 129, ® People v. Comrs. of Taxes, 23 N,

Y, 219, rev’d 2 Black 620,
§ 142 ASSETS.

11g
the corporation.’ This subject is adverted to in Williams
v. Western Union Telegraph Company.? Earl, J., after ob-
serving that by loss, misfortune, or misconduct of the man-
aging officers of a corporation, its capital may be reduced
below the charter limit, says that “ whatever property it has
up to that limit must be regarded as its capital stock. When
its property exceeds that limit, then the excess is surplus.
Such surplus belongs to the corporation, and is a portion
of its property, and, in a general sense, may be regarded
as a portion of its capital, but in a strictly legal sense, it is
not a portion of its capital, and is always regarded as sur-
plus profits.” This statement may be considered as placing
the matter in its true light.

$ 142. Assets a trust fund—Next will be considered the
most important principle applicable to the law of corpora-
tions. Theassets of an incorporated company are regarded
as a trust fund for creditors to be applied to the payment
of corporate debts, which fund may be followed into the
hands of any person having knowledge or notice of the
trust. This doctrine, it is believed, was invented or brought
conspicuously to the notice of the profession by Judge Story
in the case of Wood v. Dummer ;? and its promulgation
or adoption will constitute not the least enduring of his
titles to be considered a great jurist. The doctrine of a

 

1 New Haven v. City Bank, 31 Conn.
106. See especially Williams v. West-
ern Union Tel. Co., 93 N. Y. 188;
Barry v. Merchants’ Exchange Co., 1
Sandf. Ch. (N. Y.) 280.

293 N. Y. 188. See Christensen v.
Eno, 106 N. Y. 100.

3 3 Mason 308.

4s. P. Mumma v. Potomac Co., 8 Pet.
281; Hastings v. Drew, 76N. Y. 9; Cur-
ran v. State of Arkansas, 15 How. 308 ;
Ogilvie v. Knox Ins. Co., 22 How. 378;
Skrainka v. Allen, 7 Mo. App. 438;
Drury v. Cross, 7 Wall. 299; Railroad

Co. v. Howard, 7 Wall. 392; Bartlett
v. Drew, 57 N. Y. 5875 New Albany v.
Burke, 11 Wall. 96; Burke v. Smith, 16
Wall. 390; Wabash, St. L. & Pac. Ry.
Co. v. Ham, 114 U.S. 594; Sawyer v.
Hoag, 17 Wall. 610; Sanger v. Upton,
gt U. S. 60; Upton v. Tribilcock, 91
U. S. 47; Northrop v. Bushnell, 38
Conn. 498; Hatch v. Dana, ror U.S.
205; County of Morgan v. Allen, 103
U. S. 498; Mann v. Cooke, 20 Conn.
178; Germantown Passenger Railway
Co. v. Fitler, 60 Pa. St. 131 ; Christen-
sen v. Eno, 106 N. Y. 100. See § 162.
120 ASSETS. § 142
trust fund applied to corporate property prohibits the cor-
poration or its officers or agents from misappropriating,
wasting, or giving away corporate assets. Miller, J., in
Sawyer v. Hoag,’ speaks of it as a doctrine of modern date,
and adds that ‘it is no solid objection to such a principle
that it is modern, for the occasion for it could not sooner
have arisen.” The principle of the doctrine is in accord with
our sense of justice and fair dealing ;* and is, in some cases,
an invaluable aid to creditors of insolvent corporations seek-
_ing satisfaction of just demands? Mr. Morawetz observes :
‘The fund contributed or agreed to be contributed by the
shareholders, as capital for the purpose of carrying on the
company’s business and securing its creditors, is considered
as a substitute for the general liability of the shareholders
for obligations incurred in a corporate capacity. The fund
so contributed or agreed to be contributed is treated in
equity as a trust fund charged with the payment of
the corporate debts.”* As an illustration of the applica-
tion of the rule it may be stated that, on the insolvency
of a corporation, uncalled and unpaid subscriptions
to stock constitute a trust fund,®> for all the credit-
ors, and at least in Pennsylvania, cannot be attached
by a judgment creditor. Probably this trust-fund rule is
most frequently invoked by creditors, or their representa-
tives, in proceedings to compel the payment of the full par
value of stock which has not been paid up.". The recovery

 

117 Wall. 610, 620.

2 Union Mutual Life Ins. Co. v. Frear
Stone Mfg. Co., 97 Ill. 537; 8. C. 37
Am. Rep. 129.

3 In Union National Bank v. Doug-
lass,-1 McCra. go, Loye, J., said: ‘‘ No
doctrine of equity is more firmly estab-
lished upon solid foundations of reason
and authority, than the principle that
the capital stock, property and assets
of a corporation are to be deemed a
trust fund sacredly pledged for the pay-
ment of the debts of the corporation.”

* 2 Morawetz on Corp. (2d ed.) § 780.

5 Hatch v. Dana, 1o1 U.S. 210,

6 Lane’s Appeal, 105 Pa. St. 49; 51
Am. Rep. 166. Contra, /# ve Glen Iron
Works, 17 Fed. Rep. 324.

1 Flinn v. Bagley, 7 Fed. Rep. 785;
Upton v. Tribilcock, 91 U.S.45; Haw-
ley v. Upton, 102 U.S. 314; Chubb v.
Upton, 95 U. S. 666; Hatch v. Dana,
lor U, S. 205; Pullman v. Upton, 96
U. S. 328; Scovill v. Thayer, 105 U.
S. 155.
ASSETS. I21

§ 142
is limited in such cases to the portion due upon unpaid
" stock that is needed, with the other assets, to satisfy the cor-
porate debts." The trust includes all the property of a cor-
poration, embracing its real estate and choses in action.
Justice Bradley said: «If debts are due to the corporation
they are part of that fund, and may be collected by the
‘proper representative of the corporation, whether a trustee
appointed by a court of equity, an assignee in bankruptcy,

or other agent, for the parties interested.” ?

If corporate

 

1 Scovill v. Thayer, 105 U.S, 155.

* Coit v. North Carolina Gold Amal-
gamating Co., 14 Fed. Rep. 114. In
Sanger v. Upton, 91 U. S. 56, 60,
Swayne, J., said: “ The capital stock
of an incorporated company is a fund
set apart for the payment of its debts.
It is a substitute for the personal lia-
bility which subsists in private co-
partnerships. When debts are incur-
red, a contract arises with the creditors
that it shall not be withdrawn or ap-
plied, otherwise than upon their de-
mands, until such demands are satis-
fied. The creditors have a lien upon
itin equity. Ifdiverted, they may follow
it as far as it can be traced, and subject
it to the payment of their claims, ex-
cept as against holders who have taken
it dona fide for a valuable considera-
tion and without notice. It is publicly
‘pledged to those who deal with the

corporation, for their security. Unpaid:

‘stock is as much a part of this pledge,
and as much a part of the assets of the
company, as the cash which ‘has been
paid in upon it. Creditors have the
same right to look to it as to any thing
else, and the same right to insist upon
its payment as upon the payment of
any other debt due to the company.”
Wood v. Dummer, 3 Mason 308, 311,
per Story, J.; Bartlett v. Drew, 57 N.
Y. 587 County of Morgan v. Allen,
103 U.S. 498; Hastings v. Drew, 76N.
Y. 9; 2 Lindley on Part. 593; Wait

on Fraudulent Conveyances, § 117, and
cases cited. The learned Curtis, J., in
a case in the Supreme Court of the
United States, said: “The capital and
debts of banking and other moneyed
corporations, constitute a trust fund
and pledge for the payment of creditors
and stockholders, and a court of equity
will lay hold of the fund and see that
it be duly collected and applied... ..
A law distributing the property of an
insolvent trading or banking corpora-
tion among its stockholders, or giving
it to strangers, or seizing it to the use
of the State, would as clearly impair
the obligation of its contracts as a law
giving to the heirs the effects of a de-
ceased natural person, to the exclusion
of his creditors, would impair the obli-
gation of his contract.” Curran v.
State of Arkansas, 15 How. 312. The
rule seems to be somewhat different in
England. ‘The winding-up act of 1848
and the companies act of 1862 as ex-
pounded in Ex parte Warkworth Dock
‘Co., 18 Beavan 629, and Spackman
v. Evans, L. R. 3 H. L. 171, are
evidently intended to aid in securing
equality among shareholders rather
than to protect creditors, In Carl-
ing’s Case, L. R. 1 Ch. Div. 115, 128,
Lord Justice Mellish makes use of this
language: “It appears to me that the
only contract entered into by these
gentlemen with the company being
that they became members of the com-
122 ASSETS, §$ 143

assets are a trust fund the important equitable rule enforc-
ing equality of distribution of assets applies. The extension
of the trust-fund doctrine so as, in effect, to preclude share-
holders from avoiding subscriptions as against creditors on
the ground of fraud, or from setting up as against them
agreements to take the stock at less than par, often works
most serious hardship, and has been sharply assailed. The.
trust-fund theory has been characterized as illusive, mislead-
ing, and impracticable, and we must confess that its opera-
tion is sometimes rendered ineffectual by shrewd corporate
managers and ingenious advisers. The courts have, in some
instances, tolerated unconscionable preferences among cor-
porate creditors, and have, on the other hand, allowed unfair
transactions entered into by officers and trustees, directly
impairing the fund, to stand, which the rules governing
trusts, if fully enforced, would certainly condemn.

$ 143. Partnership assets.—The analogy concerning part-
nership assets may be kept in view in considering this trust-
fund theory. The property and effects of a limited part-
nership are treated in New York asa special fund for the
payment of copartnership debts.” In Van Alstyne v. Cook,’
the court say: ‘It is true the partnership property of a
limited partnership is a trust fund for the pavment of the

 

pany by accepting certificates of paid-
up shares, that contract must either be
adopted or rejected in its entirety. If
it is rejected, they are not shareholders
at all. If it is adopted, the company is
entitled to say, ‘they are not your
shares, but ours,’ but that does not
make them hold unpaid-up shares.” See
Currie’s Case, 3 De G. J. & S. 367;
De Ruvigne’s Case, 5 Ch. Div. 306.
In Anderson’s Case, 7 Ch. Div. 95, it
is said: “But you cannot alter the
contract to such an extent as to say:
Though you have bargained for paid-
up shares, we will change that into a

bargain to take shares not paid up, and
put you on the list of contributories on
that ground.” Compare Flinn v. Bag-
ley, 7 Fed. Rep. 788. J ve Dronfield
Silkstone Coal Co., L. R. 17 Ch. Div.
76.

' See Dabney v. Bank of State of S.
C., 3 S.C. 124; Richards v. New Hamp-
shire Ins. Co, 43 N. H. 263; Marr
v. Bank of West Tennessee, 4 Cold.
(Tenn.) 472. °

*See Innes v. Lansing, 7 Paige (N.
Y.) 583; Whitcomb v. Fowle, 7 Abb.
N.C. (N, Y.) 297.

8 25 N. Y. 493.
TRUST FUND.

§§ 144, 145 123

partnership debts; but so is the partnership property of all
partnerships, general or special.” *

$144. Professor Pomeroy’s views.—Professor Pomeroy
says that in ‘settling the affairs of an insolvent partner-
ship, corporation, or individual debtor in a creditor’s suit
brought by one on behalf of all other creditors, where the
assets are not sufficient to satisfy all demands in full, the
court always proceeds upon the principle that equality is
equity, and of apportioning the property pro raza among
all the creditors,” ®

$ 145. Trust fund after insolvency.—The Supreme Court
of Tennessee consider that the assets of a-corporation be-
come a trust fund for the benefit of creditors from the date
of the insolvency of the corporation.? This rule was ap-
plied to a foreign corporation doing business in that State ;
and the court of chancery acquiring jurisdiction was held
empowered to administer the assets in the State, and vested |
with the right to enjoin separate creditors from prosecuting
- independent suits against the common trust fund.* It is
submitted, however, that the rules peculiar to a trust fund
can be extended back of the date of insolvency, more es-
pecially when the act complained of was a factor in pro-
ducing the insolvency. Hence Love, J., said:> “The
truth is that it makes no difference whatever whether a
corporation is solvent or insolvent, so far as the doctrine is
concerned that the property is a trust fund which cannot
be withdrawn or appropriated by the stockholders until the
debts are paid.” ®

 

1Compare Ex parte Ruffin, 6 Ves.
Jr. 119; Ogilvie v. Knox Ins. Co., 22

of West Tennessee, 4 Cold. (Tenn.)
471; Coit v. North Carolina G. A. Co.,

How. 387. As to when capital stock
may be treated and divided as partner-
ship assets, see Shorb v. Beaudry, 56
Cal. 446.

* 1 Pom. Eq. Jur. § 410.

* Leipold v. Marony, 7 B. J. Lea
(Tenn.) 131; Comfort v. Patterson, 2
B. J. Lea (Tenn.) 672; Marr v. Bank

14 Fed. Rep. 13.

4 Smith v. St. Louis Mutual Life Ins.
Co., 3 Tenn. Ch. 502.

5 Union Nat. Bank v. Douglass, 1
McCra, 86, 96.

6 But see Coit v. North Carolina G.
A. Co., 14 Fed. Rep. 13.
124 TRUST FUND. $$ 146-148

§ 146. Scope of the rule.—As we have said, the doctrine
that the capital stock of a corporation is a trust fund for
creditors, extends to the entire stock subscribed, and not
merely to the percentage paid.’

§$ 147. Assets of charitable corporation.—The assets of a
charitable corporation are held in trust for the public, and
unlike the assets of a trading corporation, cannot be dis-
tributed upon its dissolution among the members thereof.”

$ 148. Property exchanged for cash.— Manifestly, the
trust-fund theory applies where corporate stock is not is-
sued for cash. Where property is taken for stock, it is
necessary that the property so acquired should be consid-
ered reasonably worth the par value of the stock given for
it.2 The directors have no more right to accept property
‘worth manifestly less than the face value of the stock than
they have to take depreciated or counterfeit currency as an
equivalent on the same face value. We may note in pass-
ing that the directors are the judges of the propriety of the
purchase of the property, and are not personally liable by
reason of an honest over-valuation,* and that the question
of good faith and over-valuation is generally for the jury.®
In Douglass v. Ireland,® Allen, J., said: ‘It is now settled
that to charge a holder of stock, issued upon and for
the purchase of property, individually for the debts of the
company, it is not enough to prove that the property has
been purchased and paid for at an over-valuation through
a mere mistake or error of judgment on the part of the

 

1Messersmith v. Sharon Savings 4 Boynton v. Andrews, 63 N. Y. 93;
Bank, 96 Pa. ‘St. 440. Boynton v. Hatch, 47 N. Y. 225. See

? Humane Fire Company’s Appeal, Van Cott v. Van Brunt, 82 N. Y. 535.
88 Pa. St. 389. See Chaps. XVII, *See Lake Superior Iron Co. v.
XVIII. Drexel, g0 N. Y. 92; Coit v. Gold

8 Chouteau v. Dean, 7 Mo. App. 215; Amalgamating Co. 119 U. S. 345;
Tallmadge v. Fishkill Iron Co., 4 Barb. Van Cott v. Van Brunt, 82 N. Y. 535.
(N.Y.) 382 ; Boynton v. Hatch, 47 N.Y. See § 583.
225; Boynton v. Andrews, 63 N.Y. 93. 673 .N. Y. oz.
§§ 149, 150 TRUST FUND. 725:

trustees, but that it must be shown that the purchase at the
price agreed upon was in bad faith and to evade the stat-
ute. The transaction may be impeached for fraud, but
not for error of judgment or mistaken views of the value
of the property, inasmuch as good faith and the exercise of
an honest judgment is all that is required.”

$. 149. Purchase of stock by corporation.—By statute in
New Hampshire, a corporation, and especially one that is
insolvent, cannot purchase a portion of its own capital
stock! against the protest of any stockholder. It has been
doubted whether this is the rule at common law. In City
Bank of Columbus v. Bruce,” it appeared that an insurance
company voted, through its directors, to allow any stock-
holder who was indebted to the company on stock notes, to
liquidate such indebtedness by turning in capital stock of
the company. Selden, J., a careful and able judge, in de-
livering the opinion of the New York Court of Appeals,
said: ‘“‘ There seems to be no ground for questioning the
validity of this transaction. Iam not aware of any com-
mon-law principle which forbids it, nor is it shown to have
been in contravention of any provision of the charter of the
company, or any other of the statutes of Ohio.” ?

§ 150. Property liable for debts.—Let us briefly consider
the property which corporate. creditors may reach. ‘ The
general rule is that the entire property of which a debtor is
the real or beneficial owner, constitutes a fund which is
primarily applicable to the fullest extent of its entire value
to the payment of its owner’s debts. Applying this prin-
ciple to corporations, Chief Justice Church said: ‘“‘ Corpo-

 

1 Currier v. Lebanon Slate Co., 56 N. Lumber Co. v. Foster, 49 Iowa 25;
H, 262. Vail v. Hamilton, 85 N: Y. 453; Clapp
217 N. Y. 507, 511. vy. Peterson, 104 Ill. 26; Coleman v..
3 See Taylor v. Miami Exporting Co., Golumbia Oil Co., 51 Pa. St. 74; State
6 Ohio 183; Dupee v. Boston Water v. Smith, 48-Vt. 266,
Power Co., 114: Mass. 37; 43; Iowa 4See Wait on Fraud. Conv, §24.:.
126 TRUST FUND. $$ 151, 152

rations cannot, any more than individuals, relieve their prop-
erty from the payment of debts, except by a sale or trans-
fer in good faith and for a full consideration.”* Mr.
Justice Gray said: ‘It is also true, in the case of a corpo-
ration, as in that of a natural person, that any conveyance
of property of the debtor, without authority of law, and
in fraud of existing creditors, is void as against them.” ?
Creditors may follow corporate property. Justice Clifford
said, in Railroad Company v. Howard :® “Equity regards the
property of a corporation as held in trust for the payment
of the debts of the corporation, and recognizes the right of
creditors to pursue it into whosesoever possession it may be
transferred, unless it has passed into the hands of a dona
jide purchaser ; and the rule is well settled that stockhold-
ers are not entitled to any share of the capital stock, nor
to any dividend of the profits, until all the debts of the
corporation are paid.”

§ 151. Trade-mark.—A corporation, as we have said, is
entitled to have a trade-mark as well as a private in-
dividual, and may sue for its infringement.* Having the
right to a trade-mark, it becomes a part of the corporate
assets, which creditors may insist upon having applied
toward the payment of debts.

§ 152. What are not assets.—Bonds borrowed by the offi-
cers of an insolvent corporation, for the fraudulent purpose
of exhibiting them to official examiners as part of its prop-
erty, do not become assets of the corporation, and a bill
filed by an assignee in bankruptcy of the corporation,

 

’ Rorke v. Thomas, 55 N. Y. 563. 87 Wall. 392, 409; S. P. Union Nat.

° Wabash, St. L. & Pac. Ry. Co.v. Bank v. Douglass, 1 McCra. 92, 93.
Ham, 114 U.S. 594, citing Story Eq. 4 Insurance Oil Tank Co. v. Scott,
Jur. § 1252; Curran v. State of Arkan- 33 La. Ann. 946; Newby v. Oregon
sas, 15 How. 304; Graham v, Railroad Central Ry. Co., Deady 609; Holmes
Co., 102 U.S. 148, 161; Railroad Co. v. Holmes, etc. Manf. Co., 37 Conn,
vy. Howard, 7 Wall. 392; Goodin v. 278. Compare London & P, Law
Cincinnati & Whitewater Canal Co., Assur. Soc. v. London & P. Joint
18 Ohio St. 169. Stock Life Ins. Co., 11 Jurist 938,
§§ 153, 154 TRUST FUND.

127
reciting that these alleged assets had been divided among
the officers of the corporation and their friends, was dis-
missed. The unissued shares of stock of a corporation are
not assets in its hands, and one to whom such shares have
been transferred by the corporation, gratuitously, does not,
by accepting them, become liable for the face value thereof
as on-a subscription.? a

$ 153. Property in foreign jurisdiction—Where the entire
property of a mining corporation, organized under the laws
of New York, consists of real estate situated in another
State, the title to such property does not vest in a receiver
of the corporation appointed by the Supreme Court of
New York.? A proceeding zz zzvztum can have no force
outside the jurisdiction where the proceeding is initiated.
We do not see, however, why the court could not compel
an actual conveyance of the land by the corporation to the
receiver.

- $154. Power of coropration to hold real estate.— The
right of a corporation to hold real estate can, as we have
seen, only be questioned by the government, and does not
concern a private individual.* The conveyance is only
voidable, and is valid until the sovereign objects and assails
it ina direct proceeding instituted for that purpose.®

A corporation may acquire a title by adverse possession,°
and a defense of adverse possession may be set up by a
corporation incapable of acquiring title to real estate."

 

1 Walker v. Reister, 102 U. S. 467.

2 Christensen v. Eno, 106 N. Y. 97.

3 Simpkins v. Smith & P. Gold Co.,
50 How. Pr. (N. Y.) 56.

4 Chicago, B. & Q. R.R. Co. v. Lew-
is, 53 Iowa 113.

5 National Bank v. Matthews, 98 U.
S. 628; Leazure v. Hillegas, 7 Serg. &
R. (Fa.) 313; Goundie v. Northamp-
‘ton Water Co., 7 Pa. St. 233; Run-
yan v. Coster, 14 Peters 122; The
Banks: v. Poitiaux, 3 Rand. (Va.) 136;

McIndoe v. City of St. Louis, ro Mo.
577; Cowell v. Springs Co., 100 U. S.
55; Christian Union v. Yount, 1o1 U.
S. 352; Am.’ Bible Society v. Marshall,
15 Ohio St. 537; Natoma Water &
Mining Co. v. Clarkin,.14 Cal. 544;
Missouri Valley Land Co. v. Bushnell,
11 Neb. 195.

6 Sherman vy. Kane, 86 N. Y. 57.

7 Humbert v. Trinity Church, 24
Wend. (N. Y.) 604. Compare Overing
v. Russell, 32 Barb. (N. Y.) 263.

4
CREDITORS’ RIGHTS. $§ 155, 156

128

§ 155. Tenant in common.—A corporation authorized by
its. charter to hold land may do so as tenant in common
with a natural person.’

§ 156. Assertion of creditors’ rights—Creditors of a cor-
poration, as we have seen,” may follow.corporate property
transferred in fraud of their rights? and take it from par-
ties who have wrongfully acquired it.4 Creditors may pur-
sue the assets of a corporation where a scheme of reincor-
poration has been entered into and the property has been:
transferred to the new association without adequate consid-
eration® So, also, creditors of an old company are not
necessarily concluded by a transfer of the corporate assets
to an entirely new company, and may follow the same,® at
least until it is shown that the assets received by the new
company have been accounted for to the defunct body or
its creditors. The creditor’s right to follow and compel the
restoration of corporate assets is usually equitable.” Thus,.
a creditor cannot maintain an action at law against a stock~
holder of an Oregon corporation to enforce his liability upon
an unpaid subscription.* After judgment and execution
against. the corporation, creditors, ordinarily, proceed by bill
in the nature of a creditor’s bill, or some statutory proceed-
ing to sequestrate the corporate assets, for, as already.
shown, a creditor at. large of a corporation has usually no
standing in court otherwise than to proceed against it to

secure a judgment at law.?

The remedy at law must be

 

1 Estell v. University of the South,
12 B. J. Lea (Tenn.) 476.

2 See §150. Rorke v. Thomas, 56
N. Y. 563.

3 Wabash, St. L. & Pac. Ry. Co. v.
Ham, 114 U.S. 594.

4Union Nat. Bank v. Douglass, 1
McCrary 86. See Jones v. Arkansas
Mech. & Agl. Co., 38 Ark. 17.

’ See San Francisco & N. P. R.R.
Co. v. Bee, 48 Cal. 398.

® Kelly v. Mariposa Land, etc. Co.,

4 Hun (N. Y.) 632; Booth v. Bunce,
33 N. Y. 139; Hibernia Ins, Co. v. St.
Louis, etc. Transp. Co., 13 Fed. Rep.
516; Brum v. Merchants’ Mut. Ins.
Co., 16 Fed. Rep. 141.

7 See Fusz v. Spaunhorst, 67 Mo.
264; Zinn v. Mendel, 9 W. Va. 580.
Compare Branch v. Roberts, 50 Barb.
(N. Y.) 435.

* Patterson v. Lynde, 106 U. S. 519.

*Cole v. Knickerbocker Life Ins.
Co., 23 Hun (N. Y.) 255; Blake v. Hin-
§ 156 CREDITORS’ RIGHTS. 129
exhausted. It seems, however, that a creditor bondholder
may restrain the unauthorized use of a corporate name,}
and Judge Shipman has even said that “the principle that
a stockholder of a company cannot maintain a bill in
equity against a wrong-doer to prevent an injury to the
‘corporation, unless it shall be averred, and shall affirma-
tively appear, that the corporation has refused to take meas-
ures to protect itself, does not extend to a bill which is in
good faith filed by a creditor.”* As will appear, creditors
may sell the corporate property on execution ;* and may,
by their representative, overthrow an ultra vzres contract.*
Creditors may pursue delinquent shareholders,® and one
creditor may restrain the payment to another of a greater
proportion of his claim than all the creditors receive.‘
Creditors, as will be shown, are usually represented in in-
solvency proceedings by receivers,’ but the reader should
be careful not to lose sight of the rule that as directors and
trustees are, in law, the managers of a corporation prior to
liquidation, they represent it and its creditors and stock-
holders in litigations.§ A creditor, though a shareholder,
may enforce his claim,® and directors may share with cred-
itors.? The relation goes to the question of good faith in
the transaction." But if directors purchase claims against
a corporation at a discount in the settlement of their stat-

 

kle, 10 Yerg. (Tenn.) 218; Belknap v.
North America Life Ins. Co., 11 Hun
(N. Y.) 282; Sturges v. Vanderbilt, 73
N. Y. 384. See Terry v. Anderson, 95
U.S. 628.

1 Newby v. Oregon Central Ry: Co.,
Deady 609.
- * Lothrop v. Stedman, 42 Conn. 583,
589; Ss. C. 13 Blatchf. rqt.

@ See Chap. XIV. Plymouth R.R.
Co: v. Colwell, 39 Pa. St. 337.

4Examine National Trust Co. v.
Miller, 33 N. J. Eq. 155; Talmage v.
Pell, 7 N. Y. 328.

9

5 Allen v. Montgomery R.R. Co., 11
Ala. 437; Gaff v. Flesher, 33 O. S.
107; Hightower v. Mustian, 8 Ga. 509.

6 Pfohl v. Simpson, 74 N. Y. 137.
See Whittlesey v. Delaney, 73 N. Y.
571. :

1 See Chaps. IX., X., X1., XII.

® Railway Co, v. Alling, 99 U. S.
463.

® Brinham v. Wellersburg Coal Co.,
47 Pa. St. 43.

© Bristol Milling, etc. Co. v. Pro-
basco, 64 Ind. 406.
~ 4 Smith v. Skeary, 47 Conn. 47.
130 § 157

CREDITORS’ RIGHTS.
utory liability, they will not be allowed more than they act-
ually paid for the claims. Taking a pledge of property
does not prevent a creditor from suing the corporation or
stockholders without selling the pledge.? With relation to
corporate securities, the reader will recall that bonds of a
corporation payable to bearer being negotiable,’ a purchaser
takes them freed from equities,* and that coupons, when
severed, become independent claims. It may also be ob-
served that the legislature has no power, as against credit-
ors, to vacate mortgages already made under powers orig-
inally granted, nor to release debts already contracted.®

§ 157. What creditors cannot do.—As a general rule, so
long as a corporation is acting within the line of its pre-
scribed powers, a creditor cannot interfere in its affairs. So,
as we have seen, the directors of a corporation are its
managing agents,° and creditors cannot, as a rule, interfere
with them prior to the recovery of judgment against, the
corporation.” In a Massachusetts case,® the court said:
“The bill is an attempt by a creditor to restrain his debtor
from making what is alleged to be an improvident contract.
. ... The court has no power to restrain the debtor from
making a disposition of his property, which is permitted by
the common law, unless fraud or a breach of trust is alleged
or shown.”*® Courts will not decree a forfeiture at the suit

 

1 Lingle v. National Ins. Co., 45 Mo.
109; Holland v. Heyman, 60 Ga. 174.

* Sonoma Valley Bank v. Hill, 59
Cal. 107.

3 Haven v. Grand Junction R.R. etc.
Co., 109 Mass, 88; Brainerd v. New
York & Harlem R.R. Co., 25 N. Y.
496; Carr v. Le Fevre, 27 Pa. St. 413;
White v. Vermont, etc, R.R. Co., 21
How. 575; Savannah & M. R.R. Co.
v. Lancaster, 62 Ala. 555.

+ Murray v. Lardner, 2 Wall. ro.

5 Sinking Fund Cases, 99 U. S. 700.
Compare Close v. Glenwood Cemetery,
107 U.S. 466.

® Memphis City v. Dean, 8 Wall. 64;
Railway Company v. Alling, 99 U.S.
472; Donohoe v. Mariposa Land, etc.
Co., 66 Cal. 317.

7See Andrew v. Vanderbilt, 37
Hun (N.Y.) 468; Sturges v. Vander-
bilt, 73 N. Y. 392; Baker v. Louisi-
ana Portable R.R. Co., 34 La, Ann.
754; Matter of Louisiana Savings
Bank, 35 La. Ann. 199; Mills v. North-
ern Railway Co., L. R.'5 Ch. App. 627,

*Pond v. Framingham, etc. R.R.
Co., 130 Mass. 194.

°'s, P. Treadwell v. Salisbury Manuf.
Co., 7 Gray (Mass.) 393.
$157 CREDITORS’ RIGHTS. ‘131

of a creditor,’ and a creditor cannot prevent or question the
right to repeal a charter.* And a creditor, generally, has
no standing in court to attack acts of a debtor corporation
done prior to the creation of his claim.2 Nor can acreditor
prevent an honest sale of corporate assets and application
of the proceeds to the payment of debts.‘

 

‘Gaylord v. Fort Wayne, M. & C.  *See Graham v. Railroad Co., 102
R.R. Co., 6 Biss. 286. U.S. 148.

7Read v. Frankfort Bank, 23 Me. 4 Barr v. Bartram & F. Mfg. Co., 41
318. Conn, 506.
CHAPTER VIII.

ASSIGNMENTS BY CORPORATIONS.

§ 158.
159.

Nature of assignments.
Assignments by corporations
for the benefit of creditors.

Assent of stockholders,

Transfers in contemplation of in-
solvency avoided in New York.

Preferential assignments.

Fraud of stockholder as affect-
ing sale by assignee.

§ 164. Fraudulent assignment — Evi-
dence.

165. Power to sell on credit.

166. Assignment directing comple-
tion of enterprise.

167. Remedy of assignee.

168. Effect of assignment on corpo-
ration.

160,
161.

162,
163.

§ 158. Nature of assignments.—Having glanced at the
forms of remedies available to litigants in controversies
affecting involved corporations, and considered certain
practical questions concerning patties,’ pleading,” and the
trust nature of corporate assets,? we will next in order
notice a branch of our subject which relates to the liquida-
tion of the affairs of involved corporations, where little
practical aid from judicial proceedings is invoked; viz.,
assignments by corporations for the benefit of creditors.

A voluntary assignmentis a transfer by a debtor of the
whole or a portion of his assets to an assignee, in trust,
for the payment of creditors, with an express or implied
agreement to return the surplus, if any, to the debtor.!

 

1 See Chaps. III. and V.

2 See Chap. VI.

3 See Chap. VII.

4See Bartlett v. Teah, 1 McCrary
176-178, Mr. Burrill says: “ Volun-
tary assignments for the benefit of
creditors are transfers, without com-
pulsion of law, by debtors, of some or
all of their property to an assignee or
assignees, in trust, to apply the same,

or the proceeds thereof, to the payment
of some or all of their debts, and to re-
turn the surplus, if any, to the debtor.”
Burrill on Assignments, § 2 (5th ed.,
1887, Baker, Voorhis & Co.). But
should not the assignment embrace
all the debtor’s property? See Tie-
meyer v. Turnquist, 85 N. Y. 522;
Knapp v. McGowan, 96 N. Y. 75.
§ 159 ASSIGNMENTS BY CORPORATIONS. 133
The essential elements of such instruments are, (1) a trans-
fer of the debtor’s property ; (2) in trust; (3) with power
to sell the assigned property; and (4) distribute the pro-

ceeds among the creditors.'

$ 159. Assignments by corporations for the benefit of credit-
ors.—It is settled, by a weight of authority which seems to
be irresistible, that a corporation possesses the power to
make an assignment of its assets in trust for the benefit of
its creditors, and may exercise this right much to the same
extent and in the same manner as a natural person, unless
restricted by its charter, or by some statutory provision.*

 

1See Ginther v. Richmond, 18 Hun
(N. Y.) 235.

?De Ruyter v. The Trustees of St.
Peter’s Church, 3 Barb. Ch. (N. Y.)
124; aff'd 3 N. Y. 238; Haxtun v.
Bishop, 3 Wend. (N. Y.) 13; Bowery
Bank Case, 5 Abb. Pr. (N. Y.) 415;
Hill v. Reed, 16 Barb. (N. Y.) 280;
De Camp v. Alward, 52 Ind. 473 VNel-
son v. Edwards, 40 Barb. (N. Y.) 279;
Union Bank of Tenn. v. Ellicott, 6 Gill
& J. (Md.) 363; State v. Bank of Mary-
land, 6 Gill & J. (Md.) 205; Savings
Bank of New Haven v. Bates, 8 Conn.
505; Beaston v. Farmers’ Bank of Dela-
ware 12 Peters 102; Coats v. Donnell,
94. N. Y. 178; Chew v. Ellingwood, 86
Mo. 273; Town v. Bank of River Rais-
in, 2 Doug. (Mich.) 530; Hurlbut v.
Carter, 21 Barb. (N. Y.) 224; Lenox
v. Roberts, 2 Wheat. 373; Jz re Pa-
tent File Co., L. R. 6 Ch. App. 83;
Pope v. Brandon, 2 Stew. (Ala.) 401;
Warner v. Mower, 11 Vt. 385, per
Redfield, J.; | Flint v. The Clinton
Company, 12 N, H. 431; &x parte
Conway, 4 Ark. 304; Ringo v. Biscoe,
13 Ark. 563; Hopkins v. ‘The Gallatin
Turnpike Co., 4 Humph. (Tenn.) 403;
Dana y. The Bank of the United States,
5 Watts & Serg. (Pa.) 223; Catlin v.
The Eagle Bank, 6 Conn. 233; Mc-
Callie v. Walton, 37 Ga. 611; Ardesco

Oil Co. v. North Am. Oil, etc. Co., 66
Pa. St. 375; Robins v. Embry, 1 Sm. &
M. Ch. (Miss.) 258; Shultz v. Sutter,
3 Mo. App. 137; Shockley v. Fisher,
75 Mo. 498; Lamb v. Cecil, 25 W. Va.
296; Swepson v. Exchange & Dep.
Bank, 9 Lea (Tenn.) 713; Sargent
v. Webster, 13 Metc. (Mass.) 497;
Gibson v. Goldthwaite, 7 Ala. 281;
2 Kent’s Com. 398, .; Burrill on As-
signments, §64. The learned Justice
Sharswood said: “ Corporations, unless
expressly restrained by the act which
establishes them, or some other Act of
Assembly, have and always have had
an unlimited power over their respective
properties, and may alienate and dis-
pose of the same as fully as any indi-
vidual may do in respect to his own
property. Hence an insolvent corpo-
tation may make a general assignment.
for the benefit of its creditors, and this
power may be exercised by the direct-
ors, unless special provision to the con-
trary is made in the charter.” Ardesco
Oil Co. v. North Am. Oil and Mining
Co., 66 Pa, St. 375-382. See Dana v.
The Bank of the United States, 5 W. &
S. (Pa.) 223.. In Hurlbut v. Carter, 21
Barb. (N. Y.) 223, Justice Johnson ob-
served: “It is settled, upon authority,
that a corporation .... may make a
valid general assignment for the bene-
ASSIGNMENTS BY CORPORATIONS. § 160

134
The cases upon this point are discussed in De Ruyter v.
The Trustees of St. Peter’s Church,’ and in affirming the
judgment of the court below in that case,‘the New York
Court of Appeals say:* ‘The power of a corporation to
assign its property in trust for the payment of its debts
cannot at this day be doubted. It has been settled not
only in this State,® but in New Hampshire, Vermont, Penn-
sylvania, Maryland, Tennessee, Alabama, and Arkansas.
The cases are cited in the chancellor’s opinion in this case.*
It is unnecessary to repeat them here.”® The chancellor
said in Mississippi: ‘I think, then, that where an assign-
ment is for the benefit of a// the creditors of the assignor,
equally and ratably, it must command the sanction of every
enlightened tribunal, whether it be made by a corporation
or a private person,” ®

The practitioner must, however, be careful to examine
local statutes affecting the administration of the affairs of
insolvent corporate bodies, for, in some cases, as we shall
see, these statutes conflict with the right of insolvent bodies
to make general assignments.

§ 160. Assent of stockholders.—The proposition has been
put forth, and to some extent concurred in, that an assign-
ment made by the directors of a corporation, without the
authority of the stockholders, is voidable as to the latter."
A later case in the same State treats the observation of the
court in the case just cited as a mere “intimation,” and

 

fit of creditors.’”’ In another case it is
said that a bank, like an individual, has
the power and authority to transfer its

of St. Peter’s Church, 3 Barb. Ch.
(N. Y.) 124.
5 See Robins v. Embry, 1 Sm. & M.

funds for the benefit of its creditors.
State of Maryland v. Bank of Mary-
land, 6 Gill & J. (Md.) 205, 230.

13 Barb. Ch. (N. Y.) 126,

73N. Y. 242.

8 Citing Haxtun v. Bishop, 3 Wend.
(N. Y.) 13.

4Citing De Ruyter v. The Trustees

Ch. (Miss.) 258; Shockley v. Fisher,
75 Mo. 5or.

* Robins v. Embry, 1 Sm. & M. Ch.
(Miss.) 258.

"Eppright v. Nickerson, 78 Mo. 484.
See Smith v. New York Consolida-
ted Stage Co., 18 Abb. Pr. (N. Y.)

419.
$ 160 ASSIGNMENTS BY CORPORATIONS, 135

affirms that a voluntary assignment by a corporation is at
least good. against everybody other than non-assenting
stockholders! The Missouri court relied upon a considera-
tion of a somewhat kindred question by Sutherland, J., and
Allen, J., in Abbott v. American Hard Rubber Company.*
But it is to be noticed that this latter case involved the
question of the right of a corporation acting by its directors
to make a sale of practically its entire plant and property,
and was not the case of an assignment by an involved cor-
poration for the benefit of creditors. The arguments very
properly advanced to support that case were, that any trans-
fer of the corporate assets made by the directors, which
would necessitate a discontinuance or complete change of
the business of the corporation, would not be tolerated
without the assent’ of the stockholders. Allen, J., said:
“Boards of directors are agents of the corporation to man-
age its affairs, and carry out the purpose and object of cts
formation.) The case can scarcely be used as an authority
against the right of an involved corporation to make an as-
signment in trust for the benefit of creditors, where all the
assets are required for the payment of debts. The chancel-
lor held, in Ward v. The Sea Insurance Company,’ that the
directors of a corporation could not, even with the consent
of the stockholders, discontinue the corporate business and
distribute the capital stock among the stockholders, unless
expressly authorized by legislative act.*> In other words,
the directors cannot alienate the entire assets of a solvent
corporation ; but there would seem to be reasons for up-
holding transfers and assignments made for the purpose of
satisfying debts, even though all the corporate assets are ex-
hausted in so doing. We have already cited Judge Shars-

 

1 Chew v. Ellingwood, 86 Mo. 273. 47 Paige (N. Y.) 294.

* 33 Barb. (N. Y.) 578, 591. 5 See Robbins v. Clay, 33 Me. 132;

3See Sheldon Hat Blocking Co. v. Conro,v. Port Henry Iron Co., 12 Barb.
Eickmeyer Hat Blocking Co., 56 How. (N. Y.) 64; Ward v. The Society of
Pr, (N. Y.) 79. Attornies, 1 Collyer 370,
136 ASSIGNMENTS BY CORPORATIONS. § 160

wood as authority for the proposition that the power pos-
sessed by insolvent corporations to make assignments “‘ may
be exercised by the directors.) A majority of a quorum
of the board may direct an assignment.” The president and
cashier of a bank are the proper parties to execute the in-
Strument.? In a case in West Virginia, the rule is laid down
that the common seal of the corporation affixed to the paper,
with proof of the signature of the proper officer, constitute
prima face evidence of the due execution of the instru-
ment, the presumption being that the officers did not ex-
ceed their authority.‘

Corporations are impersonal, and necessarily act by
agents who are the directors or trustees.5) As the general
management of corporate affairs, and the disposition and use
of corporate assets, is necessarily intrusted to the directors or
trustees, we can, upon principle, discover no controlling rea-
son why they should not also be considered as vested with
the discretion to determine the necessity for making a gen-
eral assignment, and clothed with the power to effectuate
their conclusion, Their knowledge of the exigency in the
corporate affairs inducing the act is manifestly more com-
plete than that of stockholders or creditors. It seems clear
that creditors have no such interest in corporate affairs as
confers upon them the right to interfere with a corporate
assignment for the benefit of creditors where no fraud is
practiced against them. As to stockholders, they have rele-
gated the management of the affairs of the association to
the managing agents, who ought to be empowered to act
according to their best judgment in any crisis that demands

 

1 Ardesco Oil Co, v. North Am. Ojl, * Twin Lick Oil Co, v. Marbury, 91
etc. Co., 66 Pa. St. 375, 382; Ss. P. Dana U.S. 589; Foster v. Ohio-Colorado
v. The Bank of the United States, 5 R.& M. Co., 17 Fed. Rep. 130; New-

Watts & S. (Pa.) 223. ton Manf. Co. v. White, 42 Ga. 160;
2 See Buell v. Buckingham, 16 Iowa Factors’ & Traders’ Ins, Co. v. Marine
284. Dry Dock, ete. Co., 31 La. Ann. 151;

5 See Milliken v. Steiner, 56Ga. 251. Buell v. Buckingham, 16 Iowa 292.
“Lamb v, Cecil, 25 W. Va, 288,
§ 161 ASSIGNMENTS BY CORPORATIONS.

137

the prompt appropriation of corporate assets to the pay-
ment of debts.

§ 161. Transfers in contemplation of insolvency avoided in
New York.—It is now provided by statute in New York
that it-shall not be lawful for any incorporated company to
make any transfer or assignment to any person or persons
in contemplation of the insolvency of the company.’ This
inhibition was held to apply to a banking institution, and
it was considered that a transfer was made in contempla-
tion of insolvency, as well when the insolvency actually ex-
isted as when it was anticipated.” Further construing this
statute, it has been decided that where it appeared upon the
face of a general assignment, that it was made by a manu-
facturing corporation® in contemplation of insolvency, the
instrument was void, though it provided for a ratable dis-
tribution of the assets among all the creditors Where a
judgment was recovered by default against a corporation
upon a dona fide claim, and other judgments, upon equally
meritorious claims, were procured by the confession of the
corporation, in a suit brought by a receiver, the judgment
recovered by default was allowed to stand, but the judg-
ments entered by confession were overturned as having
been acquired by the consent, friendly action, and active
co-operation of the corporation.” It is also considered that

 

17 R.S. 605, §1.
p. 655.

2 Robinson v. The Bank of Attica,
21 N.Y. 407. In National Shoe &
Leather Bank v. Mechanics’ National
Bank, 89 N.Y. 469, Danforth, J., ob-
served: “The object and spirit of this
act undoubtedly is to secure an equal
distribution of the effects of a moneyed
corporation among its creditors in
case of insolvency.”

3 See Laws of 1848, chap. 40.

4 Sibell v. Remsen, 33 N. Y. 95; S$.
p. Harris v. Thompson, 15 Barb, (N.
Y.) 62.

See Laws of 1882,

5 Kingsley v. First Nat. Bank, 31
Hun (N. Y.) 334. In New Jersey the
directors of a company when insolvent,
or in contemplation of insolvency, are
prohibited from making any sale, trans-
fer, or assignment of its property, and
an assignment so made is void as
against its creditors. American Ice
Machine Co. v. Paterson Steam Fire
Engine, etc. Co., 22 N. J. Eq. 75. In
Missouri an insurance company which
has violated the laws cannot avoid the
penalties incident thereto by making
an assignment. Relfe v. Commercial
Ins. Co., 5 Mo. App. 173. In Brou-
138 ASSIGNMENTS BY CORPORATIONS. § 161

the legal right of creditors to share equally in the property
should not be overthrown, except in favor of a purchaser in
good faith and fora valuable consideration, and that it is not
necessary to trace knowledge of the insolvency to the cred-
itor receiving the preferential payment.’ There has been,
however, a partial retreat from this latter somewhat ad-
vanced position. The learned Justice Grover, in Dutcher
v. Importers’ & Traders’ National Bank,’ delivering the
unanimous judgment of the New York Court of Appeals,
held that where the payment or transfer was made in the
ordinary course of business, with none of the usual and pe-
culiar incidents or ear-marks of a preference, and would
have been effected in the same way had the bank been en-
tirely solvent, and its affairs prosperous, the payment could
not be revoked as having been made in contemplation of in-
solvency.? In another case it was held that, to avoid, in the
hands of a dona fide holder, a transfer of a note made by an
insolvent corporation, it must appear that the transfer was
made not only when the company was insolvent or con-
templating insolvency, but also with intent to give a
preference.* The act must be done because of existing or
anticipated insolvency, or else it is not prohibited.> The
prohibition of the statute only applies to domestic corpo-
rations, Foreign corporations are not affected by it, and
preferences made by them will not be disturbed in New

 

wer v. Harbeck, 9 N. Y. 593, Allen, J.,
said: “So long as insolvency neither
exists nor is contemplated, the corpora-
tion, like an individual, can appropriate
its means to the payment of its debts
in such order and in such amounts and
proportions as the directors please.
But, upon insolvency, either actual or
contemplated, this power ceases, and
the law declares the absolute right of
every creditor to share Zvo raéa in the
assets of the company, and will not suf-
fer this right to be defeated by any act

of the corporation or its officers.” See
Marine Bank v. Clements, 31 N, Y.
33-
’ Brouwer v. Harbeck, 9 N. Y. 594,
See Cheever v. Gilbert Elevated Ry.
Co., 43 N. Y. Superior 488.

259 N.Y. 5, 11.

® Compare Phillips vy. Campbell, 43
N. Y. 272,

‘Marine Bank v. Clements, 31 N.
Y. 33.

5 Paulding v. The Chrome Steel
Company, 94 N. Y. 339.
§ 162 ASSIGNMENTS BY CORPORATIONS. 139

York, provided the charter of the companies and the stat-
utes of the foreign State or country do not forbid such
transactions.!

It will be noted that the New York statute, as inter-
preted by these cases, is framed with a view of suppressing
or uprooting preferences, whether the attempt to accom-
plish the prohibited result be made by a simple transfer of
assets or by a formal assignment.? The proposition that
legislation should be deemed essential to prohibit preferences
among creditors of an insolvent corporation may, at first
impression, seem novel. The assets of an insolvent corpora-
tion being considered as a trust fund for the payment of
creditors,® the conclusion ought to follow that the directors
or managers of the corporation are trustees, and the credit-
ors cestuzs gue trustent, as regards corporate property. If
this relationship existed, then clearly the trustee should not,
under the settled principles applicable to.the law of trusts,
be permitted to make any inequitable, unequal, or prefer-
ential disposition of the corporate trust funds. Another
reason assigned for the legislation prohibiting assignments
by insolvent associations is, that it secures the settlement of
the affairs of the corporation under the direction of a court
of equity, and not by assignees selected by the insolvent
company or its directors.*

§ 162, Preferential assignments.—The rule that the prop-
erty of a corporation is a ¢rust fund to be applied for
the equal benefit of all its creditors, is, as we have seen, con-
stantly struggling for recognition in the cases.° The funds
of acorporation may be regarded as pledged exclusively for
the payment of the debts of the corporation. The private
property of the stockholders is not liable, nor i$ there at

 

1 Coats v. Donnell, 94 N. Y. 178. 4 See American Ice Machine Co. v.
2 See also Holcomb’s Exrs, v. New Paterson Steam Fire Engine, etc. Co,,
Hope Delaware Bridge Co., 9 N. J. 22 N.J. Eq. 75.
Eq. 459. 5 See §§ 142, 145, 146.
~ 8 See § 142.
140 ASSIGNMENTS BY CORPORATIONS. § 162
common law any individual responsibility on the part of the
directors for corporate obligations. The corporate property
is, then, the sole source to which the creditors must resort.
The assets, as we have seen, might properly be considered
as a special fund or property, set apart in law, in lieu of the
private property of the corporators, to which resort may be
had for the payment of the debts of the corporation. The
directors and managers of an insolvent corporation are re-
garded as trustees of the corporate funds, and for that rea-
son should make a fro rata distribution among the various
creditors, and hence it has been held that the trustees will
not be permitted to prefer debts for which they are them-
selves personally liable.? The struggle, both in the statutes
and in the cases, has been to suppress preferences, which are
justly regarded as a crying evil with which our insolvency
and bankruptcy laws seem inadequate to cope.2 A court
of equity, it may be observed, will interfere and appoint a
receiver of a bank when the officers have been making pref-
erential payments.*

While the existence of the right of a failing debtor to pre-
fer one creditor to another in the distribution of his property
has often been regretted, it is recognized both in courts
of law and of equity.’ Cases may be cited upholding the

 

1 Robins v. Embry, 1 Sm. & M. Ch.
(Miss.) 260. See Swepson v, Exchange
& Dep. Bank, 9 Lea (Tenn.) 724; Bod-
ley v. Goodrich, 7 How. 276, “The
capital stock of a moneyed corpora-
tion is a fund for the payment of its
debts. It is a trust fund, of which the
directors are the trustees. Itis a trust
to be managed for the benefit of its
shareholders during its life, and for the
benefit of its creditors in the event of
its dissolution.. This duty is a sacred
one, and cannot be disregarded. Its
violation will not be undertaken by any
just-minded man, and will not be per-
mitted by the courts.” Hunt, J., in

Upton, Assignee v. Tribilcock, 91 U.
S. 45, 47.

® Richards v. New Hampshire In-
surance Co., 43 N. H. 264. See Colby
v. Copp, 35 N. H. 434.

8 See Marr v. The Bank of West
Tennessee, 4 Cold. (Tenn.) 471; High-
tower v. Mustian, 8 Ga. 506,

+ Irons v. Manufacturers’ Nat. Bk., 6
Bissell 301.

5 Coats v. Donnell, 94 N. Y. 178;
Jacobs v. Remsen, 36 N. Y. 668; Mur-
ray v. Riggs, 15 Johns. (N. Y.) -571;
Wilkes v. Ferris, 5 Johns. (N. Y.) 335;
Ferguson v. Spear, 65 Me. 279; For-
rester v. Moore, 77 Mo. 651; Richard-
§ 163 ASSIGNMENTS BY CORPORATIONS.

141
right of a corporation, unrestricted by statute, to make a
preferential assignment.’ The rule is quite firmly estab-
lished. Are practical working of the rule sustaining cor-
porate preferences is monstrous, The unpreferred credit-
ors have only a myth or a shadow left to which resort can
be had for payment of their claims; a soulless, fictitious,
unsubstantial entity that can be neither seen nor found.
The capital and assets of the corporation, the creditors’
trust fund, may, under this rule, be carved out and appor-
tioned among a chosen few, usually the family connections
or immediate friends of the officers making the preference.
This rule of law is entitled to take precedence, among the
many reckless absurdities to be met with in the cases affecting
corporations, as being a manifest travesty upon natural justice.

§ 163. Fraud of stockholder as affecting sale by assignee.—
Certain other phases of the subject of assignments by cor-
porations must be briefly noticed. We may observe that
the fraud of a stranger cannot be considered as affecting
the title conferred by a vendor. In the absence of alle-
gations or evidence of conspiracy, or knowledge of the
stranger's fraud on the part of the vendor, no case for relief
against the transaction is made out. Hence, asale by the as-
signee of an insolvent corporation, made by him in good faith,
is not invalidated or affected by the fraud of a stockholder
committed without the knowledge or privity of the assignee.”

 

son v, Marqueze, 59 Miss. 80 ; Totten v.
Brady, 54 Md.170; Atlantic Nat. Bank
v. Tavener, 130 Mass. 407; Spaulding
v. Strang, 37 N. Y. 135; Jordan v.
White, 38 Mich. 253; Murphy v. Briggs,
89 N. Y. 451; Frazer v. Thatcher, 49
Tex. 26. See Chapter XXIX. See Laws
of 1887, N. Y., Chap. 503, limiting
preferences in assignments by debtors
to one-third in value of the assigned
estate left after deducting wages and
salaries and the expenses of executing
the trust.

1 Coats v. Donnell, 94 N. Y. 178;
Savings Bank of New Haven v. Bates,
8 Conn. 505; State v. Bank of Mary-
land, 6 Gill & J. (Md.) 205; Ringo v.
Biscoe, 13 Ark. 5633 Catlin v. The
Eagle Bank, 6 Conn. 233; Dabney v.
Bank of State of S. C., 3 S. C. 156;
Arthur v. The Commercial and Rail-
road Bank of Vicksburg, 17 Miss.
394.

° Trevitt v. Converse, 31 Ohio St.
60,
142 ASSIGNMENTS BY CORPORATIONS. §§ 164, 165

$ 164. Fraudulent assignment — Evidence. — Assignments
made by corporations may be attacked upon substantially
the same grounds as in the cases of similar transfers by in-
dividuals. But where objections were made that the as-
signee of an insolvent corporation was a stockholder, and
former treasurer of the corporation, and was himself insol-
vent, it was held that these facts would not, per se, render
the assignment void, but: were merely proper facts for the
consideration of a jury.’ In Pope v. Brandon,’ it was held
that a deed of assignment of a corporation was not void
for the reason that the trustee was president of the institu-
tion, and executed the deed as a grantor. In Buck v.
Piedmont & Arlington Life Insurance Company,? a trus-
tee under a deed of trust, made by an insolvent company,
was superseded by a receiver. Hughes, J., said: “I think
that the mere fact of the failure of a life insurance com-
pany is przma face proof that its operations have been
conducted in a fraudulent manner; and if the failure is
not explained by some great casualty, such as a wide-spread
pestilence, or sudden financial convulsion, or physical ca-
lamity, I think it is fer se proof of fraud... .. Would
the court be justified in allowing a trustee, appointed by
such a company, in the very deed in which it avowed its
insolvency, to remain in the custody of its effects, and
to administer them? .... I think not.”

$ 165. Power to sell on credit.—A general assignment by
a corporation for the benefit of creditors, is voidable as to
creditors who may attack it, where the instrument contains
a power to sell on credit.* The same rule appertains to as-
signments made by individuals containing such power.®

 

1 Covert v. Rogers, 38 Mich. 363. N. Y. 510; Barney v. Griffin, 2 N.Y.
?2 Stewart (Ala.) gor. 365; Hutchinson v. Lord, 1 Wis. 286;
34 Hughes 420, Keep v. Sanderson, 2 Wis. 42; Brig-
4 Richardson v. Rogers, 45 Mich. ham v. Tillinghast, 13 N. Y. 215, 220.
591. Compare Nicholson y. Leavitt,6  ° Wait on Fraud. Conv. §§ 332, 333.
§§ 166-168 ASSIGNMENTS BY CORPORATIONS. 143

$ 166. Assignment directing completion of enterprise.—An
assignment to trustees, with instructions, among other
things, to borrow money to complete a railroad, and then
declare dividends among creditors, will not be upheld. In
Bodley v. Goodrich,’ Mr. Justice McLean said: “ Upon
its face this deed shows an intention by the bank to post-
pone its creditors, use the effects of the bank for the com-
pletion of the railroad, pay the trustees enormous salaries,
and make no dividend among the creditors of the bank
until these objects were accomplished. . . . It was fraudulent

against...
parties to the deed.” ?

. all creditors of the bank who did not become

§ 167. Remedy of assignee.—The assignees of an insolvent
bank may recover damages from the directors for a fraudu-

lent sale by them to the bank of its own stock.?

Anda

suit will lie in favor of an assignee to recover unpaid sub-
scriptions to the stock of a corporation.*

$ 168. Effect of assignment on corporation—Judge Story
was of the opinion that an assignment by a corporation ex-

tinguished its corporate existence.®

But the prevailing

modern doctrine seems to be that such an assignment does

 

17 How. 278.

? See Arthur v. Commercial & R.R.
Bank, 17 Miss. 394; Fellows v. Com-
mercial & R.R. Bank, 6 Rob. (La.) 246.

3Shultz v. Christman, 6 Mo. App.
338. See Chap. III.

4Lionberger v. Broadway Savings
Bank, 10 Mo. App. 499. As to the
right of judgment creditors to sue for
unpaid subscriptions, see Hatch v.
Dana, ror U. S. 205; Ogilvie v. Knox
Insurance Co., 22 How. 380; Bartlett
v. Drew, 57 N. Y. 587; Pierce v. The
Milwaukee Construction Co., 38 Wis.
253; Marsh v. Burroughs, 1 Woods
468. See § 78.

5 Beaston v, Farmers’ Bank of Dela-
ware, 12 Pet. 138. These words are

used in his dissenting opinion: “I
must say, that independent of some
special and positive law, or provision in
its charter to such an effect, I do ex-
ceedingly doubt if any corporation, at
least without the express assent of all
the corporators, can rightfully dispose
of all its property by such a general as-
signment, so as to render itself inca-
pable in future of performing any of its
corporate functions. That would be
to say that a majority of a corporation
had a right to extinguish the corpora~
tion, by its own will, and at its own
pleasure. I doubt that right; at least,
unless under very special circum-

stances.” :
144 ASSIGNMENTS BY CORPORATIONS. § 168

not operate as a dissolution? of. the corporation or surrend-
er of its franchise? In Hurlbut v. Carter,? Johnson, J.,
said: ‘“‘ Nor does it follow because a corporation can make
a voluntary assignment, that it can transfer the power of
its officers to the assignee. What is assigned? It is the
assets merely ; not the franchise. The assignee does not,
by accepting the assignment, become the corporation, nor
acquire the powers the statute confers upon the corporate
body and its officers. He merely takes the choses in action
belonging to it—the assets for collection and distribution.” *
The corporation not being dissolved by the assignment,’ the
assignee may prosecute in its name.®

 

1 Parsons v.'Eureka Powder Works, 8 21 Barb. (N. Y.) 224.
48 N. H. 66; Germantown Passenger +See The State v. Real Estate Bank,
Railway Co. v. Fitler, 60 Pa. St. 124; 5 Ark. 595.
Hurlbut v. Carter, 21 Barb. (N. Y.) 224. 5 State v. Bank of Maryland, 6 Gill &
*Town v. Bank of River Raisin, 2 J. (Md.) 208.
Doug. (Mich.) 530. ® Shryock v. Basehore, 82 Pa. St. 164.
CHAPTER IX.

RECEIVERS OF CORPORATIONS—-NATURE OF, GROUNDS FOR,
AND EFFECT OF APPOINTMENT.

§ 169.
170,
171.
172.

173.
174,
175.

176.
177.

178.
179.

180.
181.

182.

Receivers of corporations.

Nature of a receivership.

Persons not appointed receivers.

Jurisdiction to appoint receiver.

Internal dissensions as ground
for receiver.

Receivership in absence of stat-
utory authority.

Corporation as party on applica-
tion for receiver.

Receiver not appointed ex parte.

Irrevocable nature of appoint-
ment.

Stockholders’ right to a receiver
—wWhen discretionary.

Stockholder as representative of
hostile party.

Creditors’ right to a receiver.

Resignation of directors to se-
cure receivership.

Receivership on sequestration—
Statutory construction.

 

§ 183.
184.

185.
186.
187.
188.
189.

190.
19].
192.

193.
194.
195.
196.
197.

198.

Insolvency as ground of equita-
ble relief.

Receivership on repeal of char-
ter.

Defunct corporation.

In dissolution proceedings.

Statutory receiver on dissolution.

Foreign corporations,

Foreign receiver recognized by
comity.

Conflicting receivers.

Receiver and injunction.

When receiver will not be ap-
pointed.

Denial of equities by answer.

Disqualifications of receiver.

State receiver of national bank.

Corporation in character of re-
ceiver,

Protecting receiver from inter-
ference.

Laches affecting appointment.

$ 169. Receivers of corporations.—Private and guas¢ pub-
lic corporations, of almost every form and character, are

constantly placed in the hands of receivers.

Here the ju-

risdiction is necessarily equitable,’ and is somewhat differ-
ent from that which appertains in cases of natural persons.
The appointment may be effected for other purposes than
technically to preserve the property during actual litigation.
In voluntary or hostile proceedings to close up the affairs
of a corporation, or to effect a dissolution, and even in pro-

 

10

1 Skinner v. Maxwell, 66 N.C. 45; Folsom v. Evans, 5 Minn. 418, '
146 RECEIVERS OF CORPORATIONS. § 169

ceedings for other objects, it is generally necessary to have
some visible agent of the court empowered to take charge
of the assets and effects of the corporation, and to manage
or liquidate its affairs under the supervision and guidance
of the court. The peculiarities of the case demand such a
course. The dissolution or insolvency proceedings in many
instances suspend the powers and functions of the corpo-
rate officers, Then the misfortunes of corporations are, too
frequently, justly attributable to the maladministration or
negligence of corporate officials whom it is generally found
inexpedient to continue in power.’ Frequently the court
has no practical method, aside from a receivership, of deal-
ing with an invisible corporate entity and rendering the ju-
dicial mandates practically effectual. The cases of insol-
vent individuals or copartnerships are, manifestly, different.
Here there are natural persons whom the court may reach
directly, through its orders or decrees, and upon whom the
influences of self-interest and the desires to be extricated
from insolvency operate more strongly.

As receivers of corporations are so essential in proceed-
ings affecting these bodies, it becomes important to treat of
the appointment, rights, powers and duties of these officers
of the court somewhat at length in this connection, aside
from the incidental references to the subject to be found in
different parts of the discussion. The inquiry may lead to
the consideration of many phases of receivership law not
peculiar to corporations ; but this result is to a certain extent
unavoidable in a special treatise of this character. Speak-
ing of the general subject of appointing a receiver, it is
said in Mississippi: ‘‘ The plaintiff must show, first, either
that he has a clear right to the property itself; or that he
has some lien upon it; or that the property constitutes a
special fund to which he has a right to resort for the satis-
faction of his claim. And, secondly, that the possession of

 

1 See § 171,
§ 170 RECEIVERS OF CORPORATIONS. 147
the property by the defendant was obtained by fraud; or
that the property itself, or the income arising from it, is in
danger of loss from the neglect, waste, misconduct, or in-
solvency of the defendant.” ! The status, practically speak-
ing, of our receivership law, is that the court may, as a gen-
eral thing, substitute its custody and possession for that of
the real or apparent owner of property by the simple act of
signing its name. Thus, in the twinkling of an eye, in the
exercise of a vaguely defined judicial discretion, and with-
out observing any particular formula, or yielding rigid ad-
herence to any precedent, not only the possession, but in
some cases the title, to millions of property may be trans-
ferred. The exercise of this power, as we shall see, has ’
been characterized as a delicate one, but the harsh or mis-
taken use of it has wrought manifest injustice in a numer-

ous class of cases.

§$ 170. Nature of a receivership——Generally speaking, a
receiver is an indifferent or disinterested person,” appointed
by a court exercising chancery jurisdiction, to receive the
income or proceeds of property in dispute, or to take pos-
session or charge of such property, with a view to preserve
it from waste and destruction pending the controversy.2 A
receiver is an officer of the court, and is appointed on be-
half of all the parties who may establish rights in the cause,
and not on behalf of the complainant or defendant only.*

 

v. City of Brownsville, 29 Fed. Rep.
742. See § 390.

? Vermont & Canada R.R. Co. v.
Vermont Cent. R.R. Co., 46 Vt. 797.

1 Mays v. Rose, 1 Freem. Ch. (Miss.)
718, Chancery has limited jurisdiction
over religious corporations. See Bow-
den v. McLeod, 1 Edw. Ch. (N. Y.)

588; First Baptist Church v. Witherell,
3 Paige (N. Y.) 296; Willis v. Corlies, 2
Edw. Ch. 281; Robertson v. Bullions,
11 N. Y. 243. As to the power of
the courts over municipal or public
bodies, compare Welch v. St. Gene-
vieve, 1 Dill. 130; People v. Reclama-
tion District, 53 Cal. 346; Devereaux

®? Vermont & Can. R.R. Co. v. Ver-
mont Central R.R. Co., 46 Vt. 798;
Owen v. Homan, 4 H. L. Cas. 1032;
Ellis v. Boston, H. & E. R.R. Co., 107
Mass, 28,

4 Booth v. Clark, 17 How. 331. See
Meier v. Kansas Pacific Ry.Co., § Dillon
479; Hooper v. Winston, 24 Ill. 363.
148 RECEIVERS OF CORPORATIONS. § 170
The fund in his hand is considered to be in custodta legds*
for whomsoever can make out a title to it. The court itself
has the care of the property in dispute ;* the receiver is
but the creature or hand of the court;* he possesses no
powers except such as are conferred upon him by the order
of his appointment, and the course and practice of the
court ;° and neither party is responsible for his misfeasance
or malfeasance. The possession of the corporation is in
effect superseded and displaced by the appointment of a
receiver.” It follows, as will presently be shown,’ that the
court will not permit the possession of the receiver to be
disturbed, but will protect him from molestation in the dis-
charge of his duties. ‘The receiver,” says Barker, J.,

 

1 Fisher v. Andrews, 37 Hun (N. Y.)
180; Robinson v. Atlantic & G. W.
Ry. Co., 66 Pa. St. 160; Angel v. Smith,
9 Ves. 335; Skinner v. Maxwell, 68
N. C. 400; Day v. Postal Telegraph
Co., 66 Md. 368. See 2 Waterman on
Corps. 676, chap. xxii.

? Delany v. Mansfield, 1 Hog. 234;
Keeney v. Home Ins. Co., 71 N. Y.
4o1. In Fosdick v. Schall, 99 U.S.
251, Chief Justice Waite said: “The
possession taken by the receiver is only
that of the court, whose officer he is.
.... He holds, pending the litigation,
for the benefit of whomsoever in the
end it shall be found to concern, and
in the meantime the court proceeds to
determine the rights of the parties upon
the same principles it would if no
change of possession had taken place.”
In Davis v. Gray, 16 Wall. 217, the
court said: “A receiver is appointed
upon a principle of justice for the bene-
fit of all concerned. Every kind of
property of such nature that, if legal,
it might be taken in execution, may,
if equitable, be put into his possession.
Hence the appointment has been said
to be an equitable execution.” A spe-

cial receiver or assignee of a railroad
corporation appointed in hostile pro-
ceedings is not an agent of the corpo-
ration. Metz v. Buffalo, C. & P. R.R.
Co., 58 N. Y. 61. But see Safford v.
The People, 85 Ill. 558.

* Day v. Postal Telegraph Co., 66
Md. 368.

* Hooper v. Winston, 24 Ill. 363.

* Verplanck v. Mercantile Ins. Co., 2
Paige (N. Y.) 452; Hooper v. Win-
ston, 24 Ill. 363; Grant v. City of Da-
venport, 18 Ia. 194.

* Milwaukee & Minn. R.R. Co. v.
Soutter, 2 Wall. 519.

" Ohio & Miss. R.R. Co. v. Davis, 23
Ind. 553. See Metz v. Buffalo, C. & P.
R.R. Co., 58 N. Y. 61; Kain v. Smith,
80 N. Y. 469; City of Rochester v.
Bronson, 41 How. Pr. (N. Y.) 78.

* See § 237.

» Atty. Genl. v. Guardian Mut. Life
Ins. Co, 77 N. Y. 277; Angel v.
Smith, 9 Ves. 335; Robinson v, At-
lantic & G. W. Railway Co., 66 Pa. St.
160; Day v. Postal Telegraph Co., 66
Md. 368; Ames v. Trustees of Birken-
head Docks, 20 Beav. 332; Columbian
Book Co. v. De Golyer, 115 Mass. 67.
§ 170 RECEIVERS OF CORPORATIONS, 149

“represents the corporation, and also the creditors, and
the funds and causes of action which became vested in him
on his appointment, are custodza legzs,and should not be di-
verted and taken from his hands, or placed beyond the con-
trol of the court, whose duty it is to see that all the funds
of the corporation are justly and equitably distributed
among its creditors and members.”! The appointment, as
already stated, is in the nature of an equitable execution,’
and reverses, in great measure, the ordinary course of
administering justice in a court of equity in that the
seizure is made before the decree is entered.’ Usually, the
purpose of the appointment is, like the issuance of an in-
junction pendente lzte, merely to preserve the property un-
til the rights of all the parties can be adjudicated.* The
reader will recall the principle of procedure that, generally
speaking, there is ‘“‘no such thing as an action brought dis-
tinctively for the mere appointment of a receiver.” The ap-
pointment, when made, is ancillary to, or in aid of, a pend-
ing action or proceeding.® It should be carefully borne in
mind that, after the affairs of a corporation have been placed
in the hands of a receiver, nothing can be done whereby
the status of the affairs of the company can be effectually
changed, or its rights in any way lessened or prejudiced,
without the sanction of the court.® ‘The receiver,” says
Finch, J.,” ‘is the officer of the court. It made him and
can unmake him. He has no independent authority or
power. He is the mere agent or instrument through whom
the law takes into its own custody the assets and property

 

1 Fisher v. Andrews, 37 Hun (N.Y.) There must be a pending suit or pro-
180. See §197. ceeding to justify the appointment of a
2 Jeremy’s Eq. Jur. 248; Cincinnati, receiver. Crowder v. Moone, 52 Ala. 220.
S. & C. R.R. Co. v. Sloan, 31 O.S. 7. * Day v. Postal Telegraph Co., 66
8 Beverley v, Brooke, 4 Gratt. (Va.) Md. 354. Compare Barton v. Barbour,

208, 104 U. S. 126; Wiswall v. Sampson,
4 Ellis v. Boston, H. & E. R.R. Co., 14 How. 66.
107 Mass, 28. 1 Atty. Genl. v. North Am. Life Ins.

’ French Bank Case, 53 Cal. 553. Co.,-@9 N.Y. 102.
150 RECEIVERS OF CORPORATIONS. § 171
of the insolvent corporation, closes its business, and makes
final distribution. The receiver is under the control of the
court. He can do nothing without its orders.” The stock-
holders of a corporation are the persons entitled to make
the selection of the agents who are to manage the affairs of
the corporation. The effect of the appointment of a re-
ceiver is to supersede this right and to displace the agents
selected by the stockholders.’ Hence the reluctance of the
court to exercise this power of appointment, and the pro-
mulgation of the rule that the appointment will only be
made in case of urgent necessity, to protect the stockhold-
ers and creditors from loss, or to prevent an abuse of cor-
porate franchises.? With respect to his bearing toward
litigants and creditors, we may state that the receiver is not
to advocate the cause of one claimant as against another—
being indifferent between them, and owing a like duty to all
—and, for that reason, he should as far as possible see to it
that each has an equal opportunity to enforce and collect
his claim. He stands as their representative, and is bound
to give them reasonable aid.°

§ 171. Persons not appointed receivers.—It is scarcely nec-
essary to dwell upon the character and attainments which
the persons selected to discharge the important functions
of this office should possess, but we may state that it is not
usually considered proper to appoint, as receiver of an in-
volved corporation, a person formerly connected with the
unsuccessful corporate management.‘ It has been forcibly

 

1 Kain v. Smith, 80 N. Y. 469.

® City of Rochester v. Bronson, 41
How. Pr. (N. Y.) 82.

® People v. Security L. Ins. & Ann.
Co., 79 N. Y. 271. See Comyn v. Smith,
1 Hogan 81.

4 Freeholders of Middlesex Co. v.
State Bank of New Brunswick, 28 N. J.
Eq. 166; Baker v. Admr. of Backus,
32 Ill. 79; Atty. Genl. v. Bank of Co-
lumbia, 1 Paige (N. Y.) 511; McCul-

lough v. Merchants’ Loan & Trust Co.,
29 N. J. Eq. 217; Atkins v. Wabash,
St.L. & P. Ry. Co., 29 Fed. Rep. 161;
8. C. sub nom, Central Trust Co. v.
Wabash, St. L. & P. Ry. Co., 1 Rail.
& Corp. L. J. 12; Zz re Empire City
Bank, 10 How, Pr. (N. Y.) 498. Com-
pare Fripp v. Chard Ry. Co., 21 Eng.
L. & Eq. 53. See § 194; 2 Waterman
on Corps., ch. xxii,
§ I7I RECEIVERS OF CORPORATIONS, I51

observed that a person who cannot, with the aid of others,
manage a business successfully, is, as a general rule, unfit to
wind it up alone.’ Miller, J., has said:? “In my view, a re-
ceiver is strictly and solely the officer of the court. By
reason of the inability or neglect of the officers of the cor-
poration to conduct its business as it ought to be done, the
conduct of that business is taken charge of by the court
and carried on by its agent. It is the duty of that agent so
to conduct the business as that the lawful rights and legal
interests of all persons in the property and in the business
shall be protected, as far as possible, with equal and exact
justice. This is much more likely to be done by a receiver
who has no interest in the capital stock of the road, none in
its debts, and no obligations to those who have.” Gresham,
J., has used this language :* “ It has frequently been deemed
necessary, in suits against insolvent railway corporations to
foreclose mortgages, to appoint receivers to operate and
protect the property pending the litigation ; but it is unu-
sual and novel, to say the least, to entertain a bill filed by
such a corporation against its creditors, and at once, with-
out notice, place the property in the hands of one or more
of the directors, whose management has been unsuccessful.
Receivers should be impartial between the parties in inter-
est, and stockholders and directors of insolvent corporations
should not be appointed unless the case is exceptional and
urgent, and then only on the consent of parties whose in-
terests are to be intrusted to their charge.” By statute in
New York a director, trustee, or other officer, or a stock-
holder of a corporation, may be selected in the discretion of
the court as receiver in dissolution proceedings.* A cor-
poration may be empowered to act as receiver.®

 

1 McCullough v. Merchants’ Loan & Wabash, St. L. & Pac. Ry. Co., 29

Trust Co., 29 N. J. Eq. 217. Fed. Rep. 173.
? Meier v. Kansas Pacific Railway 4N. Y. Code Civ. Pro. § 2429.
Co., § Dillon 479. 5 Im ve Knickerbocker Bank, 19

3 Central Trust Co. v. Wabash, St. Barb. (N. Y.) 602; Zz re Empire City
L. & P. Ry. Co., 1 Railw. & Corp. Bank, 10 How, Pr. (N. Y.) 498. See
L. J. 16; Ss. Cc. sub nom, Atkins v. § 196.
152 RECEIVERS OF CORPORATIONS. § 172

§ 172. Jurisdiction to appoint receiver.—Let us notice for a
moment the nature of the power to which recourse is had
on applications for a receiver. There is said to be no inher-
ent jurisdiction vested in a court of equity to appoint a re-
ceiver of the property of a corporation in a suit prosecuted
by a private party. This is considered as equivalent to saying
that there is no jurisdiction vested in these courts to dissolve
a corporation in’ such a case, for the power to appoint a re-
ceiver, when put in motion, of necessity supersedes the cor-
porate power, displaces the corporate management, and sub-
stitutes its own.’ These words have been used in a case in
Oregon: “It cannot be considered the province of a court
to superintend the current business of corporations, with a
view to measure the degree of industry, skill, and shrewd-
ness to be required of, or exercised by, the directors and
other officers or agents. As aconsequence, a court of equity
will not interfere to review or correct their proceedings on
the ground of fraud or mismanagement, unless there is
cause for an absolute displacement of the officer or officers
complained of, or for a final winding up of the affairs of the
corporation.”* The statute of New York authorizing the
appointment of a receiver in a sequestration proceeding is
said to have conferred a new power upon the court of
chancery.2 In Neall v. Hill,t the court observe: “It
is well settled that a court of equity, as such, has no
jurisdiction over corporate bodies, for the purpose of re-

 

1 French Bank Case, 53 Cal. 550;
Howe v. Deuel, 43 Barb. (N. Y.) 506;
Davis v. Flagstaff Silver Mining Co., 2
Utah 74; S.C. 2 Morrison’s Mining
Rep. 660; Baker v. Louisiana Portable
Railroad Co., 34 La. Ann.757; French
v. Gifford, 30 Iowa 148. See Hedges
v. Paquett, 3 Oregon 77; Denike v. N.
Y. & R. Lime, etc. Co., 80 N. Y. 606.
See § 339. Verplanck v. Mercantile Ins.
Co., 1 Edw. Ch. (N. Y.) 84; Galwey v.
U. S. Steam Sugar Refining Co., 13

Abb, Pr. (N. Y.) 211; S.C. 36 Barb.
(N. Y.) 256; Gilman v. Greenpoint Su-
gar Co., 4 Lans. (N. Y.) 483; Wilmers-
doerffer v. Lake Mahopac Imp. Co., 18
Hun (N. Y.) 387.

* Hedges v. Paquett, 3 Ore. 80,

* Bangs v. McIntosh, 23 Barb. (N.
Y.) 599. Compare Attorney General
v. Bank of Niagara, Hopkins Ch, (N.
Y.) 354; Attorney General v. Utica
Ins. Co., 2 Johns. Ch. (N, Y.) 371.

416 Cal. 145, 150.
$§ 173 RECEIVERS OF CORPORATIONS. 153

straining their operations or winding up their concerns.
We do not find that any such power has ever been exer-
cised, in the absence of a statute conferring the jurisdic-
tion.”* In Waterbury v. Merchants’ Union Express Com-
pany,” where this same question came up, Barnard, J., uses
this language: ‘The infidelity or misconduct of some, or
even of all, of the trustees or managers of such an associa-
tion, affords no ground for taking away the rights of the
shareholders who constitute the company, either by dissolv-
ing it, or taking away its management and placing it in the
hands of an officer of the court. In such a case the princi-
ples of remedial or preventive justice go no further than to
enjoin or forbid the misconduct, or remove the unfaithful
officer. I am not aware of any authority for dissolving a
corporation or an unincorporated stock association, or for
taking its management from its proprietors or shareholders,
on the mere ground that one, or even all, of its trustees are
unfaithful. The court may enjoin the trustee, or suspend
or remove him, and, if necessary, may order a new election,
but cannot substitute its own officer.”* Executive officers
may be authorized to appoint receivers,* for the subject is
one within legislative control.

$ 173. Internal dissensions as ground for receiver.— Under
the practice prevailing in England, it is said that, with re-
gard to private partnerships, nothing is of more frequent oc-
currence than the quarrels of partners. If disputes arise,
and the parties oust each other from the management, or so
conduct themselves that the partnership cannot go on with

 

1 Compare Belmont v. Erie Railway * so Barb. (N. Y.) 157, 166.
Co., 52 Barb. (N. Y.) 668; Latimer v. §’ But see Blatchford v. Ross, 54
Eddy, 46 Barb. (N. Y.) 61. It is not Barb. (N. Y.) 42.
within the province of the chancery ‘Carey v. Giles, 9 Ga. 253; U. S.
courts to stretch their power beyond Rev. Stat. §5234; Irons v. Manufac-
the limits of the authorities of the law turers’ Nat. Bank, 6 Biss. 301 ; Stanton
for the purpose of correcting inade- v. Wilkeson, 8 Benedict 357.
quate legal remedies. Uhl v. Dillon,
10 Md. 503.
154 RECEIVERS OF CORPORATIONS. §§ 174, 175

advantage, it is every-day practice for the court to inter-
fere by injunction, and, if necessary, appoint a receiver.’
Malins, V. C., observed, in the case just cited : ‘‘ With re-
gard to public companies, I apprehend the same principle is
applicable. If a state of things exists in which the govern-
ing body are so divided that they cannot act together, and
there is the same kind of feeling between the members, as
there is frequently in the case of private partnerships, it is
clearly within the rule of this court to interfere, and it will
do so.” And where the officers have been negligent, and
the secretary has absconded with a part of the assets,
the jurisdiction of equity may be invoked. Such loss ‘‘is
prima facie evidence of a breach of the duty of the defend-
ants sufficient to authorize the interference of the court by
the appointment of a receiver.” *

$ 174. Receivership in absence of statutory authority.—
Under the practice in Louisiana, in case corporate property
has been abandoned, and there are no persons authorized to
take charge of, or conduct the corporate affairs, a receiver
may be appointed in the absence of any statutory power or
warrant for so doing.? This, however, is expressly stated to
be exceptional.

$ 175. Corporation as party on application for receiver. —
It has ‘been seen that a corporation must be made a party
defendant where it is sought to bind it by a judgment, order
or decree.* It follows, as a necessary sequence, that where
a corporation is not a party to the bill, and is not brought
into court by notice, it is error to appoint a receiver. In
Gravenstine’s Appeal,> Thompson, J., after remarking that
the corporation was not a party to the bill in question, and

 

' Featherstone v. Cooke, L.R. 16 Eq. Railroad Co., 34 La. Ann. 754; Brown

298, 301. v. Union Ins. Co., 3 La. Ann. 177; Stark
2 Evans v. Coventry, 5 De G.M.& v. Burke, 5 La. Ann. 740,
G. 911, 918. 4 See § 92.

®See Baker v. Louisiana Portable 49 Pa. St. 310-321.
§ 176

RECEIVERS OF CORPORATIONS. 155
had not been summoned into court, upon application for the
preliminary injunction, said: ‘ Under such circumstances,
I cannot but regard the decree, so far as it affects it, as ir-
regular, if not entirely a nullity. The appointment of a
receiver was a suspension of its functions and authority over
its property and effects, and was equivalent to an injunction
to restrain its agents and officers from intermeddling with
its own property in any way. Surely this could not be done
without making it a party.” ?

$ 176. Receiver not appointed ex parte.—The authorities
uniformly show a very decided aversion, on the part of the
courts, to interfering with a corporation or private party
by appointing a receiver otherwise than after reasonable
notice of the application.* In a case which arose in Michi-
gan, the court said that a receiver of an insolvent corpora-
tion would certainly not be appointed ex arte on a judg-
ment creditor’s bill, especially where the question was pend-
ing on demurrer as to the complainant’s right to file the
bill.2 And in Louisiana, the appointment of a receiver of
a corporation on an ex parte application, without even
alleging its insolvency, is declared to be absolutely null, and
carries with it no right to receive the assets or revenues of
the company.* In a case in Iowa, the papers alleged that

 

1s, p. Baker v. Backus, 32 Ill. 80.

> Field v. Ripley, 20 How. Pr. (N.
Y.) 26; French v. Gifford, 30 Iowa
148; Howe v. Jones, 57 Iowa 130;
Bisson v. Curry, 35 Iowa 72; White-
head v. Wooten, 43 Miss. 523; Nus-
baum y. Stein, 12 Md. 315; Voshell v.
Hynson, 26 Md. 83; Caillard v. Cail-
lard, 25 Beav. 512; Sandford v. Sin-
clair, 8 Paige (N. Y.) 373; Verplanck
v. Mercantile Insurance Co., 2 Paige
(N. Y.) 438; People v. Albany & Sus-
quehanna R.R. Co., 55 Barb. (N. Y.)
344; Fricker v. Peters and Calhoun
Co., 21 Fla. 257; Crowder v. Moone,
52 Ala. 220. “ Under special circum-

stances, where it is necessary to appoint
a receiver of the property of an ab-
sentee, to prevent its being wasted, or
removed beyond the jurisdiction of the
court, a receiver will be appointed ex
parte.” Sandford v. Sinclair, 8 Paige
(N. Y.) 373-375; People v. Albany &
S. R.R. Co., 55 Barb. (N. Y.) 369;
Verplanck v. Mercantile Ins, Co., 2
Paige (N. Y.) 450.

® Cook v. Detroit & Milwaukee R.R.
Co., 45 Mich. 453; Railway Co. v.
Jewett, 37 O.S. 649. Compare Young
v. Rollins, 85 N. C. 485.

4 Turgeau v. Brady, 24 La. Ann. 348.
The rule requiring notice before the
156 RECEIVERS OF CORPORATIONS. §§ 177, 178

“the plaintiffs verily believe that if notice of this applica-
tion be given to the defendants, the books, records, and
papers of said bank will be so falsified or spirited away that
they cannot ascertain the said frauds,” it was held that the
allegations were not sufficient to justify the appointment of
a receiver without notice! Where an officer fraudulently
conceals the service upon him of a notice of motion for the
appointment of a receiver of the property and effects of a
railroad corporation, and, by reason of such concealment,
the company fails to resist the motion, and claims that the
appointment is an invasion of its rights, the court will re-
open the case, and allow the company to move to vacate
the appointment.”

$177. Irrevocable nature of appointment.— When the court
has appointed a receiver over an insolvent corporation, the
appointment is beyond the control of the parties to the
action.2 They cannot stipulate away the order appointing
the receiver, and the court, having accepted the trust for
the benefit of creditors, will continue to act in the discharge
of the duty so assumed.* Hence, an order for the appoint-
ment of a receiver of an insolvent life insurance company
is not revocable by consent of parties.°

$ 178. Stockholders’ right to a receiver—When discretionary.
—In New York, in the absence of fraud or mismanagement,
a portion of the stockholders of a corporation have no abso-
lute right to the appointment of a receiver, though it be in-
solvent ; the appointment is at least a matter of discretion.®

 

appointment of a receiver will not be 7? Allen v. Dallas & Wichita R.R.
departed from, except “in a case of Co., 3 Woods 316.

grave emergency, demanding the im- “See Holmes v. McDowell, 15 Hun
mediate interference of the court for (N. Y.) 589; affi’d 76 N. Y. 596.
the prevention of irreparable injury.” 4 People v. Globe Mutual Life Ins.

Fricker v. Peters & Calhoun Co., 21 Co., 57 How. Pr. (N. Y.) 486.
Fla. 257. See Maynard v. Railey, 2 5 People v. Globe Mutual Life Ins.
Nev. 313. Co., 60 How. Pr. (N. Y.) 82.
1¥French v. Gifford, 30 Iowa 148. * Denike v. New York & R. Lime,
etc. Co., 80 N. Y. 599. See § 172.
§§ 179-181 | RECEIVERS OF CORPORATIONS. 157
In a case which arose in Georgia, it was held that a court
of equity would not appoint a receiver to carry on the
business of a company at the instance of a minority of the
stockholders, unless the majority were pursuing a course so
illegal and ruinous as to require the affairs of the company
to be stopped. Mere general charges of fraud, illegality, or
mismanagement will not be sufficient.

$ 179. Stockholder as representative of hostile party.—Fur-
thermore, the court will not appoint a receiver of the
funds of a corporation, or issue an injunction restraining
the directors from exercising their corporate powers, at the
suit of a stockholder acting in the interest of persons hos-
tile to the company.?

§ 180. Creditors’ right to a receiver.—A receiver will be ap-
pointed on behalf of creditors of an insolvent life insurance
company which has assigned its property to a trustee for
the benefit of creditors without the authority of its stock-
holders.*

$ 181. Resignation of directors to secure receivership.—
When acorporation becomes insolvent the directors may

 

1 Hand v. Dexter, 41 Ga. 454.

7 Belmont v. Erie Railway Co., 52
Barb. (N. Y.) 637. See § 622.

* Buck v. Piedmont & Arlington Life
Ins. Co., 4 Fed. Rep. 849, 853. Hughes,
J., said: “The defendant company is
confessedly insolvent. Being a life in-
surance company, insolvency and an as-
signment of all its effects in liquidation
is final and irretrievable death to its
corporate existence. It is incapable of
taking care of its own effects, and has
itself confessed the fact by assigning
them to a trustee. That trustee has
confessed his inability to administer the
property in accordance with the deed,
by taking steps to obtain the aid of a
court of chancery in the task, By the
insolvency, by the act of the defendant

company in making an assignment in
liquidation, and by the act of the trus-
tee in invoking the aid of a court, the
defendants in the suit here have them-
selves exhibited all the conditions
requisite to authorize a court to appoint
a receiver. It is useless to contend that
courts should observe extreme caution
in entering upon the appointment of
receivers. Such caution is only neces-
sary where the defendant company’s
insolvency is denied, where the com-
pany is in the full exercise of its fran-
chises and use of its property, and
where the act of the court would ab-
ruptly and harshly arrest it in its career
of action, and wrest its property from
its use and control.”
158 RECEIVERS OF CORPORATIONS. §§ 182, 183

lawfully resign in order to secure the appointment of a re-
ceiver; and it is proper for them to do so.t_ And the resig-
nation becomes effective to vacate the office without any
affirmative act of the corporation.”

§ 182. Receivership on sequestration—Statutory construc-
tion.—The statutes of New York authorizing the sequestra-
tion of the property of an insolvent corporation and the
appointment of a receiver, are considered to contain a spe-
cial delegation of power over such corporations to be exer-
cised in a prescribed manner and upon a particular state of
facts ; and, as in the case of all authority delegated by stat-
ute affecting liberty or property, the prescribed form for
obtaining jurisdiction of the person and of the subject mat-
ter must be strictly pursued.? Bronson, J., said: ‘‘ Statute
authority by which a man may be deprived of his estate
must be strictly pursued”;* and Chief Justice Marshall
observed that a person or public officer, with power to
divest another of his property, must pursue with precision
the course: prescribed by law, or his acts will be invalid.®
This rule of construction is held to apply in corporation
cases by reason of the fact that the sequestration proceed-
ing is most summary in its nature and serious in its conse-
quences, involving the virtual dissolution of the corporation
proceeded against and often the loss of its franchises.

§ 183. Insolvency as ground of equitable relief—The fact
that a bank is insolvent will not authorize it to apply to a
court of equity for a receiver to wind up its affairs. Chief
Justice Chase said: “The court is not aware of any case
which will warrant its assuming the administration of the
estate of a debtor simply upon the ground of insolvency.” ®

 

1 Smith v. Danzig, 64 How. Pr.(N. 4 Bloom v. Burdick, 1 Hill (N. Y.)
Y.) 320. 141.
* Thid. * Thatcher v, Powell, 6 Wheat. 119,
3 Bangs, Receiver, etc. v. McIntosh, 125.
23 Barb. (N. Y.) 591. See Chap. XV. ® Hugh v. McRae, Chase’s Dec. 467.

4
§ 183 RECEIVERS OF CORPORATIONS.

159
A court of equity cannot be called upon to administer
every estate which the debtor finds it inconvenient to han-
dle. It has been even held that a corporation cannot ap-
ply in its corporate capacity and name to be put into the
custody of a receiver.’ The Supreme Court of Connecti-
cut consider that mere insolvency of a corporation, using
that term in its ordinary sense to denote generally an ina-
bility to pay its debts,” would not take away or impair its
previous power to manage its affairs, nor would it convert
the corporate property into a trust fund for the benefit of
creditors.? As is stated in Treadwell v. Salisbury Manu-
facturing Company :* “It is too well settled to admit of
question, that a court of chancery has no peculiar jurisdic-
tion over corporations, to restrain them in the exercise of
their powers, or control their action, or prevent them from
violating their charter, in cases where there is no fraud or
breach of trust alleged as the foundation of the claim for
equitable relief.” ® Solvent corporations will very rarely be
placed in the hands of a receiver, and the possession will be
promptly restored when the extraordinary causes leading to
the appointment are removed.’ While insolvency may war-
rant the appointment of a receiver in certain cases, it must
distinctly appear that the plaintiff has a cause of action, the
recovery in which will be impaired by reason of insolvency
if a receiver is not appointed.” Where the directors, after
the insolvency of the corporation, made an unlawful dispo-
sition of corporate assets, this was considered ground for
the appointment of a receiver.®

 

1 Kimball v. Goodburn, 32 Mich. ro.
But.see Wabash, St. L. & P. Ry. Co.
vy. Central Trust Co., 22 Fed. Rep. 272.

2 See §§ 28, 29, 30, 31, 32.

3 The Pondville Co. v. Clark, 25
Conn, 100; Catlin v, Eagle Bank, 6
Conn. 235.

47 Gray (Mass.) 393, 399.

5s. p, Pond v. Framingham & Low-
ell R.R. Co., 130 (Mass.) 194.

® Compare Featherstone v. Cooke,

L. R. 16 Eq. 298; Waterbury v. Mer-
chants’ Union Express Co., 50 Barb,
(N. Y:) 158; Stevens v. Davison, 18
Gratt. (Va.) 819.

7See Gregory v. Gregory, 33 N. Y.
Superior 39; Turnbull v. Prentiss
Lumber Co., 55 Mich. 387; Farmers’
Loan & Trust Co. v. Chicago & A. Ry.
Co., 27 Fed. Rep. 146.

® Nichols v. Perry Patent Arm Co.,
11N, J. Eq. 126.
160 RECEIVERS OF CORPORATIONS.  §§ 184-187

§ 184. Receivership on repeal of charter.—The legislature
has the right to appoint a trustee to take the assets and
manage the affairs of a corporation whose charter has been
repealed, in conformity with the general just rules which it
has prescribed, or with the rules of a court of equity, if no
statutory provisions have been enacted.’ As we have seen,
an executive officer may be clothed by the legislature with
authority to appoint receivers.”

$ 185. Defunct corporation.— When a corporation has
been abolished by legislative action, and its powers, prop-
erty, and functions transferred to a new corporation, the
court has no power, on an ex parte application, especially
when the succeeding corporation is not a party to the suit,
to appoint a receiver of the assets of the defunct body.’

§ 186. In dissolution proceedings——In proceedings under
the New York statute to procure the voluntary dissolution
of a corporation, a receiver cannot be appointed before the
entry of the final order for dissolution.* In Louisiana, where
the term of the office of liquidator expires, the court may
appoint a receiver.

$ 187. Statutory receiver on dissolution.—In a case before
the Supreme Court of the United States,° it appeared that
a Missouri statute provided that, upon the dissolution of a
life insurance company, the assets should vest in the super-
intendent of insurance. Dissolution proceedings were con-
summated. Commenting upon the title of the insurance
superintendent, Chief Justice Waite said: ‘“ Relfe is not an
officer of the Missouri State court, but the person desig-
nated by law to take the property of any dissolved life in-

 

‘Lothrop v. Stedman, 13 Blatchf. * Young v. Rollins, 85 N.C. 485.
134. See §§ 105, 176.

? Carey v. Giles, 9 Ga. 253; U.S, 4 Re E, M. Boynton S, & F. Co., 34
Rev. Stat. §5234; Irons v. Manufac- Hun (N, Y.) 369.
turers’ Nat. Bank, 6 Biss. 301; Stan- * Stark v, Burke, 5 La. Ann. 740,
ton v. Wilkeson, 8 Benedict 357. See See Chaps. XVII., XVIII.
§ 172, 2. ® Relfe v. Rundle, 103 U. S, 222,
§ 188 RECEIVERS OF CORPORATIONS. 161

surance corporation of that State, and hold and dispose of
it in trust for the use and benefit of creditors and other
parties interested. The law which clothed him with this
trust was, in legal effect, part of the charter of the corpora-
tion. He was the statutory successor of the corporation for
the purpose of winding up its affairs. As such he repre-
sents the corporation at all times and places in all matters
connected with his trust. He is the trustee of an express
trust, with all the rights which properly belong to such a
position. He is an officer of the State, and as such repre-
sents the State in its sovereignty while performing its pub-
lic duties connected with the winding up of the affairs of
one of its insolvent and dissolved corporations. His au-
thority does not come from the decree of the court, but
from the statute.” *

§ 188. Foreign corporations.—A receiver may be appointed
in New York, at the suit of judgment creditors, over the
effects of foreign corporations, to preserve the property for
the benefit of creditors and shareholders.” Especially will
this be done where the corporation has appeared in the pro-
ceeding. It is, of course, true that the court cannot regu-
late the internal affairs of a foreign corporation, nor can it
exercise visitorial powers over such a corporation, nor en-
force any remedy beyond the bounds of the State; nor can
it annul or forfeit foreign charters.? But this is a different
jurisdiction from that of preserving the property from waste
or destruction, or sequestrating it for the benefit of resident
creditors, In a case which arose in New York, in which it
appeared that the foreign corporation was in process of dis-

 

? Relfe v. Rundle, 103 U. S, 222, 225. * Howell v. Chicago & N. W. Ry. Co.,
See Rundel vy. Life Ass’n of America, 51 Barb. (N. Y.) 379, 383; Redmond
10 Fed. Rep. 720. v. Enfield Mfg. Co., 13 Abb. Pr. N. S.

2 De Bemer v. Drew, 57 Barb. (N. (N. Y.) 332; Silver Lake Bank v. North,
Y.) 438; Murray v. Vanderbilt, 39 4 Johns. Ch. (N. Y.) 371; Merrick v.
Barb. (N. Y.) 140; Redmond v. Hoge, Van Santvoord, 34 N. Y. 208.

3 Hun (N. Y.) 171. See Chap, XVI.
11
162 RECEIVERS OF CORPORATIONS, § 189

solution in its own State, but its assets in New York were
in jeopardy by reason of the insolvency of its officers, the
jurisdiction to appoint a receiver was sustained.'| In New
Jersey the court will appoint a receiver auxiliary to the pro-
ceeding instituted against a foreign corporation in the State
which created it, and may properly invest him with the same
powers, as far as they are necessary to the collection and re-
covery of its assets, that would be granted to the receiver of
a domestic corporation.? In a case which arose in Maine,?
it appeared that receivers of a corporation had been ap-
pointed in the home jurisdiction in New York in dissolu-
tion proceedings, but the corporation was not so far extinct
as not to be amenable to the process of the courts in the
State of its creation. The creditor in Maine had served
trustee process upon a debtor of the corporation prior to
the appointment of the receiver, and the court held that
this creditor's lien would not be disturbed.

In Rhode Island a foreign corporation is not a “resi-
dent” of that State within the meaning of the statute* au-
thorizing the appointment of a receiver of a resident
debtor.®

$ 189. Foreign receiver recognized by comity.—The general
rule undoubtedly is, that a receiver cannot sue in a foreign
State as a matter of right.° His legal authority is co-ex-
tensive only with the jurisdiction of the court by whom he
was appointed.” The analogy of a voluntary alienation of

 

_'Redmond v. Hoge, 3 Hun (N. Y.)
171. See § 234. 7
* National Trust Co. v. Miller, 33 N.

Needles, 52 Mo. 17; Hope Mutual Life
Ins. Co, v. Taylor, 2 Rob. (N. Y.) 278;
Brigham v. Luddington; 12 Blatchf.

J. Eq. 159. 237; Hazard v. Durant, 19 Fed. Rep.
* Hunt v. Columbian Insurance Co., 471; Warren v. Union National Bank,
55 Me. 290. 7 Phila. (Pa.) 156. See Taylor v, Co-

4 Pub, Laws R. L, Cap. 723, §2. lumbian Ins, Co., 14 Allen (Mass.)

6 Stafford v. American Mills Co., 13
R. I. 310. See Phillips v. Newton, 12
R. I. 489; Claflin v. Beach, 4 Met.
(Mass.) 392.

6 Farmers’ & Merchants’ Ins, Co, v.

353-

” See Second Nat. Bank v. New York
Silk Mfg. Co., 11 Fed. Rep. 535; War-
ren v. Union Nat. Bank, 7 Phila. (Pa.)
156. See § 234.
§ 189 RECEIVERS OF CORPORATIONS, 163
property by a natural person being effectual everywhere,
while a transfer of the title 2 zuvztum is valid only
within the local jurisdiction, may be recalled. In Booth v.
Clark’ the United States Supreme Court said: “We
think that a receiver has never been recognized by a for-
eign tribunal as an actor in a suit. He is not within that
comity which nations have permitted, after the manner of
such nations as practice it, in respect to the judgments and
decrees of foreign tribunals, for all of them do not permit
it in the same manner and to the same extent, to make
such comity international or a part of the laws of nations.” ”
Upon principles of comity, however, a foreign receiver may
be recognized and allowed to protect or enforce the inter-
ests of the corporation of whose affairs he is the guardian.®
But comity would not require the courts to.permit the ex-
ercise of such privileges to the detriment of home citizens
who are pursuing appropriate legal remedies in their own
courts. In Planters’ Bank v. Bass,’ the court held that trus-
tees, appointed under a law of another State to take charge
of the assets, collect the debts, etc., of a dissolved corpora-
tion, may sue a debtor of a corporation in another State.®
Adopting this language in a later case, the court said that
they could see no reason why the assignee or trustee of an
insolvent foreign corporation should not sue in the courts

 

117 How. 335. 86°Pa. St. 291; Runk v. St. John, 29

2 See s. Pp. Moseby v. Burrow, 52
Texas 403; Central Trust Co. v. Wa-
‘bash, St. L. & P. Ry. Co., 1 Railw.
& Corp. L. J. 12; 8. C. sub nom. At-
kins v. Wabash, St. L. & P. Ry. Co.,
‘29 Fed. Rep. 161; Day v. Postal Tele-
‘graph Co,., 66 Md. 360. See Relfe
v. Rundle, 103 U. S. 222; Parsons v.
Charter Oak Life Ins. Co., 31 Fed. Rep.
‘308; and the comments in the latter
case upon Booth v. Clark; examine
also Hurd v, City of Elizabeth, 41 N.

Let.
: 3 Bagby v. Atlantic, M. & O. R. Co.,

Barb. (N. Y.) 585; Metzner v. Bauer, 98
Ind. 425; Bank v. McLeod, 38 Ohio St.
174; Lycoming Fire Ins. Co. v. Wright,
55 Vt. 526; McAlpin v. Jones, 1o La.
Ann. 552; Hurd v. City of Elizabeth,
41 N. J. L.1; Wilmer v. Atlanta, etc.

*R.R, Co., 2 Woods 418. See Bidlack

v. Mason, 26 N. J. Eq. 230; Ellis v.
Boston, etc. R.R. Co., 107 Mass. 1.

4 Hunt v. Columbian Insurance Co.,
55 Me. 298.

52 La. Ann. 431. /

6 See Bank of Augusta v. Earle, 13
Peters 519.
164 RECEIVERS OF CORPORATIONS.  §§ 190-192

of Louisiana! In Wilmer v. Atlanta & Richmond Air
Line Railway Company,’ this language is used: “ We think
the courts of other jurisdictions would feel constrained, as
a matter of comity, to afford all necessary aid in their power
to put the receiver of the court in possession.” This doc-
trine is rapidly superseding Booth v. Clark.

$ 190. Conflicting receivers.—When it is represented that
the trust property has fallen into the hands of two different
receivers, accountable to three different courts, to the mani-
fest detriment of the trust estate, that fact of itself was con-
sidered a sufficient reason for the appointment of a receiver
of the whole property, if the court had jurisdiction to make
such appointment.’ Fractions of a day may be considered
in determining the priority of the appointment of receivers.*

$ 191. Receiver and injunction.—The authority to be ex-
ercised in the appointment of a receiver of a corporation
has been fitly characterized as ‘‘a delicate one,” not to be
resorted to until the court is possessed of all the facts of the
case, as the effect of the appointment is to take the prop-
erty out of the hands and control of the persons to whom
the stockholders had confided it.” It by no means follows
that because an injunction is granted, a receiver should be
appointed. The applications for these forms of relief raise
independent questions. For instance, circumstances may
call for the suspension of the operations and business of a
bank, while the directors then in charge of its affairs may
be entirely free from blame, and in all respects qualified to
wind up its concerns.

 

§ 192, When receiver will not be appointed. Though a
statute may authorize the appointment of a receiver of an

 

' Life Association of America v. Levy, “People v. Central City Bank, 53
33 La. Ann, 1203. Barb. (N. Y.) 412.

22 Woods 419. ° Oakley v. Paterson Bank, 1 Green’s

3 Wilmer v. Atlanta & Richmond Air Ch. (N.J.) 179. See § 170.
Line Ry.Co., 2 Woods 409. See §259.
‘

§ 192 RECEIVERS OF CORPORATIONS. 165

insolvent corporation, yet the courts in New Jersey will
decline to exercise the jurisdiction, even in a case of in-
solvency, if the directors are responsible persons, and are
liquidating the affairs of the corporation to the satisfaction
of the stockholders and creditors other than complainant.
Justice Bradley decided* that an application for the ap-
pointment of a receiver would be overruled where it ap-
peared that the property was in possession of a person not
a party to the suit. In Union Trust Co. v. St. Louis,
Iron Mountain & Southern Railroad Company,’ Justice
Miller held, in an exceptional case, that a court of
equity would not appoint a receiver of a railroad cor-
poration merely upon a showing that there had been a
default in the payment of interest, secured by a mort-
gage of the properties and income of the company, that
upon such default the trustees under the mortgage were
entitled to immediate possession, and that such possession
had been refused... It was considered necessary to show, in
addition to these facts, that ultimate loss would happen to
the beneficiaries under the mortgage, by permitting the
property to remain in the hands of its owners until final de-
cree and sale.* A receiver will not be appointed to super-
sede permanently the managers of a railway, and to take
entire charge of the affairs of the railroad.> It is only ina
strong case, and when the majority are clearly violating the
chartered rights of the minority, and putting their interests
in imminent danger, that a court of equity will, at the in-
stance of a minority of the stockholders in a corporation,
appoint a receiver. A bill containing mere general charges
of fraud, illegality, or mismanagement is demurrable.®
Where the two owners of the capital stock of a corpora-

 

2 City Pottery Co. v. Yates, 37 N. J. 4See Williamson v. New Albany, etc.

Eq. 543. R.R. Co., 1 Biss. 198.
? Searles v. Jackonsville, P. & M. 5 Del., Lack. & W. R.R. Co. v. Erie
R.R. Co., 2 Woods 626. Ry. Co., 21 N.J. Eq. 298. See Chap.XI1t

34 Dillon 114. 6 Hand v. Dexter, 41 Ga. 454.
166 RECEIVERS OF CORPORATIONS. $ 193
tion disagree concerning an annual statement, and one of.
them assumed control of the corporate affairs to the ex-
clusion of the other, this was not considered as ground for
a receiver! That an insurance company has ceased to do
business as such, that it has reinsured its risks, and that. its
officers are engaged merely in collecting its assets and pay-
ing its debts, are not sufficient. reasons for appointing a re-
ceiver, or issuing an injunction.? A receiver will not be
appointed on a bill filed by one stockholder of a company
against a director of the company, to take charge of moneys
alleged to have been improperly received and retained by
the said director, no apprehension of loss being alleged in.
the bill, and the answer setting forth that the money was
loaned to the director by the board of directors? An
order for an injunction and receiver will not be made in an
improper case, even on the consent of parties, especially
where the rights of third parties may be concerned. The
corporation itself cannot usually apply to be placed in the
hands of a receiver.®

$ 193. Denial of equities by answer.—It was urged before
Justice Woods at circuit,® that a plaintiff is never en-
titled to a receiver when the equities of the case are fully
and fairly denied by the sworn answers. It was considered,
however, that this was true only when the motion for a re-
ceiver was heard on bill and answer. When there was other
evidence than the bill to support the application, the court
would consider whether the additional evidence did not

 

‘Einstein v. Rosenfeld, 38 N. J. Eq.
309.

*Streit v. Citizens’ Fire Ins. Co., 29
N. J. Eq. 21.

8 Hager v. Stevens, 2 Halst. Ch. (N.
J.) 374.

4 Whelpley v. Erie Railway Co., 6
Blatchf. 271. A corporation may be
permitted to defeat a creditor’s applica-
tion for a receiver by giving security

for any recovery that may ultimately be .
had against it. Barclay.v. Quicksilver
Mining Co., 9 Abb, Pr. N.S. (N. Y.)
283,

5 Kimball v. Goodburn, 32 Mich. ro.
But see §276; Wabash, St. L. & P.
Ry. Co. v. Central Trust Co., 22 Fed.
Rep. 272.

®Allen v. Dallas & Wichita R.R.
Co., 3 Woods 332.
167

§$ 194, 195 RECEIVERS OF CORPORATIONS.

Overcome the denials of the answer, and if it did so, the re-
ceiver would be appointed notwithstanding such denials.}

$ 194. Disqualifications of receiver.—In a case which arose
in Illinois, it was held to be a fatal objection to the person
appointed receiver, that he was not disinterested, in that he
was the legal adviser of the complainant, and framed the
bill, and was also a legal adviser of the corporation, and one
of its largest creditors. These facts were said to disqualify
him, and Justice Breese said he should not have been ap-
pointed.” But this question of the selection of a receiver
is generally discretionary with the court, and not, essen-
tially, jurisdictional. It may be injudicious, but it is not
unlawful to appoint as receiver of a bank one of its late
officers? Allusion has been made to this branch of our
subject,* and we will not therefore pursue it further.

$ 195. State receiver of national bank.—A receiver will be
appointed by a State court on behalf of a judgment creditor
to take possession of the assets of a national bank that is
insolvent and in process of liquidation, where the equitable
assets of the bank are endangered. The creditor is not
bound to await the appointment of a receiver on a bill filed
in the Federal courts, though the State receiver may be
superseded by such an appointment.® While the national
banking act confers upon the comptroller of the currency the
power, in certain contingencies, to appoint a receiver, yet in
cases not within the provisions of that act, a national bank
may be proceeded against the same as any other debtor.®

 

Citing Thompsen v. Diffenderfer, 1 ’ Matter of Bowery Bank, 16 How.

Md. Ch. 489; Simmons v. Henderson,
Freem. Ch. (Miss.) 493; Henn v.
Walsh, 2 Edw. Ch. (N. Y.) 129; Bu-
chanan v. Comstock, 57 Barb. (N. Y.)
568 ; Fairbairn v. Fisher, 4 Jones Eq.
(N. C.) 390; Callanan v. Shaw, 19
Iowa 183; Rhodes v. Lee, 32 Ga. 470.

? Baker v. Backus, 32 Ill. 115. See

§ 171.

Pr. (N. Y.) 56.

4See § 171.

5 Merchants’ & Planters’ Nat. Bank
v. Trustees of Masonic Hall, 63 Ga.
551. See May v. Printup, 59 Ga.
128,

‘Irons v. Manufrs. Nat. Bank, 6
Biss. 301.
168 RECEIVERS OF- CORPORATIONS. $$ 196-198

$ 196. Corporation in character of receiver.— Whether the
dissolution of a corporation is brought about by a judgment
of a court, or is the result of a lawful act of legislation, it is
reasonable that suitable provision for the administration of
the assets should be made, and a corporation may be ap-
pointed receiver as well as a natural person.’ In New
York, as we have seen, a receiver of a corporation need
not necessarily be a natural person; a corporate body may

be appointed receiver of another corporation that has be-
come insolvent.’

$ 197. Protecting receiver from interference.—In appoint-
ing a receiver to close up the affairs of a corporation, it is
competent for the court to enjoin the officers and directors
from collecting the assets of the corporation, or interfering
with the property affected by the receivership.’ ‘There is
no question,” says Romilly, J., in Ames v. Trustees of Birk-
enhead Docks,* “but that this court will not permit a re-
ceiver appointed by its authority, and who is therefore its
officer, to be interfered with, or dispossessed of the property
he is directed to receive, by any one, although the order ap-
pointing him may be perfectly erroneous, This court re-
quires and insists, that application should be made to the
court for permission to take possession of any property of
which the receiver either has taken or is directed to take
possession.” ®

$ 198. Laches affecting appointment.—If a creditor permits
his application for a receiver to lie dormant for months,
until a similar application has been made in the interest of
another creditor, he will be postponed. The rule applied

 

1 Western N. C. R.R. Co. v. Rollins, graph Co., 66 Md. 368; Fisher v. An-

82 N. C. 530. drews, 37 Hun (N. Y.) 180, See § 170.
2 In re Knickerbocker Bank, 19 Barb. —* 20 Beav. 353.
(N. Y.) 602, See §171. 5s, Pp, Keokuk Northern Line Packet

® Morgan v. New York & Albany R. Co. v. Davidson, 13 Mo, App. 565.
Co., 10 Paige (N. Y.) 290; Attorney ° National Mechanics’ Banking Assn.
General v. Guardian Mutual Life Ins. v. Mariposa Co. 60 Barb, (N. Y.)
Co., 77 N. Y. 277; Day v. Postal Tele- 423.
§ 198 RECEIVERS OF CORPORATIONS, 169

to dormant executions governs by analogy.’ And where
the notice of motion for the appointment of a receiver is
fraudulently suppressed by any officer, the corporation may,
as already shown, be subsequently heard, but unreasonable
delay on its part in making the motion to vacate the ap-
pointment of the receiver will be regarded as acquiescence
in the appointment? Where the misconduct which con-
stitutes the ground of the application happened several
years before the application, and no present trouble is
threatened, a receiver will not be appointed ;* and, gener-
ally speaking, the right to obtain the appointment of a re-
ceiver on a particular ground may be lost by laches, acqui-
escence,* or participation by the plaintiff in the transaction
which constitutes the basis of the application.

 

1 See § 246. 4See Kean v. Colt, 5 N. J. Eq. 365;
* Allen v. Dallas & Wichita R.R.Co., Hyde Park Gas Co. v. Kerber, 5 Bradw.
3 Woods 316. (IiL.) 132; Gray v. Chaplin, 2 Russ. 126;

3 Kean v. Colt, 5 N. J. Eq. 365. Hager v. Stevens, 6 N. J. Eq. 374.
5 q g q
CHAPTER X.

TITLE, POWERS, DUTIES, AND LIABILITIES OF RECEIVERS.

§ 199. Nature of receiver’s title.
200, Status of temporary receiver.
201. Qualification of receiver.

202. Title to real estate upon disso-
lution,

Appointment does not effect dis-
solution.

Duty of receiver.

To whom accountable.

Official covenants.

Liability for rent.

Authorized corporate acts bind
receiver,
Transactions
ceiver,
Relation of receiver to creditors

and stockholders.

Discretionary power of receiver.

203.

204.
205.
206.
207.
208.

209. avoided by re-

210.

211.

 

Power to compromise claims.

Resisting claims.

Receiver completing contract of
insolvent corporation.

Continued use of franchises.

When receiver will not be al-
lowed to continue business.
Mandamus not proper to compel
operation of railroad.

Levying assessments.

Election of directors after re-
ceivership.

220. Purchaser at receiver’s sale.

221, Investment and care of fund—
Payment.

Discharge of receivers.

Receiver’s compensation and ex-
penses,

§ 212.
213.
214.

215.
216,

217.

218.
219.

222,
223.

$ 199. Nature of receiver’s title—Upon the appointment
of a receiver of an insolvent corporation, the title to its
property is divested by force of law.’ As a consequence, the
receiver should act, contract, and convey in his own name.
The use of the name of the corporation is unnecessary.? The
receiver is not created by the corporation, nor does he de-
rive his power or his title from it, but he is brought into
existence by the same authority that gave life to the corpo-

 

1 Freeholders of Middlesex Co. v.
State Bank at New Brunswick, 30 N,
J. Eq. 301.

* Hoyt v. Thompson, 5 N. Y. 320.
In Receivers v. Paterson Gas Light Co.,
23 N. J. Law 292, Chief Justice Green
said: “ The assignment to the receivers,

being by operation of law, passes the
rights and property of the corporation
precisely in the same plight and condi-
tion, and subject to the same equities,
as the corporation held them.” See
§§ 224, 225.
§ 199 RECEIVERS. I7I

ration. He is invested with title by the act of the law.
He is a creation of the law for the protection of the rights
of creditors, and must necessarily be clothed with thcir at-
tributes and equities to accomplish the purpose of his crea-
tion. He represents both the corporation and its credit-
ors, and is invested with the rights and powers of both, so
far as may be necessary to perform his functions.'. A de-
cree appointing a receiver of a dissolved corporation vests
in him all its property, assets, and effects for distribution,
and a judgment creditor cannot take the property on exe-
cution.? A permanent receiver is absolutely vested with
all the assets of the corporation, and has full power to sell
and dispose of the same and settle up its affairs. He be-
comes possessed of any right of action, including any assign-
able demand in tort, e. g., conversion of personal property
of the corporation,’ which that body was entitled to assert at
the time of hisappointment.6 The appointment of a receiver,
as we shall presently see, does not change the rights or con-
tracts of acorporation." In the language of Lord Hardwicke,
the appointment “ does not at all affect the right.”® “The
appointment of a receiver,” said Johnson, P. J., ‘could not
operate to change the nature or terms of these agreements.
Courts have no power, any more than legislatures, to
change and impair the essential obligations of a valid con-
tract, and to convert a limited and conditional obligation

 

' National Trust Co, v. Miller, 33 N. * Brouwer v. Hill, 1 Sandf. (N. Y.)
J. Eq. 158. 629; Gillet. v. Fairchild, 4 Denio (N.
? Atty. Genl. v. Guardian Mut, Life Y.) 80. In New York the receiver of
Ins. Co., 77 N. Y. 272. See Kimball v. an insolvent corporation ‘has _all the

Ives, 30 Hun (N. Y.) 568. powers and authority conferred by law
8 See Chapman v. Douglas, 5 Daly. upon trustees of insolvent debtors, and
(N. Y.) 244. is subject to the duties and obligations

* Verplanck v. Mercantile Ins. Co,, 2, imposed upon them. Jz ve Van Al-
Paige (N. Y.) 438; S. P. Second Nat. len, 37 Barb. (N. Y.) 228.

Bank v. New York Silk.Manf. Co., 11. 7 Williams v. Babcock, 25 Barb. (N.
Fed. Rep. 535. Y.) 109; Savage v. Medbury, 19 N. Y.
5 Gillet v. Fairchild, 4 Denio (N.Y.) 32; Moise.v. Chapman, 24 Ga. 249.,

80; Terry v. Bamberger,14 Blatchf. 234. * Skip v. Harwood, 3,Atk. 564.
172 RECEIVERS. § 200
into an unconditional one.”? In Devendorf v. Beardsley,”
James; J., said: “If a note in the hands of the corpora-
tion was void, or incapable of enforcement, by reason of
fraud or illegality in its procurement or inception, passing
into the hands of a receiver does not purge it of those de-
fects.” The receiver of an insolvent national bank, we may
observe, holds only the estate and title of the bank in its
assets, and he has ordinarily no greater rights in enforcing
their collection than the bank itself would have had.? The

receiver takes title subject to any existing lien.*

§ 200. Status of temporary receiver.—In a recent case be-
fore the New York Court of Appeals it was stated that a
temporary receiver in a dissolution action was not vested
with the title to the property of the corporation; the cor-
poration did not become divested of its property until final
judgment of dissolution and the appointment of the final
receiver. Earl, J., observed: “The temporary receiver was
not a trustee for the creditors of the corporation, but he was
a mere care-taker, custodian, and manager of its property
and franchises, under the direction of the court, during the
pendency of the action, having lawful possession of the prop-
erty ; and if a trustee in any sense, he was a trustee for the
corporation.” * In an earlier case in the same State this lan-
guage is used concerning a receiver fendente lite: ‘The
title remains in those in whom it was vested when the ap-
pointment was made.”*® There can be no temporary re-

 

1 Williams v. Babcock, 25 Barb. (N.
Y.) 120; Ss. P. Savage v. Medbury, 19
N. Y. 32.

2 23 Barb. (N. Y.) 656, 659.

3 Casey v. La Société de Crédit Mo-
bilier, 2 Woods 77.

4See Second Nat. Bank v. New
York Silk Manufacturing Co, 11
Fed. Rep. 532; /# ve North American
Gutta Percha Co., 17 How. Pr. (N. Y.)
549; Gere v. Dibble, 17 How. Pr. (N.

Y.) 31; Rich v. Loutrel, 18 How. Pr.
(N. Y.) 121; Bell v. Shibley, 33 Barb.
(N. Y.) 610; Snow v. Winslow, 54
Iowa 200.

® Herring v. N. Y., Lake Erie & W.
R.R. Co., 105 N. Y. 371. Compare
Ellis v. Boston, H. & E. R.R. Co., 107
Mass. 1, 28; /# ve Colvin, 3 Md. Ch.
Dec. 278; Ex parte Dunn, 8 S.C. 207.

* Keeney v. Home Insurance Co., 71
N. Y. 401.
§$§ 201, 202 RECEIVERS.

173
ceiver appointed in voluntary dissolution proceedings in
New York State,’ though in proceedings instituted by a
creditor a temporary receiver may be had.2 Where the
People sue in that State to annul a corporate franchise an
injunction may issue pending the action ;* and by a recent
statute, where the legislature have annulled or dissolved a
corporate charter, a temporary receiver, who shall also be
the permanent receiver, may be appointed.*

§ 201. Qualification of receiver.—The title of the receiver
usually relates to the time of his appointment rather than
to the date of his qualification.® But in statutory dissolu-
tion proceedings in New York the receiver's title does not
vest until the filing ® of the bond, and a creditor may acquire:
a lien by levy or attachment between the date of the ap-
pointment and the giving of the security.” Usually the re-
ceiver need not be sworn.®

§ 202. Title to real estate upon dissolution The common-
law rule, that upon the dissolution of a corporation its real
property reverted to the original grantors or their heirs, is
in the main obsolete in this country. Thus in New York,
upon the dissolution of a corporation, the title to all its
property, whether real or personal, vests in the receiver of

 

' Matter of French Manfg. Co., 12
Hun (N. Y.) 488; Chamberlain v.
Rochester S. P. V. Co., 7 Hun (N. Y.)
557; Matter of E. M. Boynton Saw, etc.
Co., 34 Hun (N. Y.) 369; Matter of
Waterbury, 8 Paige (N. Y.) 380.

2.N. Y. Code Civ. Pro. § 1788.

3 Ibid. § 1802.

4See N. Y. Law 1886, ch. 310;
People v. O’Brien, 45 Hun (N. Y.) 519,
now pending on appeal.

5 See Steele v. Sturges, 5 Abb. Pr.
(N. Y.) 442; Matter of John Berry,
Receiver, 26 Barb. (N. Y.) 55; Rutter
y. Tallis, 5 Sandf. (N. Y.) 610. Contra
Rich v. Loutrel, 18 How. Pr. (N.Y.) 122.

5 Official bonds must now be re-
corded in New York. See Laws N. Y.
1887, ch. 372.

7 Chamberlain v. Rochester S. P. V.
Co., 7 Hun (N. Y.) 557; but see Mat-
ter of John Berry, Receiver, 26 Barb.
(N. Y.) 55.

® American Bank v. Cooper, 54 Me.
441. It would seem that in New York
a receiver of a corporation in dissolu-
tion proceedings is required to take the
same oath as the trustee of an insol-
vent debtor. 2R.5.41;3 R.S., 7thed.,
p. 2400; N. Y. Code Civ. Pro. § 1788,
See 19 Abb. N.C. (N. Y.) 361, zore,
RECEIVERS. $$ 203, 204

174

the corporation for the benefit of the creditors and share-
holders.’

§ 203. Appointment does not effect dissolution.—As is else-
where explained,? the appointment of a receiver does not,
of itself, have the effect of dissolving the corporation,’ nor
does it preclude a party from suing the association in rela-
tion to matters which took place prior to the appointment
of the receiver.* All corporate action is not necessarily
suspended.® The appointment merely displaces the direct-
ors and substitutes the officer of the court as regards the
general control of the corporate assets.°®

$ 204. Duty of receiver.—‘‘ The first duty of receivers of in-
solvent corporations,” observes Mr. High, ‘‘is to faithfully
collect and justly disburse the assets of the corporation,
which constitute a trust fund for its creditors. In the dis-
charge of this duty, they are properly vested with a certain
degree of discretion, in the compromising and settlement
of demands against the corporation ; but, in the exercise of
their discretionary powers, they should keep constantly in
view the interests of those whom they represent, and for
whom they act.”* It may be noted that receivers in mat-
ters involving the exercise of judgment and discretion may
appeal to the court for instructions and guidance,® and thus
escape, in large measure, personal responsibility for any loss
resulting from following the line of action to which judicial

 

1 Owen v. Smith, 31 Barb. (N. Y.)
641. See Beal v. New York Cent. & H.
R. R.R. Co., 41 Hun (N. Y.) 179. See
§ 349. In Heath v. Barmore, 50 N. Y.
302, the court held that the rule of the
common law, that real estate held by a
corporation at the time of its dissolution
reverts to the grantor, does not prevail
in New York State in respect to stock
corporations. Where lands are conveyed
absolutély to a corporation having
stockholders, no reversion or possibility
of a reverter remains in the grantor,

* See Chap. XVIL

3 Moseby v, Burrow, 52 Texas 396;
Pringle v. Woolworth, go N. Y. 502.

a Kincaid v. Dwinelle, 59 N. Y. 548.
See § 215.

® Stevens v. Davison, 18 Gratt. (Va.,)
819. See Holland v. Heyman, 60 Ga.
174. .

* Kain v. Smith, 80 N. Y. 469.

" High on Receivers, § 334.

* See Weeks v. Cornwall, 19 Abb.
N.C. (N. Y.) 360.
§ 205 RECEIVERS, tr
sanction was accorded.’ In Demain v. Cassidy,® the court
say of a receiver’s functions: “In the absence of specific
detailed authority over the property, his duties were such
as the law imposed, and that was to take charge of the
property and safely keep it, subject to the further order of
the court.” Where one receiver neglects his duty and his

co-receiver appropriates the funds, both will be liable.?

$ 205. To whom accountable.—The receiver, until fully
discharged, is accountable to the court which appointed
him.* Contempt proceedings will lie against him for a dis-
obedience of its orders.’ Another court will not, as a rule,
institute any investigation as to his trust,® or arbitrarily
take the fund from his possession.*?. ‘The errors or ir-
regular proceedings of the receiver must be carrected by

the court having control of
matters can be set up in an

his action. None of these
action brought by him under

 

1 See J re Van Allen, 37 Barb. (N.Y.)
225; People v. Security Life Ins., etc.
Co., 79 N. Y. 267; Lottimer v. Lord, 4
E. D. Smith (N. Y.) 191; Smith v. N.
Y. Consolidated Stage Co., 18 Abb. Pr.
(N. Y.) 431; Cammack v. Johnson, 2
N. J. Eq. 163; Curtis v. Leavitt, 1 Abb.
Pr. (N. Y.) 274.

255 Miss. 322,

3 Commonwealth v. Eagle Fire Ins.
Co., 14 Allen (Mass.) 344.

“Henry v. Kaufman, 24 Md. 1.
Conkling v. Butler, 4 Biss. 22.

5See Clark v. Bininger, 75 N. Y.
344; People v. Brooks, 40 Mich. 333;
Davies v. Cracraft, 14 Ves. 143; J” re
Bell’s Estate, L. R. 9 Eq. 172; Cart-
wright’s Case, 114 Mass. 239, 240. In
this latter case, Gray, C. J., said: “ The
taking and spending by this receiver
for his own use, whether with or with-
out the concurrence or advice of the
other receivers, of more than $10,000
of the funds in his possession as an
officer and representative of the court,
was a gross breach of trust, tending to

See

bring reproach, disgrace, and distrust
upon the administration of justice, and
was a contempt of the authority of the
court, and punishable, according to
the law of the land and the established
practice of all courts of similar juris-
diction, by fine or imprisonment at the
discretion of the court. The object of
an attachment and commitment for a
gross contempt of this nature being not
merely to compel restoration of the
money illegally taken, but to punish the
offender, the discretion of the court
cannot be controlled by the fact of his’
not having the present means of repay-
ing what he has abstracted.”

® Conkling v. Butler, 4 Biss. 22.

7Galster v. Syracuse Savings Bank,
29 Hun (N. Y.) 594. The courts of
Massachusetts, however, took jurisdic-
tion of a case against a receiver ap-
pointed in a foreign jurisdiction, charg-
ing him with a breach of duty as com-
mon carrier. Paige v. Smith, 99 Mass.
395:
176 RECEIVERS. §§ 206, 207

the direction of the court.”* Hence, when a receiver has
been instructed to sue, he is bound to proceed with his
action, and another court will not restrain him, nor will it
make him a party to a new action and enjoin him.” Soa
mandamus will not issue against a railroad company and
its receiver appointed by another court directing their con-
duct in the management of the road.?

§ 206. Official covenants—Where a receiver acts within
the scope of his official capacity, he is not personally liable.
Thus, where a receiver, acting solely as such, assigned cer-
tain judgments and covenanted as to the amount due there-
on, it was considered that any recourse of the purchaser
must be against the receiver in his official capacity.*

§ 207. Liability for rent.—The’ receiver is not liable for
rent of premises leased to the corporation, unless by some
act he elects to continue the possession.® If he adopts this
latter course, he becomes liable by privity of estate upon
the covenants of the lease, and may be peremptorily ordered
to make payments to the lessor.6 Ruger, Ch. J., said:
“The principles which govern the liability of an assignee
of a lease seem to be applicable to the case of a receiver,
and he would be equitably and legally chargeable with the
payment of rent under a lease for such time as he con-
tinued to occupy the property demised.”* His position
has been said to be analogous to that of an executor who
takes possession and enjoys the occupation of property
held under a lease by his testator. He thereby becomes

 

1 Stewart v. Lay, 45 Iowa 612, *’Commonwealth v. Franklin Insur-
* Winfield v. Bacon, 24 Barb. (N. ance Co., 115 Mass. 278.
Y.) 154. * People v. Universal Life Ins. Co.,
*State v. Marietta & C. Railroad 30 Hun (N. Y.) 142; Woodruff v. Erie
Co., 35 O. S. 154. Railway Co., 93 N. Y. 623.
4Livingston v. Pettigrew, 7 Lans, ” Woodruff v. Erie Railway Co.,, 93
(N. Y.) 405. Compare Ellis v. Little, N.Y. 624.
27 Kans, 707; Newman v. Davenport,
9 Baxter (Tenn.) 538.
§§ 208, 209 RECEIVERS, 177

liable for the payment of the rent accruing during his oc-
cupancy of the premises, according to the terms of the lease
under which it was acquired.'| The assignee of a bankrupt
also occupies an analogous position, and is subject to a
similar liability.

§ 208. Authorized corporate acts bind receiver.—It results
from what has already been stated,” that a receiver cannot
disaffirm authorized acts of the corporate body. Speaking

_of this subject, Bronson, C. J., observes that a receiver “is
as much bound by a settlement which the company was
authorized to make, as was the company itself. It would
be strange indeed if the legal acts of a corporation did not
bind the receiver of its effects. If the rule were not so, no
one would dare venture to deal with a corporation.”?®
Upon the same principle receivers cannot disturb liens upon
the property.* And he cannot retry questions decided ad-
versely to the corporation.’ In the case last cited the court
said : “ Upon no principle can the receiver be permitted to
litigate the same questions again.”

§ 209. Transactions avoided by receiver—As the receiver
now usually represents both creditors and stockholders, it
follows that he may maintain a suit to attack a transaction
entered into by the corporation or its officers, in fraud of
the rights of either of these classes of persons, and that he
may bring an action to recover corporate assets that have
been wasted or misapplied. In New York a receiver of

 

1 Woodruff v. Erie Railway Co., 93 v. Loutrel, 18 How. Pr. (N. Y.) 121;
N. Y. 624; citing Martin v. Black, 9 Bell v. Shibley, 33 Barb. (N. Y.) 610,
Paige (N. Y.) 641. See § 199.

® See § 199. 5 Hopkins v. Taylor, 87 Ill. 436.

* Hyde v. Lynde, 4 N. Y. 387, 392; | ® Attorney General v, Guardian Mu-
Williams v. Babcock, 25 Barb. (N. Y.} tual Life Ins. Co., 77 N. Y. 272; Tuck-
120; Savage v. Medbury, 19 N.Y. ermanv. Brown, 33 N. Y.297; Brouwer
32. v. Appleby, 1 Sandf. (N. Y.) 158; Gillet

4 InrveNorth American GuttaPercha v. Moody, 3 N. Y. 479. Compare
Co., 17 How. Pr. (N. ¥.) 549; Gere v. Leavitt v. Blatchford, 17 N. Y. 528
Dibble, 17 How. Pr. (N. Y.) 31; Rich See §§ 90, 227.

12
178 RECEIVERS. § 210
an insolvent corporation may institute a suit to annul a
mortgage purporting to have been executed by the corpora-
tion, but lacking the consent of the requisite number of
stockholders as required by the charter.t So a receiver may
repudiate an illegally executed contract of the corporation
and reclaim the property.2, Thus where a banking associa-
tion, without proper authority, purchased State stock, the
vendor being aware that it was intended to sell it again, and
certificates of deposit were issued for it and certain mort-
gages held by the bank assigned as security, it was decided
that the transaction was illegal, and the receiver was en-
titled to avoid it.

§ 210. Relation of receiver to creditors and stockholders.—
The receiver of a corporation, as we have shown, acts ina
triple capacity. He represents the corporation,’ and is, also,
as already seen, a trustee for the creditors and for the stock-
holders of the corporation, and is equally bound to guard
and subserve the interests of these different classes of par-
ties.* In New York he is not only a trustee for the creditor
upon whose application he was appointed, but for all the
other creditors of the corporation.®

 

1Vail v. Hamilton, 85 N. Y. 453,
affirming 20 Hun (N. Y.) 355.

2 Talmage v. Pell, 7 N. Y. 328.

3 See §§ 90, 199.

4 Libby v. Rosekrans, 55 Barb. (N.
Y.) 220; Talmage v. Pell, 7 N. Y. 347;
Alexander v. Relfe, 74 Mo. 495; Na-
tional Trust Co. v. Miller, 33 N. J. Eq.
158; Gillet v. Moody, 3 N. Y. 479;
Stokes v. New Jersey Pottery Co., 46
N. J. Law 237; Powers v. C. H. Ham-
ilton Paper Co., 60 Wis. 29; Dane v.
Young, 61 Me. 160, See Sawyer v.
Hoag, 17 Wall. 619; Upton v., Tribil-
cock, 91 U.S. 45.

5 Libby v. Rosekrans, 55 Barb. (N.
Y.) 202. It was observed by the learned
Comstock, J., in Curtis v, Leavitt, 15

N. Y. 44, that a receiver of an insolvent
banking concern “has no interest in, or
power over, the property affected by the
trusts in question, except such as he
derives under the statutes which have
been mentioned. It has been said in
this, as in other cases, that he repre-
sents the creditors and the stockhold-
ers, but for all the purposes of in-
quiry into his title, he really represents
the corporation. He is by law vested
with the estate of the corporate body,
and takes his title under and through
it. It is true, indeed, that he is de-
clared to be a trustee for creditors and
stockholders ; but this only proves that
they are the beneficiaries of the funds
in his hands, without indicating the
§§ 211-213 RECEIVERS. 179

§ 211. Discretionary power of receiver.—A decree against
an insolvent corporation closing up its affairs and appoint-
ing a receiver, which authorizes the latter to compromise in
his discretion with stockholders with regard to the payment
of their subscription, was considered in Illinois to be erro-
neous, and especially so when all the stockholders were not
parties to the proceeding. Each stockholder was said to
have a vested right in the contract for subscription of every

other stockholder.

§ 212. Power to compromise claims.—In New York the
receiver of an insolvent corporation was authorized by the
court to compromise doubtful and disputed claims against
the company by the allowance of such claims as he may
deem just and equitable; also to arbitrate such claims
where arbitration was provided for in the statute; and to
compromise with debtors of the corporation who were un-
able to pay in full? The decision of a receiver upon the
question of the validity of a claim is not final; the creditor
may subsequently proceed to have the validity of his claim
judicially determined in a suit against the corporation.?

§ 213. Resisting claims.—Where a receiver has refused to
allow a claim, and the dispute has been referred to a ref-
eree, it is the duty of the receiver to continue the opposi-
tion to the claim so long as he considers there is a reason-
able chance to render such opposition effectual.4 ‘He is

 

grounds which would be available to
the corporation, if it were still in exist-
ence, solvent, and no recéivership had

sources of his title or the extent of his
powers. If, then, in a controversy be-
tween the receiver and third parties, in

respect to the corporate estate, it is
possible to form a conception of rights,
legal or equitable, belonging to the
shareholders as individuals, which the
corporation itself could not assert in
its own name, the receiver does not
represent those rights. So far as share-
holders are concerned, he can litigate
respecting the fund upon precisely the

been constituted.”

1 Chandler v. Brown, 77 III. 333.

? Matter of Croton Insurance Co,, 3
Barb. Ch. (N. Y.) 642.

* Bank of Bethel v. Pahquioque
Bank, 14 Wall. 383.

4 Atty. Gen}. v. Life & Fire Ins. Co.,
4 Paige (N. Y.) 224.
180 RECEIVERS. § 214

to exercise his best skill, sagacity, and judgment in the dis-
charge of all his duties, and if claims be asserted against the
property in his custody, arising out of transactions which
occurred prior to his appointment, and concerning which
he has no personal knowledge, and which, on examination,
appear to him to be questionable, his duty requires him to
tesolve his doubts against the claimant and in favor of the
trust, and to refuse to recognize the claims as obligations
of the trust until directed to do so by the court.”?

$ 214. Receiver completing contract of insolvent corpora-
tion. —A recetver of an insolvent corporation may complete
zts unperformed contracts, and materials purchased by him
while engaged in so doing cannot be setzed by creditors of
the assoctation.

A case in the Connecticut Supreme Court of Errors fur-
nishes an illustration. The courts of New Jersey appointed
C. receiver of the Watson Manufacturing Company, a New
Jersey corporation. With funds collected by him as such
receiver, C. purchased iron for the construction of a bridge
in Connecticut and took it into that State, employed work-
men, and constructed a bridge pursuant to a contract pre-
viously entered into between the insolvent corporation and
the town of New Haven. A small balance due from the
town of New Haven was attached for a debt against the
insolvent corporation. Though the work was done and the
bills made out in the name of the bankrupt corporation,
yet the materials having been purchased and the labor sup-
plied by the receiver, he was held, as against the creditor of
the corporation, entitled to the compensation for, and profits
arising from, the completion of the contract.? In effect the
arrangement instanced was upheld, though it is to be ob-
served that the issue did not come up in a direct form.

 

4 Lehigh Coal & Nav. Co, v.Central Blake Crusher Co. v. Town of New
Railroad Co., 41 N, J. Eq. 167, 175. Haven, 46 Conn. 473; Cooke v. Town
* See Pond v. Cooke, 45 Conn. 130; of Orange, 48 Conn, 4o9.
§§ 215, 216 RECEIVERS, 181

§ 215. Continued use of franchise—In a case before the
New York Supreme Court, the fact that a corporation had
been adjudged insolvent, and a receiver had been appointed
in an action brought against it, was held not to authorize
the court to restrain the receiver from exercising the cor-
porate franchises in the interest of the corporation where
no forfeiture had been adjudged in an action by the people.’

§ 216. When receiver will not be allowed to continue busi-
ness.—In another case in the same court,” on a motion
made to compel a receiver to continue business, a statute?
was relied upon which seemed to provide that a receiver,
in closing up the affairs of an insurance company, might
accept future premiums and continue the business, etc.,
until an accumulation of funds had resulted sufficient to
meet all the obligations of the company. In denying
a motion made to direct the receiver to continue the
business, the court took the ground that no reasonable
probability existed that the attempt would succeed, and
added: “I do not propose to examine this somewhat
peculiar scheme for having this court, through its officer,
carry on life insurance business. It is certainly undesirable
that this court, or its officer, should be thus engaged,
especially when we consider that in every such case it must
have been already decided that the assets and funds were
not sufficient to justify the further continuance of the busi-
ness, At least, it should appear, from the facts before us
and from the statute, that it is our imperative duty to have
the receiver carry on business before we undertake it.” *
It seems a receiver may continue the publication of a news-
paper in order to preserve the good-will.®

 

* Moran v. Lydecker, 27 Hun (N.Y.)_ v. Atlantic Mutual Life Ins. Co., 77 N.

582. See § 203. Y. 336. Compare McCay v. Black, 14
? People v. Atlantic Mutual Life Ins. Phila. (Pa.) 635.

Co., 15 Hun (N. Y.) 85. 5 See Marten v. Van Schaick, 4 Paige
® Laws of 1869, chap. go2. (N. Y.) 480; Kelly v. Hutton, 17 W.

* People v. Atlantic Mut. Life Ins. R. 425, 427.
Co., 15 Hun (N. Y.) 85. See Atty. Genl.
182 RECEIVERS, §§ 217-220
§ 217, Mandamus not proper to compel operation of rail-
road.—Where a receiver of a railroad company has been
appointed, and is in possession of the road, a mandamus will
not be awarded directing the company and its receiver as
to the operation of the road. The corporation in such a
case is powerless, for its control over the property was
divested by the appointment of the receiver, while the latter
is subject to the order and direction of the court that ap-
pointed him.?
- § 218. Levying assessments.—A receiver of an insolvent
insurance company may levy and collect assessments on
premium notes,® and he may sue in a foreign State to re-
cover assessments upon such notes.? A court of equity may
make a call requiring stock to be paid up.*

§ 219. Election of directors after receivership.—A court of
chancery may order the election of a board of directors not-
withstanding the corporation is in the hands of a receiver.®
This results from the conclusion already stated, that the ap-
pointment of a receiver does not effect a dissolution.* The
court will not, however, in the receivership proceedings,
pass upon any question affecting an adjournment of a
stockholders’ meeting, as such a matter is not germane to
the management of the receivership.”

§ 220. Purchaser at receiver’s sale—Judgment creditors
are at liberty to bid upon and buy the property of a cor-
poration at a receiver's sale,* but the receiver cannot be a

 

1 State v. Marietta & C. Railroad
Co., 35 O. S. 154. See §§ 60, 205,
' 2 Shaughnessy v. The Rensselaer Ins.
Co., 21 Barb. (N. Y.) 605; Embree v.
Shideler, 36 Ind. 423 ; Williams v. Bab-
cock, 25 Barb. (N. Y.) 109; Bangs v.
Gray, 12 N. Y. 477.

® Lycoming Fire Insurance Co. v.
Wright, 55 Vt. 526. See §§ 189,
234.

4 Scovill v. Thayer, 105 U. S. 143;
Glenn vy. Williams, 60 Md. 93. See

Curry v. Woodward, 53 Ala. 371. See
§ 617.

® Lehigh Coal & Nav. Co. v. Central
R.R. Co. of N. J., 35 N. J. Eq. 349.
Compare Stevens v. Davison, 18 Gratt.
(Va.) 819.

° See §§ 36, 203, and Chaps. XVIL.,
XVIII.

* Taylor v. Philadelphia & R. R.R.
Co., 7 Fed. Rep. 381.

* Libby v. Rosekrans, 55 Barb. (N.
Y.) 202,
§ 221 RECEIVERS, 183
purchaser.* His title would be voidable. In some States
a receiver is forbidden by statute from purchasing at his

own sale.

§ 221. Investment and care of fund—Payments.—A receiver
has no authority, without the direction and consent of the
court, to invest the money. In the absence of directions it
is his duty to keep and protect the funds of the corporation
committed to his charge, and to hold them ready for dis-
tribution.? If he uses the money in his private business he
will be held accountable for the profits.? It is a palpable
breach of trust for him to loan it even temporarily.* The
receiver will be punished in contempt proceedings if he
spends the money, and he cannot shield himself by plead-
ing that he has not the present means of repaying what he
has abstracted.’ To escape personal liability for loss a re-
ceiver should deposit moneys in bank in his official capacity,
If the moneys are mingled with his individual funds, or
temporarily placed beyond his control, or deposited for his
individual benefit or advantage, he may be personally liable
for any loss if the bank of deposit should suspend.* If the
receiver mingles the trust funds with his own, or neglects to
account at the proper time, or uses the money, he may be
held liable for interest.’ Where the court has made an order

 

insolvent bank as agent, and the right
to follow the same, see Illinois Trust

1 Jewett v. Miller, 10 N. Y. 402;
Titherington’s Admr. v. Hodge, 81 Ky.

286; Carr v. Houser, 46 Ga. 477.

? Attorney General v, North Ain. Life
Ins. Co., 89 N. Y. 94, modifying 26
Hun (N. Y.) 294. By statute in New
York the order appointing a receiver
must designate one or more places
where the fund shall be deposited. N.
Y. Laws 1883, ch. 378.

5 Battaile v. Fisher, 36 Miss, 321.

4 Utica Insurance Co, v. Lynch, 11
Paige (N. Y.) 522; Attorney General
v. North Am. Life Ins. Co., 89 N. Y. 94.

5 Cartwright’s Case, 114 Mass. 240.
As to mingling funds collected by an

& Sav. Bank v. Smith, 21 Blatchf. 275;
S. C. sub nom. Illinois Trust Sav. Bank
v. First Nat. Bank, 15 Fed. Rep. 858;
Hoffman v. First Nat. Bank, 46 N. J.
Law 604; Thompson v. Gloucester
City Sav. Inst., 6 Cent. Rep. (N. J.)
328; St. Louis & S.F. Ry. Co. v. John-
ston, 27 Fed. Rep. 243.

6 See Drever v. Maudesley, 13 L. J.
Ch. 433; Wren v. Kirton, 11 Ves.
377; Salway v. Salway, 2 Russ. & M.
215, aff'd sub nom. White v. Baugh,
9 Bligh N. S. 181.

‘See Hinckley v. Railroad Co., 100
184 RECEIVERS. §$§ 222, 223

directing the receiver to distribute the fund among the
creditors who have proved their claims, he will be protected
against the demands of other creditors.’

§ 222. Discharge of receivers.—We have seen that a re-
ceiver is usually accountable only to the court that ap-
pointed him. It may be further noted that generally an
absolute discharge is necessary to free him from liability.’
He is, of course, protected where he has distributed the
money under order of the court ;* and the protection will be
extended where the order of appointment is reversed.” The
receiver in a foreclosure case must be discharged upon pay-
ment of the amount found due.®

$ 223. Receiver’s compensation and expenses.— When it
becomes the duty of a court of equity to take property
under its own charge, through a receiver, the property, as
we shall presently show, becomes chargeable with the neces-
sary expense incurred in taking care of and saving it, in-
cluding an allowance to the receiver for his services. He
is, as we have seen, the officer and agent of the court, and
not of the parties ; and it is the right of the court, essential
for its own efficiency in the protection of the property, to
keep it under control until the expenses and allowances are
paid or secured.” The receiver is generally entitled to com-
pensation in proportion to the magnitude of the trust, and
the responsibilities assumed, and duties discharged by him.®

 

U.S. 153, 156, 157; Jz re Carter, 3 § Milwaukie & Minn. R.R. Co. v.
Paige (N. Y.) 146; Hooper v. Winston, Soutter, 2 Wall. 510, 521.

24 Ill. 353; Harman v. Forster, 1 Hog. ™Marrow v. Wood, 56 Ala. 1, 14.
318; Harrison v. Boydell, 6 Sim. 211. See Chap. XIII. As to the compensa-
Compare Trayhern v. Nat. Mechanics’ tion of a receiver of an insurance com-

Bk., 57 Md. 600, pany, and the basis upon which it has
1 Keene v. Gaehle, 56 Md. 343. been estimated, see Attorney General v.
3 See § 205. North American Life Ins. Co., 89 N.
3 State v. Gibson, 21 Ark. 140, Y. 94.
4 Keene v. Gaehle, 56 Md. 343. * Jones v. Keen, 115 Mass. 170; Mc-

' Holcombe v. Johnson, 27 Minn. Arthur v. Montclair Railway Co., 27
353. N. J. Eq. 77; Cowdrey v. Railroad Co.,
§ 223 RECEIVERS. 185

A receiver who, in violation of his trust, enters into a
combination with outsiders to purchase the railroad of
which he is receiver, cannot maintain a bill for a share of
the profits resulting from the purchase.’ The expenses of
a receivership of a national bank, appointed in a creditor’s
suit, contesting a voluntary liquidation of the bank, cannot
be charged upon stockholders as part of their statutory lia-
bility, but must come from the creditors at whose instance
the receiver was appointed.”

 

1 Woods 331. In New York, by stat- This act is held not to apply to receiv-
ute, every receiver of a corporation is ers appointed in mortgage foreclosure
allowed five per cent. on the first one cases. United States Trust Co. v. New
hundred thousand dollars actually re- York, W,S.&B. Ry. Co., ror N, Y. 478.
ceived and paid out, and two and one- =‘ Farley v. St. Paul, M. & M. Ry. Co.,
half per cent. on all sums in excess 4 McCra. 138.

thereof. N. Y. Laws 1883, ch. 378. |” Richmond v. Irons, 121 U. S. 27.
CHAPTER XI.

PROCEEDINGS BY AND AGAINST RECEIVERS.

Status of receiver as litigant.
Receiver suing in corporate
name.
Permission to bring suit.
Receiver as complainant,
Member suing for receiver.
Receiver’s discretion as to suit.
Control of courts over suits.

Forms of procedure bind re-
ceiver.

Ordinary rules of law control.

When receiver cannot sue,

Foreign receiver.

Suits for subscriptions.

Actions against receivers —
Trespassers.

Protecting receiver—Leave to sue.

What constitutes interference
with receiver.

§ 224.
225,

226.
227,
228.
229.
230.
231.

232.
233.
234.
235.
236.

237.
238.

 

Creditors’ remedies against re-
ceivers.

Receiver’s liability as carrier.

Suit for tort against receiver—
Judgment.

Personal liability of assignee or
receiver.

Personal liability of committee
of creditors.

Ordering payment of claims by
receiver.

Collateral attack on receiver’s
appointment.

Removal of receiver.

Collusive receivership.

Abatement of suits.

Substitution of receiver.

Effect of judgment.

Right of appeal.

§ 239.

240.
241.

242.
243.
244.
245.

246.
247.
248.
249.
250,
251,

$ 224. Status of receiver as litigant—Manifestly a re-.
ceiver becomes entitled to enforce the rights of action that

were vested in the corporation.?

Whether his own name

should be employed in the litigation or that of the corpora-

tion, will be presently considered.?

A receiver may sue in

trover for the conversion of corporate property,® or upon a

 

‘White v. Haight, 16 N. Y. 310;
Brouwer v. Hill, 1 Sandf. (N. Y.) 629;
Osgood v. Laytin, 48 Barb. (N. Y.)
464; Freeholders of Middlesex Co, v.
State Bank, 30 N. J. Eq. 311; Hoyt v.
Thompson, 5 N. Y. 320; Owen v.
Smith, 31 Barb. (N. Y.) 641; National
Trust Co. v. Miller, 33 N. J. Eq. 158;

Atty. Genl. v. Guardian Mut. Life Ins,
Co., 77 N. Y. 272. Compare Coope v,
Bowles, 42 Barb. (N. Y.) 87. See
§ 199.

® See § 225.

® Terry v. Bamberger, 14 Blatchf.
234; Gillet v. Fairchild, 4 Denio (N.
Y.) 80,
§ 225 PROCEEDINGS BY AND AGAINST RECEIVERS. 187
note given to the company,’ and generally for all moneys
due to the corporation.? Thus, Ingraham, J., observed in
the case last cited: ‘‘ The receivers, by virtue of their gen-
eral powers, have authority to sue for all moneys due to the
company, and for all property improperly disposed of in
violation of the rights of either creditors or stockholders,
for the purpose of paying the debts and dividing the sur-
plus, if any, among the stockholders.” In Pennsylvania a
receiver may be substituted in an attachment action brought
against the corporation anterior to the appointment of the
receiver.® But a receiver cannot interfere in a case until he
has been made a party by order of the court. Hence,
when an action has been brought against a corporation, and
a receiver is subsequently appointed, he cannot make a mo-
tion in the action, or conduct an appeal, in the absence of
such an order.*

$ 225. Receiver suing in corporate name.—There seems to
be authority holding that a receiver of a corporation can-
not, in the absence of statutory authority, sue in his own
name, but must invoke the name of the corporation.’ It

 

1 White v. Haight, 16 N. Y. 310; 66 N. C. 252. See, however, Yeager

reaff’d* Bell v. McElwain, 18 How. Pr.
(N. Y.) 150.

2 Osgood v. Laytin, 48 Barb. (N. Y.)
464.

+ Pickersgill v. Myers, 99 Pa. St. 602.

4 Tracy v. First Nat. Bank of Selma,
37 N. Y. 523. The receiver of a bank-
ing corporation is not the successor in
office of the president, and a suit can-
not be continued by him in the name
of the president. Talmage v. Pell, 9
Paige (N. Y.) 410.

5Herron v. Vance, 17 Ind. 597;
Manlove v. Burger, 38 Ind. 211; Gar-
ver v. Kent, 70 Ind. 428; Harrell v.
Kent, 71 Ind. 602; Moriarty v. Kent,
71 Ind. 601; Ingersoll v. Cooper, 5
Blackf. (Ind.) 427; Freeman v. Win-
chester, 18 Miss. 577; Battle v. Davis,

v. Wallace, 44 Pa. St. 294; Kennedy
v. Gibson, 8 Wall. 498; Bank v. Ken-
nedy, 17 Wall. 21; Wilson v. Allen, 6
Barb. (N. Y.) 545; Mann v. Pentz, 3
N. Y. 422. But see Helme v. Little-
john, 12 La. Ann. 298; Baker v. Cooper,
57 Me. 388; Wray v. Jamison, 10
Humph. (Tenn.) 186. Compare gen-
erally Singerly v. Fox, 75 Pa. St. 114;
De Wolf v. Sprague Manuf. Co., 11 R.
I, 380. In Wilson v. Allen, 6 Barb. (N.
Y.) 545, Willard, J., said: “In equity,
an order for a receiver, when his ap-
pointment is completed, vests in him
all the property and effects, subject
to the order, without an assignment.
(Mann v. Pentz, 2 Sandf. Ch. (N. Y.)
257, reversed 3 N.Y. 415.) Atlaw,an,
ordinary receiver was not considered
188 PROCEEDINGS BY AND AGAINST RECEIVERS,

§ 225
is impossible to reconcile the authorities in other States
with many of the cases just cited! In Maine, receivers of
a bank were permitted to maintain forcible entry and de-
tainer proceedings for the real estate of the bank.? Wal-
ton, J., said: “ The object of the suit is to obtain posses-
sion of the real estate in question for the receivers, and not
for the bank. A suit in the name of the bank would not
accomplish that purpose: for the execution, or writ of
possession, if one was obtained, would require the officer
executing it to put the bank, and not the receivers, into
possession. As it is the receivers that are seeking to ob-
tain possession, we think the suit is properly brought in
their names. It is the direct road to the end in view.”?
And, in Illinois, a receiver of the assets of a bank may
prosecute a suit to recover money due to it without making
the bank a party to the suit. Under statutory provisions
in Indiana,®> Connecticut,6 Maryland,” Ohio,’ and New
York,’ the right of a receiver to maintain suit in his own
name seems to be clear.” The statutory policy of many of

 

as having the legal title, so as to au-
thorize him to institute a suit in his own
name for any debt or demand trans-
ferred to him, or to the possession or
control of which he was entitled under
an order of this court, until the act of
April, 1845.” See Wilson v. Wilson, 1
Barb. Ch. (N. Y.) 594, per Chancellor
Walworth. In Attorney General v.
Atlantic Mutual Life Ins. Co., 100 N,
Y. 279, 283, Earl, J., said: “It is not
a general rule that a receiver can only
take title from an insolvent person or
corporation by a formal conveyance.
The general rule is otherwise, as in the
case of receivers appointed in supple-
mentary proceedings, and receivers and
assignees appointed in bankrupt pro-
ceedings, and in nearly all cases of the
appointment of receivers of insolvent
corporations. The title of receivers in
such cases to real and personal prop-

erty, both in this country and in Eng-
land, is generally statutory, and not
under any formal conveyance.”

1See Wray v. Jamison, 1o Humph.
(Tenn.) 186; Helme v. Littlejohn, 12
La. Ann. 298.

? Baker v. Cooper, 57 Me. 388. But
see American Bank v. Cooper, 54 Me.
438.

* Baker v. Cooper, 57 Me. 388, 389.

‘Iglehart v. Bierce, 36 Ill. 133.

° Manlove v. Burger, 38 Ind. 211.

‘ Terry v. Bamberger, 44 Conn. 558.

* Hayes v. Brotzman, 46 Md. 519.

*Miami Exporting Co. v. Gano, 13
Ohio 269.

* Nathan v. Whitlock, 9 Paigg (N.
Y.) 152; Wilson v. Allen, 6 Barb.
(N. Y.) 545. Compare Brinckerhoff v.
Bostwick, 88 N. Y. 61.

© Speaking of a receiver of a national
bank, Justice Swayne said, in Kennedy
§ 226 PROCEEDINGS BY AND AGAINST RECEIVERS. 189
the States, and the general tendency of the modern author-
ities, to consider a receiver as of more legal importance than

a mere custodian, stakeholder, or bailiff, and to regard him

as a depository of title, is to be commended.'

§ 226. Permission to bring suit.—The rule has prevailed to
some extent that a receiver must be specially authorized by

the court to institute suit.”

In Screven v. Clark,? the court

said: ‘‘ The rule is perhaps an arbitrary one, but it is, nev-
ertheless, well settled, that a receiver has no right to sue

 

v. Gibson, 8 Wall. 506: “ The receiver
is the statutory assignee of the associa-
tion, and is the proper party to institute
all suits ; they may be brought both at
law and in equity, in his name, or in the
name of the association for his use.
He represents both the creditors and
the association, and when he sues in
his own name it is not necessary to
make either a party to the suit.”

‘In Hoyt v. Thompson, 5 N. Y. 337,
Ch. J. Ruggles said: “A further objec-
tion made to the plaintiff’s title is, that
the property of the insolvent corpora-
tion was not vested in the receivers by
force of the statute ; but that they were
created the agents of the company, and
substituted in the place of the directors,
for the purpose of settling its affairs.
And, secondly, as a consequence of
their proposition, that the receivers can-
not sell or dispose of the property in
their own name, but must convey it in
the name and under the common seal
of the corporation; and we are re-
ferred to the case of Willink v. The
Morris Canal and Banking Company
(3 Green Ch. (N. J.) 400), as an au-
thority for those propositions, It is
true that the chancellor of that State,
in some observations not necessary to
the decision of the question before him,
said, in that case, that the property of
the corporation does not vest in the
receivers, and that. they were substi-

tuted in the place of the directors, for
the purpose of settling and closing the
affairs of the company. But he said,
at the same time, that a power was
delegated to the receivers to take charge
of the property and to sell it. This
power is delegated by the statute, and
not by the corporation; and the re-
ceivers are not appointed by the con-
sent either of the directors or the stock-
holders. The chancellor does not say,
and the case does not warrant the in-
ference, that the receivers are to sel] in
the name of the corporation, or to use.
its common seal. There seems to be
no more reason for using the name of
the corporation in selling its effects,
than for a master in chancery in selling
lands under a mortgage, or a sheriff in
selling goods under execution; and a
sale by the receivers, under the power
delegated by the statute, is as effectual
to convey the title as if the right of
property was vested in them. In one
case they would convey their own title ;
in the other, they convey the title of
the corporation, The sale is properly
the act of the receivers, under the power
conferred by statute, and not the act
of the corporation.”

2 Wynn v. Lord Newborough, 3 Bro.
C. C. 88; Battle v. Davis, 66 N. C.
252; Screven v. Clark, 48 Ga. 41. See
Green v.Winter, 1 Johns. Ch. (N.Y.) 60,

3 48 Ga, 41, 42. See § 229.
Igo PROCEEDINGS BY AND AGAINST RECEIVERS, § 227

without express authority from the chancellor; his general
authority to collect and keep the assets is not sufficient to
justify him in bringing an action.’ A receiver is at best
only an officer of the court, and the foundation of the rule
probably is that it is always for the court itself to determine
whether it shall be dragged into litigation.” It has been
said that a receiver is under no obligation to attempt to
take property out of the possession of a third person, or of
the defendant, by force, and without an express order of the
court directing him so to do.*

§ 227. Receiver as complainant.— While, as we have seen,®
there may be authority for the proposition that receivers are
only stakeholders, bailiffs, or officers of the court, holding
merely the custody of the property for the benefit of oth-
ers, yet the prevalent idea now is, that the receiver of
a corporation is vested with the title to its property, and
may sue in his own name.* A receiver of a corporation, as
has been shown,° may bring a suit to set aside a judgment
on the ground that it was obtained by collusion and fraud,
and without consideration.® Such an officer may maintain
an action to disafirm and set aside illegal or fraudulent
transfers of the property of a corporation made by its agents
or officers, or to recover its funds or securities invested or
misapplied.” He may sue for unpaid instalments due on
capital stock,’ and can recover back moneys paid as divi-
dends whilst the company was insolvent.® He may take ad-

 

1 Citing Daniell’s Chan, Prac. 1988, 48 Md. 461; Vail v. Hamilton, 85 N.

et seq. Y. 453. See § 225.
2 Parker v. Browning, 8 Paige Ch. 5 See § 209,

(N. Y.) 390. * Whittlesey v. Delaney, 73 N. Y. 571.
3 See §§ 224, 225. ™ Attorney General v. Guardian Mut.

4 Frank v. Morrison, 58 Md. 440; Life Ins. Co., 77 N. Y. 272; Alexander
Atty. Genl. v. Guardian Mut. Life Ins. v, Relfe, 74 Mo. 495.
Co., 77 N. Y. 272; Owen v. Smith, 31 * Dayton v. Borst, 31 N.Y. 435; Gill
Barb. (N. Y.) 641; Hoytv. Thompson, v. Balis, 72 Mo. 424.
5 N.Y. 320; Hayes, Receiver, v. Brotz- Osgood v. Laytin, 3 Keyes (N. Y.)
man, 46 Md. 521; Morrison v. Dorsey, 521. But see Butterworth v. O’Brien,
§§ 228-230 PROCEEDINGS BY AND AGAINST RECEIVERS, 191.
vantage of any fraud against the rights of creditors of the
insolvent corporation.’

§ 228. Member suing for receiver—It has already ap-
peared*® that stockholders may file a bill in equity in a
proper case where a corporation has refused to institute
suit, or its managers are interested hostilely to the proposed
litigation. So, where a right of action is vested in and
should be asserted by the receiver of an association, it
must be made to appear, before a member can maintain
the action, that tine receiver has been requested to bring it
and has neglected to do so.

§ 229. Receiver’s discretion as to suit—The prosecution of
debts due the insolvent corporation, and the determination
to prosecute, is, in our modern procedure, except in special
cases, left largely to the sound discretion of the receiver.‘
The rule exacting express authority from the court for
each suit or proceeding instituted by him is being relaxed.

§ 230. Control of courts over suits.—The court will inter-
fere in a proper case to prevent the abuse of his powers on
the part of a receiver, and where he has caused unauthor-
ized and vexatious proceedings to be instituted, will direct
him to discontinue them. But, as a general rule, when
the receiver enters upon a litigation, the court will

 

24 How. Pr. (N. Y.) 438. Compare
Van Dyck v. McQuade, 86 N. Y. 45.

‘ Hayes v. Kenyon, 7 R. I. 136. In
this case Ames, C. J., said: “His
principal office, under the law, as we
have seen, is to care for and represent
the interest of creditors; and in all
such cases, the receiver or assignee, call
him by whatever name you will, nay
take advantage of any fraud in deroga-
tion of the rights of creditors, to which
the insolvent debtor was a party. A
deed which is void as against credit-
ors, is void also as against those who
by law represent creditors, Doe d.

Grimsby v. Ball, 11 M.. & W. 531, 533.
If this principle were not applied to the
receivers of insolvent banks, the re-
ceivership would, in a great number of
cases, be of very little use.”

* See §§ 74, 75, 98, 99, 100.

* Fisher v. Andrews, 37 Hun (N. Y.)
176. See Kelsey v. Sargent, 40 Hun
(N. Y.) 150, 153; Brinckerhoff v. Bost-
wick, 88 N.Y. 52. See § 100,

4 In re Van Allen, 37 Barb. (N. Y.)
231.

5 In re Merritt, 5 Paige (N. Y.) 125,
aff'd Merritt v. Lyon, 16 Wend, (N.

Y.) 405.
.192 PROCEEDINGS BY AND AGAINST RECEIVERS. $$ 231, 232

not interfere with his management of the suit.’ He is
entitled to all the privileges of independent thought and
freedom of action accorded to any other party. He is not
irrevocably bound to accept a decision rendered against him,
but may, in good faith, prosecute an appeal.

§ 231. Forms of procedure bind receiver.—The receiver
occupies no vantage-ground as a litigant. He will be com-
pelled to observe and conform to the distinctions existing
between forms of procedure.” Thus, Van Fleet, V. C.,
said: “The petitioner, although an officer of this court, is
entitled to no privilege here that would not be accorded to
any other suitor. In seeking relief here he must come by
the same process that other suitors are required to use, and
must prosecute his suit in the same manner that any other
suitor would be required to do. The rules of practice are
as much a law unto him as to other suitors, and, while the
present rules of practice remain in force, no suitor can
have relief on a case like that on which the petitioner's
claim to relief rests, unless he seeks it by formal bill.”®
The receiver is not authorized to sue in chancery for the
collection of a purely legal demand.’ When the receiver
is unsuccessful in an action the victorious party is entitled
to costs, payment of which may in some cases be ordered
forthwith, out of the funds in his hands.5

§ 232. Ordinary rules of law control—Upon principle and
authority, it is considered that a receiver, operating a rail-
road under the order of a court of equity, stands, in respect
to duty and liability, in the position the corporation would.
have occupied were it operating the road, and the question
as to whether or not he is liable for negligence must be

 

! Devendorf v. Dickinson, 21 How. ® Receiver of State Bank v. First
Pr. (N. Y.) 275. Nat. Bank, 34 N. J. Eq. 458.

2 Receiver of State Bank y. First 4 Freeman v. Winchester, 18 Miss. 580,
Nat. Bank, 34 N.J. Eq. 450; Freeman » Columbian Ins. Co, v. Stevens, 37
v. Winchester, 18 Miss. 577. N, Y¥. 536.
$ 233 PROCEEDINGS BY AND AGAINST RECEIVERS. 193

tested by the same rules which would be applied were the
corporation actually the party defendant before the court."

§ 233. When receiver cannot sue.— Where a statutory
liability exists in favor of creditors who fail within certain
prescribed conditions, a receiver cannot sue to enforce
such liability.? Hence, a receiver does not become a trustee
for depositors: to manage, settle, and enforce their claims
where the statute expressly gives the right of action at law to
the depositors.* Wallace, J., held in Jacobson v. Allen‘ that a
receiver of “all the estate, property, and equitable interests”
of an insolvent banking corporation, organized under the
laws of the State of Illinois, could not enforce, against a
stockholder, the liability imposed by the Illinois statute on
each stockholder for double the amount of his stock, such
liability being one in favor of creditors and not in favor of
the corporation. The court said: “The receiver of an in-
solvent corporation makes his title through the corporation.
He cannot through his appointment acquire that which the
corporation never had, He represents the creditors of the
corporation in the administration of his trust, but his trust
relates only to the corporate assets. As trustee for credit-

 

' Klein v. Jewett, 26 N. J. Eq. 476.
See Meara v. Holbrook, 20 O. S. 137;
Blumenthal v. Brainerd, 38 Vt. 402;
Paige v. Smith, 99 Mass. 395.

2 Farnsworth v. Wood, 91 N. Y. 308.
See § 314. In this case a receiver
in sequestration proceedings sought
to enforce the personal liability of stock-
holders to a particular class of cred-
itors, this liability being created under
the Manufacturing Act of 1848. Ra-
pallo, J.,said (p. 313): “ The liability does
not exist in favor of the corporation it-
self, nor for the benefit of all its credit-
ors, but only in favor of such creditors
as are within the prescribed conditions.
It is not a general right, but one which
attaches to the particular creditors only

13

who are within the conditions, and is to
be enforced by these in their own right
and for their own special benefit. The
receiver in this case is not vested with
the rights of action of these creditors,
but only with... . ‘the stock, prop-
erty, things in action, and effects of the
corporation. The rights of certain
creditors to prosecute their claims
against certain of the stockholders
never were the property of the corpo-
ration, nor rights of action vested in it,
nor is there any provision of the statute
which transfers these rights of action
from the creditors to the receiver.”
Compare § 49.

3 Wincock v. Turpin, 96 Ill. 135.

* 20 Blatchf. 525, 527.
194 PROCEEDINGS BY AND AGAINST RECEIVERS. § 234

ors, he represents them in following the assets of the cor-
poration, and can assert their rights in cases where the cor-
poration would not be heard. He is not a trustee for cred-
itors in relation to assets which belong to them individually
or as a body.” ?

§ 234. Foreign receiver—A receiver of the effects of an
insolvent corporation of another State, appointed under the
laws of such State, may dispose of the property of the cor-
poration situate in New York State, and of the debts due
such corporation from residents of New York State, and
the purchasers of such debts will obtain a right of action in
that State? In Connecticut a receiver of a foreign cor-
poration, appointed in a foreign State, may maintain a suit
in his own name to recover moneys which are claimed to
constitute a part of the corporate estate.? And if the title
to property has once vested in a receiver, the law of another
State will not divest him of it if he should take it into such
other State in the performance of his duty.* But it seems
that trustee process® and attachment proceedings® will lie
at the instigation of home crediters, although a receiver has
been appointed in another State. And, in a recent case in
Maryland, this language is used: “‘ The receiver appointed
by the court of New York had no extra-territorial power
to institute proceedings in the courts of this State, in regard
to property not subject to the jurisdiction of the court from

 

* Citing Bristol v. Sanford. 12 Blatchf.
341. Compare Weeks v. Love, 50 N.
Y. 571.

° Hoyt v. Thompson, 5 N. Y. 320.
See §§ 188, 189, 218.

® Cooke v. Town of Orange, 48 Conn.
gor. See § 188.

4 Pond v. Cooke, 45 Conn. 126. See
Killmer v. Hobart, 58 How. Pr. (N. Y.)
452. Concerning the appointment of a
receiver over railroad property run-
ning through more than one State, see
McElrath v. Pittsburg & S. R.R. Co.,

55 Pa. St. 189; Muller v. Dows, 94 U.
S. 450; Central Trust Co. v. Wabash,
St. L. & P. Rway. Co., 1 Railw. &
Corp. L. J. 16; 8... sub nom. Atkins
v. Wabash, St. L. & P. Ry. Co., 29
Fed. Rep. 161. See Chap. XII.

’ Taylor v. Columbian Ins. Co., 14
Allen (Mass.) 353.

® Dunlop v. Paterson Fire Ins. Co.,
12 Hun (N. Y.) 627, aff'd 74 N.Y.
145.

"Day v. Postal Telegraph Co., 66
Md. 360,
§§ 235, 236 PROCEEDINGS BY AND AGAINST RECEIVERS. 195
which he received his appointment. His functions and
powers, for purposes of litigation, are held to be limited to
the courts of the State within which he was appointed, and
the principles of comity between the States do not apply to
a case like the present.”

$§ 235. Suits for subscriptions—In New York a receiver of
a corporation is vested with the right to sue for unpaid sub-
scriptions,” and the same rule obtains in Louisiana,* Mary-
land,* Rhode Island,® Iowa,*® and Ohio.*. Generally speak-
ing, a receiver cannot compel payment of a subscription
that the corporation could not have enforced at the time of
his appointment. The receiver of an insolvent corporation
may bring separate suits against the several stockholders to
recover any sum remaining due upon their shares of stock.?
If the corporation has instituted suit for an unpaid subscrip-
tion, the receiver may continue the action in the name of
the original plaintiff..° It may be noted that claims for un-
paid subscriptions to the stock of a railroad corporation do
not pass by a mortgage of its property and franchises ; such
claims, as we have said, vest in a receiver of the corpora-
tion.™

$ 236. Actions against receivers—Trespassers.—A receiver
is only entitled to take into custody the property of which
he is authorized to take possession by the order or decree
of the court. When he assumes to take or hold possession

 

' Citing Bartlett v. Wilbur, 53 Md.
485; Booth v. Clark, 17 How. 322;
High on Rec. §239. See Moseby v.
Burrow, 52 Tex. 402.

2 Rankine v. Elliott, 16 N. Y. 377;
Calkins v. Atkinson, 2 Lans. (N. Y.)
12; Pentz v. Hawley, 1 Barb. Ch. (N.
Y.) 122; Van Wagenen v. Clark, 22
Hun (N. Y.) 497. But see Mann v.
Pentz, 3 N.Y. 415.

8 Gas Light & Banking Co. v. Haynes,
7 La, Ann. 114; New Orleans Gas
Light Co. v. Bennett, 6 La.Ann. 457.

4 Frank v. Mortison, 58 Md. 423.

5 Tobey v. Russell, 9 R. I. 58.

§ Stewart v. Lay, 45 Iowa 604.

7 Clarke v. Thomas, 34 O. S. 46.
Compare Gaff v. Flesher, 33 O. S. 107.

* Cutting v. Damerel, 88 N. Y. 410;
Billings v. Robinson, 28 Hun (N. Y.)
122.

° Van Wagenen v. Clark, 22 Hun (N.
Y.) 497.

2° Phoenix Warehousing Co.v. Badger,
67 N. Y. 294.

1 Dean vy. Biggs, 25 Hun (N. Y.) 122.
196 PROCEEDINGS BY AND AGAINST RECEIVERS.  § 237
‘of property not embraced in the decree appointing him,
and to which the debtor never had any title, he is not act-
ing as the agent or representative of the court of chancery,
but is a mere trespasser, and the owner may sue him for
damages, or recover possession of the property illegally
taken or detained. A person having a claim or lien upon
a fund in the hands of a receiver, should properly proceed
by petition.’

§ 237. Protecting receiver—Leave to sue.—The court, as we
have seen, will not tolerate any interference with its right-
ful possession of property held by a receiver.’ In a special
proceeding to wind up the affairs of a corporation, the court
has power to, and will, enjoin an action by a creditor against
the receiver, where the action hampers the receiver, and
greatly increases the costs and expenses of the receivership.*
‘And if leave to sue the receiver has been improvidently
granted, it may be withdrawn by the court though sitting
in another district.5 It is essential, in all cases where it is
desired to sue the receiver officially, to obtain leave of
the court before so doing, for, as we have seen, the court
will not allow its possession to be disturbed without its
consent.® ‘This rule is essential for the protection of re-

 

1Hills v. Parker, 111 Mass. 510;
Parker v. Browning, 8 Paige (N. Y.)
388. Compare Paige v. Smith, 99
Mass. 395; Leighton v. Harwood, 111
Mass. 67; Jz re Young, 7 Fed. Rep.
855; Palys v. Jewett, 32 N. J. Eq. 302.
In Parker v. Browning, 8 Paige (N.
Y.) 391, the court said: “ Where the
property is in the possession of a third
person, under a claim of title, the court
will not protect the officer who attempts
by violence to obtain possession, any
further than the law will protect him.”
In Barton v. Barbour, 104 U. S. 134,
Woods, J., said: “If, by mistake or
wrongfully, the receiver takes possession
of property belonging to another, such

person may bring suit therefor against
him personally as a matter of right;
for in such case the receiver would be
acting ultra vzres,””

* Porter v. Kingman, 126 Mass. 141;
Olds v. Tucker, 35 Ohio St. 581. See
Winfield v. Bacon, 24 Barb. (N. Y.)
154; Smith v, Earl of Effingham, 2
Beav. 232.

*See.§§ 170, 258. Palys v. Jewett, 32
N. J. Eq. 302,

“Atty, Genl. v. North America Life
Ins. Co., 6 Abb. N. C. (N. Y.) 293, 302.

‘Ibid. See Attorney General v.
North Am. Life Ins. Co., 77 N.Y, 297,
reversing Ss. C.15 Hun 18,

®Melendy v. Barbour, 78 Va. 544;
§ 237 PROCEEDINGS BY AND AGAINST RECEIVERS, 197
ceivers against unnecessary and oppressive litigation, and
should be carefully maintained.”? The court has even the
power to restrain parties who are within its jurisdiction.
from prosecuting suits in foreign courts which tend to in-
terfere with the possession and management of the property
by the receiver.? Strikers may be punished for interfering
with the operation of a railroad in the hands of a receiver.?
The permission to sue the receiver will not, however, be
withheld unless the claim preferred is manifestly unfounded
and vexatious.* But speaking on this subject, Woods,
Circuit Judge, said: “It is essential, that the petition
should, on its face, show that the petitioner has a case.
The court should not allow its receiver to be harassed by
a suit where, according to his own showing, the plaintiff
has no cause of action.”® Authority may be found that
the failure to obtain permission to prosecute a receiver is a
jurisdictional defect. Suing a receiver without obtaining
such permission will be punished as a contempt of court,’

 

Barton v. Barbour, 104 U.S. 126, affi’g
3 MacA. (D. C.) 212; De Graffenried
v. Brunswick & A. R.R.Co., 57 Ga. 22;
Taylor v. Baldwin, 14 Abb. Pr. (N.
Y.) 166; De Groot v. Jay, 30 Barb.
(N. Y.).483; Randfield v. Randfield, 3
De G., F. & J. 766; Miller v. Loeb, 64
Barb. (N. Y.) 454; Thompson v. Scott,
4 Dill. 508; Meredith Village Savings
Bank v. Simpson, 22 Kan. 414; Ken-
nedy v. Indianapolis, C. & L. R.R.Co.,
3 Fed. Rep. 97; S. C. 2 Flip. 704.

1De Groot v. Jay, 30 Barb. (N. Y.)
484. In Barton v. Barbour, 104 U.S.
128, Woods, J., said: “The evident
purpose of a suitor who brings his ac-
tion against a receiver without leave,
is to obtain some advantage over the
other claimants upon the assets in the
receiver's hands. His judgment, if he
recovered one, would be against the
defendant in his capacity as receiver,
and the execution would run against
the property in his hands as such.”

Citing Hall v. Smith, 2 Bing. 156;
Camp v. Barney, 4 Hun (N. Y.) 373;
Commonwealth vy. Runk, 26 Pa. St.
235; Thompson v. Scott, 4 Dill. 508.

? Vermont & Canada R.R. Co. v.
Vermont Central R.R. Co., 46 Vt. 792.

3 In re Doolittle, 23 Fed. Rep. 544.
See note by Francis Wharton, Esq., on
Pp. 549, 551, and Jz re Higgins, 27
Fed. Rep. 443.

4Palys v. Jewett, 32 N. J. Eq. 302.
See Randfield v. Randfield, 3 De G.,
F. & J. 766.

5 Jordan v. Wells, 3 Woods 528.

6 Keen v. Breckenridge, 96 Ind. 69;
Barton v. Barbour, 104 U. S. 126,
affi'g 3 MacA. (D.C.) 212. Compare
Peale v. Phipps, 14 How. 368. Sea
contra, St. Joseph & Denver City R.R,
Co. v. Smith, 19 Kan. 225; Kinney v.
Crocker, 18 Wis. 74; Camp v. Barney,
4 Hun (N. Y.) 373.

7 Thompson v. Scott, 3 Cent. L. J.
737; 8. C.4 Dillon 508; De Groot v.
198 PROCEEDINGS BY AND AGAINST RECEIVERS, §§ 238-240
and the action will be enjoined.’ This protection, as we
have seen, is not extended where the receiver is prosecuted
as a trespasser.®

§ 238. What constitutes interference with receiver. Where
a receiver of a corporation is appointed, and, as such, be-
comes vested with the exclusive right to manufacture cer-
tain articles, under letters patent which the, corporation
owned, it is a contempt of court for a former official to
manufacture the articles? While it is true that an action
for an infringement of a patent must be prosecuted in the
Federal tribunals, yet a proceeding of the character indi-
cated is not brought to redress an infringement, “ but to
punish an interference with the title and possession of the
receiver.” So it is contempt-of court to interfere with the
running of the trains of a railroad corporation in the hands
of a receiver, and the guilty parties may be punished in the
cause in which the receiver was appointed.‘

§ 239. Creditors’ remedies against receivers.—Where a re-
ceiver, appointed in an action against a corporation, fraudu-
lently obtains an order for the sale of a debt due the cor-
poration, an equitable action at the suit of a creditor will
lie to vacate the order and set aside the sale So bond-
holders and creditors are entitled, for reasonable cause, to
an inspection of the books, papers, and accounts relating
to a receivership.®

$ 240. Receiver’s liability as carrier—A receiver operating
a road sustains toward the public the relation of common car-

 

Jay, 30 Barb. (N. Y.) 483; S.c. 9 Abb.
Pr. 364; Vermont & Canada R.R. Co.
v, Vermont Central R.R. Co., 46 Vt. 792.

1Tink v. Rundle, 10 Beav. 318;
Evelyn v. Lewis, 3 Hare 472; Parr v.
Bell, 9 Ir. Eq. 55; 2x ve Persse, 8 Ir.
Eq. 111.

°In re Young, 7 Fed. Rep. 855.
Compare Curran v. Craig, 22 Fed,
Rep. 101,

° In re Woven Tape Skirt Co., 12
Hun (N. Y.) 111. Compare Noe v.
Gibson, 7 Paige (N. Y.) 515.

* Secor v. Toledo, P. & W. Ry. Co., 7
Biss. 513; King v. Ohio& M. Ry. Co.,
7 Biss. 529. See United States vy.
Kane, 23 Fed. Rep. 748.

* Hackley v. Draper, 60 N. Y. 88,

®° Fowler’s Petition, 9 Abb. N.C. (N.
Y.) 268,
§§ 241,242 PROCEEDINGS BY AND AGAINST RECEIVERS. 199
rier, and will be amenable to the common-law courts in an
action for negligence.’ And the earnings of the road inthe
hands of a receiver are properly chargeable with the value
of goods ‘lost in transportation, and such losses must be
paid before the money is distributed to bondholders.”

$ 241. Suit for tort against receiver—Judgment.—An ac-
tion may be maintained against a receiver for a tort com-
mitted by the corporation prior to his appointment. The
judgment, if recovered, will be collectible out of the assets
in his hands.? But after the discharge of a receiver, an ac-
tion cannot be maintained against him for personal injuries
sustained by the negligence of his employés, for he is not
personally liable for their torts.‘

$ 242, Personal liability of assignee or receiver. The tend-
ency of the law is against holding a receiver or assignee
personally responsible for damages for an injury caused by
the negligence of his employés® in the absence of evidence
that the officer was negligent in the selection of the servant.
Allen, J.,-said: ‘I know of no principle upon which a re-
ceiver or other officer of a court, merely obeying the orders
of the court, having no interest in the prosecution of the

 

1 Newell v. Smith, 49 Vt. 255. See
in this connection Paige v. Smith, 99
Mass. 395; Blumenthal v. Brainerd, 38

sibility of such a trust; it is only when
he himself commits the wrong that he
is held personally liable. The proceed-

Vt. 408; Kinney v. Crocker, 18 Wis.
74; Kain v. Smith, 80 N. Y. 458;
Wabash Ry. Co. v. Brown, 5 Bradw.
(IIL) 595.

2 Cowdrey v. Galveston, H. & H.R.
Co., 93 U. S. 352.

3 Combs v. Smith, 78 Mo. 38. See
Commonwealth v. Runk, 26 Pa. St.
237.

4 Davis v. Duncan, 19 Fed. Rep.
477. In this case the court said: “A

receiver, as such, upon principle and .

authority, is not personally liable for
the torts of his employés. Were he so
liable, few men would take the respon-

ings against him as receiver, for the
wrongs of his employés, is in the na-
ture of a proceeding zz rem, and ren-
ders the property in his hands, as such,
liable for compensation for such inju-
ries.” Citing Meara’s Adm’r v. Hol-
brook, 20 Ohio St. 137; Klein v. Jew-
ett, 11 C. E. Green (N. J.) 474; Jordan
vy. Wells, 3 Woods 527; Kennedy v. In-
dianapolis, C. & L. R.R. Co., 11 Cent.
L. J. 89; S.C. 2 Flipp. 704.

5 Cardot v. Barney, 63 N. Y. 281; S.C.
20 Am. Rep. 533. Compare Metz v.
Buffalo, C. & P. R.R. Co., 58 N. Y. 61;
Kain v. Smith, 80 N. Y. 458.
200 PROCEEDINGS BY AND AGAINST RECEIVERS. § 243
work and deriving no profit from it, should be answerable
except for his own acts and neglects.” In Camp v. Barney *
the New York Supreme Court held that an action would
not lie against a receiver personally for injuries to a passen-
ger caused by the negligence of the employés of the receiver,
while carrying on the business of operating a railroad by
order of the court; but that where the judgment was ob-
tained against the receiver personally for such injuries, the
record might be amended so as to render the judgment one
against the receiver as such. The receiver is, of course,

liable in his official capacity for such an injury.’

§ 243. Personal liability of committee of creditors.— Where
the creditors of a corporation selected three of their num-
ber who were elected directors of the corporation, and
charged with the management of its business, the court
decided that they were not personally liable for supplies
furnished them, and used in the conduct of the corporate
business.* Sharswood, J., observed: ‘On what principle,
then, could they be held personally liable as partners?
They had not agreed to be partners. They did not receive
any part of the profits, and they did not hold themselves
out to the world as partners.” . . . . They were de facéo di-
rectors, and a committee appointed by the board to manage
the affairs of the corporation for its benefit, and to enable

 

1 Cardot v. Barney, 63 N. Y. 290.

2 4 Hun (N. Y.) 373.

* Meara’s Admr. v. Holbrook, 20 O.
S. 137; 8. C. 5 Am. Rep. 633. See
Kennedy v. Indianapolis, C. & L. R.R.
Co., 2 Flip. 704; Klein v. Jewett, 26
N. J. Eq. 476; Ohio & Miss. R.R. Co,
v. Davis, 23 Ind. 553. In Cardot v.
Barney, 63 N. Y. 281, the court de-
cided that a receiver was not liable in
an action for negligence causing the
death of a passenger where no personal
negligence was imputed to him in the
selection of the agent or in the per-
formance of any duty. But the receiver

4

is individually responsible for the care-
ful and proper management of any
property the possession of which he has
voluntarily assumed. Kain v. Smith,
80 N. Y. 459. Compare Rogers v.
Wheeler, 43 N. Y. 598; Sprague v.
Smith, 29 Vt. 421; Barter v. Wheeler, 49
N. H.9; Lamphear v. Buckingham, 33
Conn. 237; Blumenthal v. Brainerd, 38
Vt. 409; Paige v. Smith, 99 Mass. 395 ;
Ballou v. Farnum, 9 Allen (Mass.) 47;
Ferrin v. Myrick, 41 N. Y. 315.

4 Beeson v. Lang, 85 Pa. St. 197.

* Citing Irwin v. Bidwell, 72 Pa. St.
244.
$§ 244,245 PROCEEDINGS BY AND AGAINST RECEIVERS, 201

it to pay its debts! Even if they had been outside parties
appointed by the board of directors to manage its affairs,
and acting in its name and on its behalf, it is not easy to
understand on what principle they could be held personally
liable. An agent who is authorized by a principal—who
discloses him and makes a contract in his name—is not per-
sonally liable.”* The facts of this case were peculiar, and
probably the conclusion reached upon the point actually in-
volved is sound, but it does not necessarily follow that the
members of a committee are in every case free from per-
sonal responsibility. Thus, the committee appointed by a
political gathering to provide a free dinner for the party are
personally liable for the bill. They do not represent a
permanent or responsible body.

$ 244. Ordering payment of claims by receiver.—An order
for the payment of a creditor of an insolvent corporation
for which a receiver has been appointed, can only be made
in New York on application to the court in which the pro-
ceedings were had, and in the district in which the receiver
was appointed.* A receiver should, for his own safety,
make payments only under the sanction of the court.

§ 245. Collateral attack on receiver’s appointment.— Where
a receiver has been legally appointed, and has not been dis-
charged from his trust, his appointment cannot be the sub-
ject of collateral attack. If any one is aggrieved by the
order appointing a receiver, or continuing him in office, he
must institute proper proceedings to test the validity of the
receiver's appointment, or to have the property restored to
the proper custodian.’ A third party will not be permitted

 

1 Citing Cochran v. Arnold, 58 Pa. 5 Keokuk Northern Line P. Co. v.
St. 399. Davidson, 13 Mo. App. 565. See At-
? Compare Cox v. Hickman, 8H. L. torney General v. Guardian Mutual
Cas, 268, Life Ins. Co., 77 N. Y. 272; Aubhends
3 Fichbaum v. Irons, 6 W. & S. (Pa.) v. The People, 81 Ill. 551.
67. 6 Vermont & Canada R.R. Co. v.
4 Rinn v. Astor Fire Ins. Co., 59 N. Vermont Central R.R. Co., 46 Vt. 795;
Y. 143. See § 205. Russell vy. East Anglian Ry. Co, 3
202 PROCEEDINGS BY AND AGAINST RECEIVERS. § 246
to interfere with the receiver's possession upon the theory

that the appointment was improvidently made.’

§ 246. Removal of receiver—Power to appoint a receiver
implies power to remove him.? When the court appoints
a receiver, who absents himself, and fails to file the bond
required under the order of the court, it lies within the dis-
cretion of the court to remove him, and appoint another in
his stead. The right of removal generally rests in the
sound discretion of the court. Though charges of mis-
management of the trust are made against the receiver by
interested parties, in an irregular manner, yet they will not
fail ‘to challenge the attention and scrutiny of the court.”®
The exercise of the power of removal does not, of course,
affect claims against the receivership. In Jay v. DeGroot,"
a receiver of a corporation had recovered judgment by de-
fault, and defendant sought to open the judgment, with a
view to question the regularity of the receivership. It was
held that, as the corporation had acquiesced in the receiv-
ership, the defendants could not object to any irregulari-
ties, enough being shown to give the court jurisdiction.®

The court may substitute a

new receiver in the place of

 

Macn. & G, 104; Beverley v. Brooke,
4 Gratt. (Va.) 187.

»Ames v. Trustees of Birkenhead
Docks, 20 Beav. 332; Russell v. East
Anglian Ry. Co., 3 Macn. & G, 104;
Cook v. Citizens’ Nat. Bank, 73 Ind.
256. ‘There is no question,” says
Judge Romilly in Ames v. Trustees of
Birkenhead Docks, 20 Beav. 353, “but
that this court will not permit a re-
ceiver, appointed by its authority, and
who is therefore its officer, to be inter-
fered with or dispossessed of the prop-
erty he is directed to receive, by any
one, although the order appointing him
may be perfectly erroneous; this court
requires and insists that application
should be made to the court for per-

mission to take possession of any prop-
erty of which the receiver either has
taken or is directed to take posses-
sion.”

* Cincinnati, S. & C. R.R. Co. v.
Sloan, 31 O. S. 1. <

§ Matter of Louisiana Savings Bank
& S. D. Co., 35 La. Ann, 196. See
Ferry v. Bank of Central New York, 15
How. Pr. (N. Y.) 446.

*Siney v. New York Consolidated
Stage Co., 18 Abb. Pr. (N. Y.) 435.

*Coe v. N. J. Midland Ry. Co., 28
N. J. Eq. 32.

* Ex parte Brown, 15 S. C. 518,

“17 Abb. Pr. (N. Y.) 36, xote.

*See Allen v. Dallas & W.R.R. Co.,
3 Woods 316.
§§ 247-251 PROCEEDINGS BY AND AGAINST RECEIVERS. 203

one who withdraws, or allow the remaining receivers to
continue the trust.

§ 247. Collusive receivership.—In New York, where the
court is satisfied that the appointment of a receiver of the
assets of a corporation was made collusively, and for the
purpose of defrauding the plaintiff in another action pend-
ing against the trustees of the corporation, to which action
the receiver is a party, it may make an order on notice in
the second action, vacating the appointment of the re-
ceiver, and naming another in his place. This is upon the
theory that a collusive or fraudulent proceeding, even
though judicial in its nature, cannot be maintained, but
may be assailed and disregarded whenever and wherever it
may be legally brought in question.®

§ 248. Abatement of suits——Suits pending against a cor-
poration are not abated by the appointment of a receiver.*
The latter may, however, apply to be made a party. A
succeeding receiver may be substituted by sez. fa. as plain-
tiff.6 A bill of revival or supplemental bill may be filed,
to continue an action in the name of a new receiver.®

$ 249. Substitution of receiver—_In New Yotk, upon the
death or removal of a receiver, it is proper practice to sub-
stitute the successor in the action, and thus continue it.”

§ 250. Effect of judgment.—The judgment recovered in the
name of the receiver has the same effect, as regards being
an estoppel, as though recovered in the name of the corpo-
ration.®

§ 251. Right of appeal__Where a receiver is appointed in

 

1 Wiswell v. Starr, 48 Me. 4o1. 5 Searcy v. Stubbs, 12 Ga. 437.
? Wilson v. Barney, 5 Hun (N.Y.) 259. * Palmer v. Murray, 18 How. Pr. (N.
See State of Michigan v. Phoenix Y.). 545.
Bank, 33 N. Y. 9. 7Sheldon v. Adams, 27 How. Pr.
4 Mercantile Ins. Co. v. Jaynes, 87 (N. Y.) 179; S.C. 41 Barb. (N. Y.) 54.
Ill. 199. See Wyatt v. Ohio & Miss. ° Bank of North America v, Wheeler,
R.R. Co., 10 Ill. App. 289. 28 Conn, 433.
‘
x

204 PROCEEDINGS BY AND AGAINST RECEIVERS. § 251

foreclosure, and a decree subsequently rendered, directing
him to pay a sum of money into court in settlement of his
accounts, it is considered that he has a right of appeal.’
The appeal does not affect the foreclosure in any way, ex-
cept as relates to the settlement of the receiver’s accounts,

 

"Hinckley v. Gilman, C. & S. R.R. appeal. Blossom v. Milwaukee, etc.
Co., 94 U. S. 467. So a bidder at Railroad Co,, 1 Wall. 655.
a foreclosure sale may be allowed an
CHAPTER XII.

RAILROAD RECEIVERS.

 

§ 252. Ras Pere dep ieetabee § 262. Consolidated roads.

253. Rule riaclan q 263. Title of receiver in foreclosure.

254. Discretion as to appointment in oes ee
foreclosure: 265. When aoe will not be ap-

255. Receiver after decree. 6 P Ouse 5 ‘

asd. ‘Te prevent farieinure, 266. Duties of railroad receiver.

257. Receiver prior to default. ee Leasing additional line,

258. Receiver in sequestration pro- Payments by receiver:
ceedings: 269. Expenditures not allowed.

259. Appointment on petition of cor- 270. Guits by vailtood es
poration. 271. Officers as receivers.

260. To collect damages. 272. Selection and removal.

261. Conflicting jurisdictions. 273. Discharge of receiver.

§ 252. Railroad receivers— Reluctance to appoint. — Rail-
road companies, though possessed of certain characteristics
of a public nature, and sometimes called guasz public as-
sociations,’ are, nevertheless, private civil corporations.? In
a New York case, Johnson, C., said:* “ A railroad corpo-
ration does not differ from any other corporation, nor from
any natural person in respect to the general obligation to
obey the laws. It is just as likely to get a fraudulent credit
as any other corporation, and can claim no special immunity.
No distinction can be drawn to exclude a railroad corporation
from the provision of this statute which would not equally

 

1 Holladay v. Patterson, 5 Oregon
177.

2 Sweatt v. Boston, Hartford & Erie
RR. Co., 3 Clifford 339; Pierce v.Com-
monwealth, 104 Pa. St. 150, A com-
pany may be considered a railroad cor-

poration though authorized to do other
kinds of business than that of trans-
portation. Improvement Company v.
Slack, 100 U.S. 648.

? Hoyle v. Plattsburgh & M. R.R.
Co., 54.N. Y. 326,
206 RAILROAD RECEIVERS. § 252
exclude every trading corporation. This is obviously in-
admissible.”1 The management of these corporations in
the courts constitutes an important branch of our sub-
ject. The colossal character of railroad enterprises; the
vast fortunes invested in the stock and securities of these
roads; the great difficulty, expense, and uncertainty in-
cident to successfully establishing new railway lines, and the
deep-laid plans of unscrupulous manipulators or rival
companies to appropriate the property or destroy the en-
terprise, all ‘result in forcing the steady appearance of
these corporations in almost every phase of litigation.?
The authorities are full of expressions to the effect that ex-
treme caution will be exercised on the part of the courts
before assuming the management of a railroad by the ap-
pointment of a receiver.’ A simple default in the payment

 

1 The legislature may authorize the
construction of railroads under high-
ways or streets. See Baltimore & P.
R.R. Co, v. Reaney, 42 Md. 117. It
may also authorize elevated railways
or structures. See Jz re New York
Elevated R.R. Co., 70 N. Y. 327; ln
ve-Gilbert Elevated Ry. Co., 7o N.
Y. 361; J ve Kings Co. Elevated
Ry. Co., 20 Hun (N. Y.) 217.

? Until the mortgagee procures the
appointment of a receiver, or takes
possession of the property, he has no
interest in, and is not responsible for,
the dealings of the mortgagor had with
other parties. Bronson v. La Crosse &
Milwaukie R.R. Co., 2 Wall. 283.

*Meyer v. Johnston, 53 Ala. 237;
Kelly v. Trustees of Alabama & C.
R.R. Co., 58 Ala. 4%9; Overton v.
Memphis & L.R. R. Co., 10 Fed. Rep.
866; Ss. C. 3 McCra. 436; Stevens v.
Davison, 18 Gratt. (Va.) 819; Rail-
way Co. v. Jewett, 37 O. S. 649; Mil-
waukie & M. Railroad Co. v. Soutter,
2 Wall. 522; Wallace v. Loomis, 97 U.
S. 162; Benedict v. St. Joseph & W.R.

Co., 19 Fed. Rep. 174; State of Florida
v. Jacksonville, P. & M. R.R. Co., 15
Fla. 201; Gardiner v. London, C. & D.
Ry. Co., L. R.2 Ch. App. 201. Specific
performance of a contract to construct
a railway will not be decreed. See Fal-
lon v. Railroad Company, 1 Dillon
121; Danforth y. Phila. & Cape May
S. L. R’way Co., 30 N. J. Eq. 12;
South Wales Ry. Co. v. Wythes, 5 De
G., M. & G. 880. In Ross v. Union
Pacific Ry. Co., Woolworth’s C. C. R.
42, Miller, J., said: “I am inclined to
concur fully with Judge Story, that ‘in
cases of contract to build a house or a
bridge,’ or, I will venture to add, a rail-
road, ‘ aspecific performance would not
be decreed.” Again, he says (p. 44) :
“ The rule is settled, even in the Eng-
lish Chancery, where the jurisdiction is
greatly extended in all such cases, that
it will decree specific performance only
when it can dispose of the matter by an
order capable of being enforced at once ;
that it will not decree a party to per-
form a continuous duty extending over
a number of years, but will leave the
§ 252 RAILROAD RECEIVERS, 207°
of interest will not justify the exercise of the jurisdiction.
In Kennedy v. St. Paul & Pacific Railroad Company,”
the learned Dillon, J., an experienced authority upon
this subject, said: “I assent, in the fullest manner, to the
proposition that a court of equity ought not to enter
upon the work of either operating or building a railway,
if this can possibly be avoided without the certain and
great sacrifice of the rights and securities of the parties in
interest.” Nelson, J., said: “I am not unmindful that
the appointment of a receiver is a delicate exercise of au-
thority.”* The Court of Appeals of Virginiat conceded
the rule to be that a court of chancery would reluctantly
appoint a receiver to take charge of and manage a railroad,
but considered it competent to do so where such a course

was indispensable to secure

the rights of the legitimate

 

opposite party to his remedy at law.”
We also find this language: “It is no
part of the duty ofa court of chancery to
build railroads, and the assent of all the
parties interested in the property can-
not make it such.” Credit Co. of Lon-
don v. Arkansas Central R.R. Co., 15
Fed. Rep. 46, 50. A specific perform-
ance by areceiver of a contract entered
into by his corporation will not be en-
forced. Swayne, J., said: “ A specific
performance by the receiver would be
a form of satisfaction or payment which
he cannot be required to make.” Ex-
press Co. v. Railroad Co., 99 U.S. 191,
200. These observations are peculiarly
applicable to the cases concerning rail-
road receivers, which we are about to
consider.

1 Williamson v. New Albany,, etc.
R.R. Co., 1 Biss. 198.

25 Dillon, 525.

>Ruggles v. Southern Minnesota
R.R. Co., 5 Chicago Legal News 111.
In Delaware, Lack. & Western R.R.
Co. v. Erie Ry. Co., 21 N. J. Eq. 303,
the Chief Justice said: “ The authorities

go no further than to say, that a re-
ceiver will not be appointed to super-
sede permanently the managers of a
railway and to take charge of the entire
affairs of the road. The doctrine has
not been extended beyond this, and to
this extent it is sanctioned by the cases
of Russell v. East Anglian Railway
Company, 3 Macn. & G. 125, and Fripp
v. The Chard Railway Co., 11 Hare
254. These decisions rest on the
practical difficulty the court would en-
counter in any endeavor to conduct,
through its officers, the business of a
great railway.” The defects in the
jurisdiction of equity to wind up the
concerns of a corporation is a subject
of comment elsewhere. See §§ 172,
174. Neallv. Hill, 16 Cal. 145; Water-
bury v. Merchants’ Union Express Co.,
50 Barb. (N. Y.) 157; Belmont v. Erie
Railway Co., 52 Barb. (N. Y.) 637;
Cook v. Detroit & M. R.R. Co., 45
Mich. 453.

4Stevens v. Davison, 18 Gratt. (Va.)
828.
208 RAILROAD RECEIVERS. § 252

stockholders; and to prevent a failure of justice. It was
held proper, in the case cited, for the court to take charge
of and manage a railroad until it was ascertained by proper
inquiry in the action who constituted the lawful stockhold-
ers of the company to whom the custody and management
of the road should be committed. In another case it was
held that all the circumstances were to be taken into con-
sideration, and if greater injury would ensue from the ap-
pointment than from leaving the property in its present
custody, or other opposing considerations could be as-
signed, no receiver would be appointed.1/ Hammond, J.,
has said: ‘‘Courts should be confined strictly to the domain
of courts of law and equity, engaged only in the business
of settling, according to the established rules of law and
equity, the controversies that arise and come within the
workshop of jurisprudence, but not those that lie outside
and within the arena of gladiatorial struggles for business
_advantages and speculations.”* Speaking of a railroad
receivership, the Supreme Court of Vermont observed :
‘It is never to be created, because it will do no harm; nor
even because it will do good, unless the exigency be such
as to impose the duty upon the court.”*® These quotations
are set forth, not as truly reflecting the policy of the courts
in passing upon applications for the appointment of rail-
road receivers, for the citations embody no well-defined
rule, and are persistently violated in spirit ; but rather to
demonstrate that the dangerous nature of the jurisdiction
is, in some measure, appreciated in judicial circles. We
cannot but hazard the observation that the courts constantly
protest against the appointment of railroad receivers, and as
constantly sanction the practice which they so persistently

 

1Vose v, Reed, 1 Woods 650; s, P, 8 Vermont & C. R.R. Co. vy. Vermont

Tysen v. Wabash Ry. Co., 8 Biss. 255. Central R.R. Co., 50 Vt. 569. Acourt

*American Loan & Trust Co. v. of equity will not appoint a receiver to

' Toledo, C. & S. Ry. Co., 29 Fed. Rep. carry on the business of mining, Hand
416, 421. , v. Dexter, 41 Ga. 461.
§ 253 RAILROAD RECEIVERS. 209

condemn. It is not alone the exercise of the power of ap-
pointment of receivers that engenders the evil results against
which we proclaim. The care and preservation of the cor-
porate assets may, in a numerous class of cases, require the
selection of a suitable custodian. But it is the extraordi-
nary power conferred by judicial custom upon the receivers
to manage, use, and encumber the property that entails the
disastrous results which disgrace the annals of railroad
litigation.

§$ 253. Rule in England.—In England the Court of
Chancery seems to be very much averse to exercising juris-
diction by appointing a receiver of a railroad. The difficul-
ties encountered in America were appreciated in England.
Thus, in Gardner v. London, Chatham & Dover Railway
Company,’ Lord Justice Cairns very forcibly said: “ But
in addition to the general principle that the Court of Chan-
cery will not, in any case, assume the permanent manage-
ment of a business or undertaking, there is that peculiarity
in the undertaking of a railway which would, in my opin-
ion, make it improper for the Court of Chancery to assume
the management of it at all. When Parliament, acting for
the public interest, authorizes the construction and mainte-
nance of a railway, both as a highway for the public, and as
a road on which the company may themselves become
carriers of passengers and goods, it confers powers and im-
poses duties and responsibilities of the largest and most im-
portant kind, and it confers and imposes them upon the
company which Parliament has before it, and upon no
other body of persons. These powers must be executed
and these duties discharged by the company. They can-
not be delegated or transferred. The company will, of
course, act by its servants, for a corporation cannot act
otherwise, but the responsibility will be that of the com-

 

‘L. R. 2 Ch. App. 212.
14
210 RAILROAD RECEIVERS. § 254
pany. The company could not, by agreement, hand over the
management of the railway to the debenture holders. It is
impossible to suppose that the Court of Chancery can
make itself, or its officer, without any parliamentary au-
thority, the hand to execute these powers, and all the more
impossible when it is obvious that there can be no real and
correlative responsibility for the consequences of any im-
perfect management. It is said that the railway company
did not object to the order for a manager. This may
well be so. But in the view I take of the case the order
would be improper, even if made on the express agreement
and request of the company.” But statutes have been
enacted in England enlarging the jurisdiction to appoint
receivers and managers of railroad corporations.’

$ 254. Discretion as to appointment in foreclosure. —
Though there is authority for the statement that it is not
against public policy to appoint a receiver over a corpora-
tion,” yet a receiver will not be appointed ina railroad fore-
closure’ litigation as a matter of course.? The propriety of
the appointment rests in the sound discretion of the court
to which the application is made.‘ The granting of this
relief is “not a matter of strict right.”> The court, in one
of the cases cited, said: “In such cases courts of equity

 

1 See in this general connection Le
Manchester & M. Ry. Co., 14 Ch.
D. 645; /# re Birmingham & L.J. Ry.
Co., 18 Ch. D. 155; Jz re Southern
Railway Co., 5 L. R. Ir. 165. Com-
pare De Winton v. The Mayor, etc.
of Brecon, 26 Beav. 533; Hopkins v.
Worcester & B, Canal Co., L. R. 6
Eq. 447.

2 State v. Northern Central Railway
Co., 18 Md. 216. The directors ordi-
narily possess authority to mortgage
and pledge corporate assets and securi-
ties. Hendee v. Pinkerton, 14 Allen
(Mass.) 381; McCurdy’s Appeal, 65

Pa, St. 290; Hatch v. Coddington, 95
U.S. 48; Butler v. Rahm, 46 Md. sqr.

* Williamson v. New Albany, etc.
R.R. Co., 1 Biss. 205.

*Tysen v. Wabash Railway Co., 8
Biss. 247; Vose v. Reed, 1 Woods 650;
Keep v. Michigan Lake Shore R.R,
Co., 6 Chicago Legal News 101; Un-
ion Trust Co. v. St. Louis, I. M. & S,
R.R.Co., 4 Dill. 114; Cincinnati, S, &
C. R.R, Co, v. Sloan, 31 O.S. 1. State
utes regulating the subject of receivers
in mortgage cases are in force in many
States and Territories,

® Fosdick v. Schall, 99 U. S. 253.
§ 254 RAILROAD RECEIVERS, 211
will pay a just respect to such legal and equitable rights
and interests of the possessor of the fund, and will not
withdraw it from him by the appointment of a receiver, un-
less the facts averred and established in proof show that
there has been an abuse or a danger of abuse on his part.
For the rule of such courts is not to displace a dona fide
possessor from any of the just rights attached to his title,
unless there be some equitable ground for interference.” ?
Receivers, we may observe, are usually appointed in fore-
closure cases where the security is insufficient to satisfy the
mortgage debt and the corporation has misapplied its earn-
ings,” or has expressly included the rents and profits in the
mortgage? The power to appoint a receiver is to be exer-
cised only in strong cases. And a receiver will not be ap-
pointed if it is clear that the property will realize sufficient
money to pay the mortgage debt, interest and costs.‘
There must be imminent danger to the property,° or like-
lihood of abuse on the part of the mortgagor or party in
possession.® The special facts in each particular case must
be considered, and if these facts show that the appointment
of a receiver is inexpedient or improper, the application

 

1 Williamson v. New Albany, etc.
R.R. Co., 1 Biss. 205; citing Tyson v.
Fairclough, 2 Sim. & Stuart 142.

2 See Ruggles v. Southern Minnesota
R.R. Co., 5 Chicago Legal News 110;
Pullan v. Cincinnati & C. R.R. Co., 4
Biss. 35; Wyckoff v. Scofield, 103 N.
Y. 633; Keep v. Michigan Lake Shore
R.R. Co., 6 Chicago Legal News tor.
Compare Newport & C. Bridge Co. v.
Douglass, 12 Bush (Ky.) 673.

8 See Des Moines Gas Co, v. West,
44 Iowa 23, 25; Shotwell v. Smith, 3
Edw. Ch. (N. Y.) 588.

4 Pullan v. Cincinnati & C, A.L. R.R.
Co., 4 Biss. 35. See Shotwell v. Smith,
3 Edw. Ch. (N. Y.) 588. The receiver
will not be appointed ex Jarte, Port

Huron & G. Ry. Co. v. Judge of St.
Clair, 31 Mich. 456; State of Florida
v. Jacksonville, P. & M. R.R.Co., 15
Fla. 201. See § 176,

5 Ibid. Compare Fisher v. Concord
R.R. Co., 50 N. H. 204.

* Keep v. Michigan Lake Shore R.R.
Co.,6 Chicago Legal News ror. In New
Jersey by statute the chancellor may
summarily appoint a receiver where a
railroad neglects to run trains for ten
days. The chancellor, when satisfied
of the willingness and ability of the
corporation to operate its road, will
order the receiver to deliver up posses~
sion. Matter of Long Branch & Sea
Shore R.R. Co., 24 N. J. Eq. 398.
212 RAILROAD RECEIVERS. §§ 255, 256

will be denied.! The receivership will of necessity be al-
lowed where the corporation is insolvent, the trustee dead,
and the road is in possession of parties who are acting in
-hostility to the decrees of the court.”

§ 255. Receiver after decree.—A receiver may be appointed
after decree, where, under a State law, a sale cannot be had
for six months from the date of the decree.® The net in-
come of the road after decree is considered to be the prop-
erty of the bondholders, and should be applied in liquida-
tion of their claims. The fact that certain bondholders are
in possession, to the exclusion of others, is a sufficient rea-
son for the appointment of a receiver, unless the interval
between the decree and sale is to be very brief.

We may observe, that after decree and sale in foreclos-
ure, and before confirmation, the mortgagor may be re-
strained from committing waste.‘

$ 256. To prevent forfeiture.—A frequent ground of juris-
‘diction for the appointment of a receiver, is in cases where
the court acts with a view to obviate forfeitures. Thus, a
railroad company had a valuable land-grant which would
lapse and become a total loss to it, provided the road was
not finished within a given time. It was decided, in a
much-quoted case, that a receiver could be appointed on
application of the bondholders, and, as will presently ap-
pear,’ that the court could permit him to borrow money to
complete the line. His debentures issued for that pur-
pose were made a first lien upon the property of the cor-
poration.

 

'Vose v. Reed, 1 Woods 650; s.P. 4 Mutual Life Ins. Co. v. Bigler, 79
Tysen v. Wabash Ry. Co., 8 Biss. 255. N. Y. 568. See Wright v. Atkyns, 1
? Bill v. New Albany, etc. Ry. Co. Ves. & B. 313; Goodman v. Kine, 8
2 Biss. 390. A circuit court in Illinois Beav. 379.
‘cannot in vacation appoint a receiver 5 See § 283.
of a railroad company, Hammock v, ® Kennedy v. St. Paul & Pacific R.R.
‘Loan & Trust Co., 105 U.S. 77. Co., 2 Dill. 448; S. P. Jerome v. Mc-
3 Benedict v. St. Joseph & W. R.R. Carter, 94 U.S. 738.
Co., 19 Fed. Rep. 173.
§§ 257-259 RAILROAD RECEIVERS. 213

§ 257. Receiver prior to default.—A receiver may even be
had before breach of the technical conditions of the mort-
gage. Thus, where a railroad company is insolvent, and
threatened with the destruction of its business, a receiver
may be appointed, notwithstanding it had not yet made
default in its obligations to the petitioner. While a mort-
gagee cannot ask for relief until his mortgage debt has be-
come due, he can go into a court of equity before that
time has arrived, and ask for an injunction and a receiver
to prevent the subject-matter from being impaired or
wasted.”

$ 258. Receiver in sequestration proceedings.—When an
insolvent railroad company is in the hands of a receiver in
sequestration proceedings in New York, a judgment cred-
itor of the corporation will, as we have shown, be restrained
from prosecuting a stockholder, and the receiver will be
left undisturbed to collect and distribute the assets for the
benefit of all concerned.®

§ 259. Appointment on petition of corporation.—The appli-
cations for receiverships do not always proceed from bond-
holders or trustees. In Wabash, St. Louis & Pacific Railway
Company v. Central Trust Company,* a case which we
shall presently notice in another connection, a receiver was
appointed on the petition of an insolvent railroad corpo-
ration. It appeared that the system was composed of
numerous lines of railway, upon portions of which independ-
ent liens existed, and it was claimed in the bill that irrep-

 

1 Brassey v. N. Y. & N. E, R.R. Co.,
22 Blatchf. 72; s. Cc. 19 Fed. Rep, 663.
See Long Dock Co. v. Mallery, 12 N.
J. Eq. 431.

* As was said in Long Dock Co. v.
Mallery, 12 N. J. Eq. 448: “If the bill
shows a case for an injunction and re-
ceiver, the exercise of that power is
called for, although the time of pay-

ment set in the mortgage has not yet
come, unless the equity of the bill is met
by theanswer..... The power of the
court to preserve the pledge from de-
struction to answer the exigency of the
mortgage is undoubted.”

8 Rankine v. Elliott, 16 N. Y. 377.
See §§ 170, 237.

422 Fed. Rep. 272.
214 RAILROAD RECEIVERS. §§ 260, 261

arable injury would result if the system was broken up.
The receivers appointed in this case were subsequently su-
perseded as to a part of the property.1. In New Jersey a
railroad receiver will be appointed in insolvency proceed-
ings, and will be empowered to act much the same as in
foreclosure proceedings,’

$ 260. To collect damages.— When a railroad company has
occupied private property with its road, and has neglected
to pay damages, there is authority in Missouri to the effect
that the right of the owner to maintain ejectment is not
clear, provided the owner has acquiesced in the occupancy,
and it was intimated that the court might interfere, if nec-
essary, and place the road in the hands of a receiver, until
the damages were paid from the earnings.®

§ 261. Conflicting jurisdictions.—Questions concerning
conflicting jurisdictions of the courts frequently arise in
receivership cases. Without entering into a general dis-
cussion of the subject, we may note the general rule that
the court first acquiring jurisdiction of the subject-matter
will control the litigation and the possession of the prop-
erty to the end. When fwo receivers are appointed upon
the same day, by different justices, and both receivers claim

 

1See Atkins v. Wabash, St. L. & P.
Ry. Co., 29 Fed. Rep. 161. See § 275.

? Hoover v. Montclair & G. L. Ry.
Co., 29 N. J. Eq. 4.

3 Provolt v. Chicago, R. I. & P.R.R.
Co., 57 Mo. 264.

4 Bill v. New Albany, etc. Ry. Co., 2
Biss. 390. See Robinson v. Atlantic &
G. W. Ry. Co., 66 Pa. St. 160; Minne-
sota Co. v. St. Paul Co., 2 Wall. 609;
The Ohio & Miss. R.R. Co. v. Fitch,
20 Ind. 505; Memphis City v. Dean, &
Wall. 64. In Union Trust Co. v. Rock-
ford, R. I. & St. L. R.R. Co., 6 Biss.
198, the court said: ‘The proper ap-
plication of this rule does not require
that the court which first takes juris-

diction of the case shall also first take,
by its officers, possession of the thing
in controversy, if tangible and suscep-
tible of seizure, for such a rule would
only lead to unseemly haste on the
part of officers to get the manual pos-
session of the property ; and while the
court first appealed to was investigating
the rights of the respective parties, an-
other court, acting with more haste,
might, by a seizure of the property,
make the first suit wholly unavailing,
To avoid such a result, the broad rule
is laid down that the court first in-
voked will not be interfered with by
another court while the jurisdiction is
retained.”
§ 262 RAILROAD RECEIVERS, 215
the assets of the corporation, a question of legal priority
is presented which can only be solved by taking notice of
the fractions of the day upon which the receivers were ap-

pointed.

§ 262. Consolidated roads.—When two railroads, incorpo-
rated by different States, have been consolidated, a receiver
may be appointed in the Federal courts over the entire con-
solidated property.” Obviously it would be most unfortu-
nate for all concerned if one property should be held in por-
tions by different receivers accountable to different courts.
The rolling stock must necessarily pass from one end of the
road to the other; and if different divisions were under the
control of separate courts and receivers, it would be well-
nigh impossible to administer the affairs of the road, and
render accurate and satisfactory accounts. Such a divided
control would tend to cripple the operations of the road,
destroy its business, reduce its receipts, and place the
security of the creditors in jeopardy.* And a railroad lying

 

1 The People v. Central City Bank, 53
Barb. (N. Y.) 412. In State of Florida
v. Jacksonville P. & M. R.R. Co., 15 Fla.
201, 275, the court say: “A receiver
does not represent the plaintiff in a suit,
and the court should not in a subse-
quent suit displace a receiver appointed
in a prior suit, affecting the same sub-
ject-matter. This we state as a gen-
eral rule of convenience, and do not
mean to say that under some circum-
stances it might not be proper. The
proper course, as a general rule of
practice, is to extend the receivership
in the first suit over the second, sub-
ject to the legal and equitable claims
of all parties, and the rights of the par-
ties in each suit are substantially the
same as if different persons had been
appointed at the several times when
such receivership was granted. If,
however, a different receiver is ap-
pointed in the second suit, then the

plaintiffs may claim that the receiver
in the former shall deliver to the re-
ceiver appointed in his suit." Compare
Cagger v. Howard, 1 Barb. Ch. (N. Y.)
368; Howell v. Ripley, 10 Paige (N.
Y¥.) 43.

* Wilmer v. Atlanta & R. A. L. Ry.
Co., 2 Woods 409. See Chap. XX.

°In Wilmer v. Atlanta & R. A. L.
Ry. Co., 2 Woods 409, 418, Woods,
Circuit Judge, said: “Can this court,
having obtained jurisdiction over the
person of this corporate body, exercise
jurisdiction over its real and personal
property outside the limits of the State,
by the appointment of a receiver to take
possession of the entire property, both
within and without the State? There
is a precedent for the exercise of such
jurisdiction. In Ellis v. The Boston,
Hartford & Erie R.R. Co., 107 Mass. 1,
the court appointed a receiver for the
entire line of the defendant company’s
216 RAILROAD RECEIVERS. §§ 263, 264

in different States may be sold as an entirety by the Circuit
Court of the United States for the district comprising one
of the States,’

$ 263. Title of receiver in foreclosure.—The receiver in a
mortgage case can only claim the property covered by the
mortgage. Hence he cannot recover from a railway super-
intendent prior earnings of the road to which the mortgage
did not attach.” Davis, J., said: ‘ The right of the plaintiffs
cannot extend beyond the property mortgaged; and the
right of the receiver must necessarily have the same limita-
tion.”® It may be noted that a well-recognized principle
exists to embrace accessions and after-acquired property of
the railroad within the mortgage upon its property, and this
principle is generally supplemented by the peculiar form of
mortgage used in railroad cases.*

$ 264. Effect of appointment.—It has been shown that the
appointment of a receiver does not dissolve a corporation.
“Certainly it can do all things necessary to preserve its
legal existence, notwithstanding the appointment of the re-
ceiver to whom the temporary management of the road is
given.”* This rule obtains generally, as regards the ap-
pointment of a receiver of a railroad corporation.?’ The
appointment, as is elsewhere shown, will not abate legal
proceedings.

 

road, which extended from Boston, in 5 See §§ 203, 219, and Chaps. XVII.,

Massachusetts,to Fishkill,in NewYork.”

1 Muller v. Dows, 94 U.S. 444.

? Noyes v. Rich, 52 Me. 115.

3 Ibid. 115, 117.

4 See Pierce v. Emery, 32 N. H. 484;
Shaw v. Bill, 95 U.S. 10; Galveston
Railroad v. Cowdrey, 11 Wall. 459;
United States v. New Orleans R.R. Co.,
12 Wall. 362; Philadelphia, W. & B.
‘R.R. Co. v. Woelpper, 64 Pa. St. 366.
The decree in foreclosure proceedings
should name an upset price large
enough to cover claims, Blair v. St.
Louis, H. & K. R. Co., 25 Fed. Rep. 232.

XVIII. ; Moseby v. Burrow, 52 Texas
396; State v. Merchant, 37 O. S. 2513
Pringle v. Woolworth, go N. Y. 502;
Kincaid v. Dwinelle, 59 N. Y. 548;
Ohio & Miss. Ry. Co. v. Russell, 115
Tll. 52.

* Ohio & M. Ry. Co. v. Russell, 115
Ill. 57.

"State v. Merchant, 37 O. S. 251;
People v. Barnett, 91 Ill. 422.

* People v. Barnett, g1 Ill. 422. See
Safford v. People, 85 Ill. 558; Phila~
delphia & R, R.R. Co. v. Common-
wealth, 104 Pa. St. 80.
§ 265 RAILROAD RECEIVERS. 217

§ 265. When receiver will not be appointed.—We have ad-
verted to the disinclination of the court to appoint railroad
receivers,’ and to the exercise of discretion in the appoint-
ment of receivers in foreclosure. Further pursuing the
general subject of railroad receiverships, we may state that
a bill filed by certain holders of stock which it is charged
was illegally issued asking that a receiver be appointed, and
the corporation directed to pay to him a sum sufficient to
repay the money advanced for the stock, will not justify
the appointment of a receiver when the identity of the
money is lost.2 The disinclination of the court to appoint
a receiver in cases where it is not vitally essential is illus-
trated in another case in the Supreme Court of the United
States. In Milwaukie & Minnesota Railroad Company v.
Soutter,* Miller, J., said: “The idea of appointing or con-
tinuing a receiver for the purpose of taking ninety-five miles
of railroad from its lawful owners, which is earning a gross
revenue of $800,000 per annum, to enforce the payment of
a judgment of $16,000, the lien of which is seriously con-
troverted, is so repugnant to all our ideas of judicial pro-
ceedings that we cannot argue the question.” An injunc-
tion and receiver will not be allowed in an improper
case, even with the consent of both parties, more espe-
cially where the rights of third parties may be concerned.
And where several railroads have common rights in a
tunnel, a bill in equity will lie in case of a dispute over
such rights, but a receiver will not be appointed to man-

 

1 See § 252. in a case of necessity, to protect the

2 See § 254. stockholders or creditors from loss, or
3 Whelpley v. Erie Railway Co., 6 to prevent an abuse of the corporate
Blatchf. 271. franchises. The stockholders are en-
42 Wall. 523. titled to have the selection of the agents

5 Whelpley v. Erie Railway Co., 6 who are to manage the affairs of the
Blatchf. 274. In City of Rochester v. corporation, and this power ought not to
Bronson, 41 How. Pr. (N. Y.) 82, the be taken from them, unless it is neces-
court said that the appointment of a_ sary for their own protection, or that of
receiver “ ought not to be made unless creditors or the State.”
218 § 266

RAILROAD RECEIVERS.
age the tunnel if the rights of the parties can be otherwise
preserved.

Default in payment of interest on a mortgage will not
necessarily warrant the appointment of a receiver.”

§ 266. Duties of railroad receiver—The most important
duties devolving upon a railroad receiver comprise the op-
eration and management of the road.’ It is, as we have
seen,‘ the difficulty of discharging this duty that makes the
court so reluctant to appoint receivers. Concerning the
functions of a receiver, the court in Safford v. The People®
said: ‘When the receivers were appointed by the Federal
court, there was no change in the corporate body. Its ex-
istence was intact, with its legal functions unimpaired, but
simply its acts were performed by agents appointed by the
court and not by the corporation. The agents appointed
by the court to perform its duties and exercise its functions
are legally its agents, although they are under the direction
of the court appointing them, within the limits of its char-
ter. The court only authorizes the receiver to exercise the
privileges and perform the duties prescribed by the charter.
The court does not, nor could it if attempted, enlarge or

 

» Delaware, L. & W. R.R. Co. v.
Erie Ry. Co., 21 N. J. Eq. 298.

? Union Trust Co. v. St. Louis, I. M.
& S. Railroad Co., 4 Dillon 114, Com-
pare Cheever v. Rutland & B. R.R.
Co., 39 Vt. 653; Williamson v. New
Albany, etc. R.R. Co., 1 Biss. 198. See
§187. In Union Trust Co. v. St. Louis,
I. M. & S. Railroad Co., 4 Dillon 117,
Miller, Circuit Justice, observed : “It is
also said that the income of the road
mortgaged to plaintiff can be secured
in no other way than by appointing a
receiver, and perhaps this is the surest
mode of effecting that purpose. But
the income is no more mortgaged than
the visible property and the franchises
of the company, and, unless there is

danger of loss to the bondholders, there
is no more reason why the income
should be sequestrated than the other
property of the company. It is also in
the power of the court, without appoint-
ing a receiver, to require of the defend-
ant to render account of the income,
and, after payment of the necessary ex-
penses, to pay so much as rightfully
should be paid to the debt secured by
the mortgage.”

3 See Vermont & Canada R.R. Co. v.
Vermont Central R.R. Co., 46 Vt. 792;
Kennedy v. St. Paul & Pacific R.R. Co.,
2 Dill. 448.

“See § 252.

5 85 Ill. 560.
$§ 267, 268 RAILROAD RECEIVERS.

219
restrict the powers and duties conferred by the charter.”?!
Judge Woods has said that the receivers act merely in
place of the president and directors, except so far only as
the court may otherwise direct.? They may fulfil the con-
tracts of the corporation so far as beneficial, and they are
entitled to repayment. of all reasonable expenses and
charges in preference to all other claims upon the prop-
erty.2 The receiver may be empowered to construct a
branch line to be paid for out of income.‘

§ 267. Leasing additional line—Comment will presently
be made upon the extraordinary power which the courts
exercise in the management of corporate affairs through a
receiver.” It has been decided in Virginia that the court
may even authorize the receiver to lease other lines of rail-
way to be operated in connection with the road, when such
a course seems advisable for the creditors’ interests.®

§ 268, Payments by receiver.— Rentals due fora line of road
operated by the company under a lease and continued by
the receiver, should be paid out of the receiver's funds."
The receiver may make payments from net earnings to par-

 

1 But see Metz v. Buffalo, C. & P.
R.R. Co., 58 N. Y. 61.

2 Davenport v. Receivers of Alabama
& C. Railroad Co., 2 Woods 519.

2 Ellis v. Boston, H. & E, R.R. Co.,
107 Mass. 28.

4 See Gibert v. Washington City, V.
M.& G.S.R.R. Co., 33 Gratt.(Va.) 586.

§ See Chap. XIII.

°Gibert v. ‘Washington. City, V.
M. & G. 5S, R.R. Co., 33 Gratt. (Va.)
586. In the opinion, the court said
(p. 603): “A court of equity, having
in charge the mortgaged property of
a railroad company, is authorized to
do all acts that may be. necessary
within its corporate power to preserve
the property, and to give to it ad-
ditional value, not only for the bene-

fit of the lien creditors, but also for the
benefit of the company, whose posses-
sion the court has displaced by the ap-
pointment of a receiver, and by taking:
into its own hands the property, rights,
works, and franchises of the company.
Any act, it would seem, necessary for
the protection and preservation of the
property, is a legitimate and proper
act, and whatever is manifestly appro-
priate to such preservation and protec-

tion, or to the enhancement of the value

of the property, not in excess of the
powers of. the corporation, will always
be upheld and enforced by the courts.”
Citing Jerome v. McCarter, 94 U. S.
734; Wallace v. Loomis, 97 U. S. 162,

1 Woodruff v. Erie Ry. Co., 93 N.
Y. 609. See § 207.
220 RAILROAD RECEIVERS. § 269
ties who had furnished car-springs, spirals and machinery
supplies to the road prior to insolvency, and which the re-
ceiver continued to use in the business! The order ap-
pointing the receiver may also direct him to pay past oper-
ating expenses for the period of ninety days.? Mr. Justice
Bradley said: “All outlays made by the receiver in good
faith, in the ordinary course, with a view to advance and
promote the business of the road, and to render it profita-
ble and successful, are fairly within the line of discretion
which is necessarily allowed to a receiver intrusted with
the management and operation of a railroad in his hands.” ®
The receiver’s contracts for labor and supplies will bind the
trust.*

§ 269. Expenditures not allowed.—Expenditures made by
a receiver to defeat a subsidy to a rival line, will not be al-
lowed. Field, J., said: “(It was no part of the receiver’s
duty to interfere with the construction of a parallel line of
railway, or to attempt to defeat any contemplated aid for
such an enterprise. The proposed line may have been of
great importance to the public, and necessary to the pros-
perity of the city, though it might possibly diminish the
future earnings of the company whose road was in _ his

 

' Hale v. Frost, 99 U. S. 389. Com-
pare Fosdick v. Schall, 99 U.S. 253.

® Miltenberger v. Logansport Ry.
Co., 106 U. S. 286-292. Where a re-
ceiver is appointed of the rents, issues,
and profits of a railroad, it ishis duty
to receive the gross receipts of the
company for the carriage of passen-
gers, freight, mails, etc., and to pay
the running expenses thereout, and
not to receive only the surplus after
paying expenses, ‘The court said in
one case: “I think that the gross re-
ceipts should be paid to the receiver.
This is the usual course in other cases,
It affords, no doubt, to the creditors a
better security, that all that is available

shall reach his hands, than if a surplus,
to be ascertained by the companies’
own officers, were to be paid over. In
fact, if that were the only duty.of the
receiver,—that is, to receive the surplus
and pay it over, czz dono appoint him
at all; the creditor would probably de-
rive as much benefit from an order on
the company to pay into court from
time to time the balance in hand, to be
verified by affidavit.” Simpson vy. Ot-
tawa & P. Ry. Co., ro Up. Can. L. J.
108; s. C. 1 Chan. Ch. Rep. (Can.) 128,

* Cowdrey v. Railroad Co., 1 Woods
331, 336.

4 Lehigh Coal & Nav. Co. v. Cen-
tral R.R. Co., 41 N. J. Eq. 167, 175.
RAILROAD RECEIVERS, 221

$§ 270-272
charge. At any rate, as an officer of the court, the receiver
could not be allowed to determine the question of its im-
portance, either to the public or the company, and, acting
upon such determination, to appropriate funds in his cus-
tody to aid or defeat the measure, without sanctioning a
principle which would open the door to all sorts of abuses.
A receiver is not authorized, without the previous direction
of the court, to incur any expenses on account of property
in his hands, beyond what is absolutely essential to its pres-
ervation and use, as contemplated by his appointment.” ?
Generally speaking, a receiver is not permitted to lessen the
fund, or to make repairs in his discretion, but must apply
to the court for directions. So expenses attending nego-
tiations among bondholders, had with the design of selling
the road, are not properly payable by a receiver, especially
where it appears that there is no surplus in his hands.

$ 270. Suits by railroad receiver —A railroad receiver may
maintain a suit auxiliary to the principal action, to prevent
State officers from forfeiting lands of the company.‘

$ 271. Officers as receivers.—In case an order is made, di-
recting the officers of a road to manage it, subject to the
order of the court, and to report to it, the officers become,
in effect, receivers of the property.®

§ 272. Selection and removal.—As we have seen, the office
of receiver should not usually be conferred upon a party to
the cause,® as receivers should be impartial between the

 

1 Cowdrey v. Galveston, H. & H. R.R.
Co., 93 U.S. 353.

2 See Wyckoff v. Scofield, 103 N. Y.
632; Blunt v. Clitherow, 6 Ves. 799;
Attorney ‘General v. Vigor, 11 Ves.
563. In Wyckoff v. Scofield, 103 N. Y.
633, Danforth, J., said: “ The expenses
were not incurred nor the repairs made
with its [the court’s] permission, and
whether, having been made, the court
should allow its receiver to reimburse

the contractor, was a matter entirely
within its discretion.”

3 Central Trust Co. v. Wabash, St.
L. & P. Ry. Co., 25 Fed. Rep. 69.

4 Davis v. Gray, 16 Wall. 203. See
Chap. XI.

5 In re Fifty-four First Mortgage
Bonds, (Gibbes v. Greenville & C. R.R.
Co.), 15 S.C. 304; Ex parte Brown,
15 S. C. 518,

® See Young v. Rollins, 85 N.C. 485.
222 RAILROAD RECEIVERS, § 273

parties.’ In some cases two receivers are appointed over a
railroad. Where a disagreement results in the manage-
ment, it is proper for the court to remove them, and ap-
point a single disinterested person.* A change of incum-
bent does not, however, affect the status of claims against.
the receivership.? The power of removal, as we have seen,‘
is implied from the power to appoint,° and rests largely in
‘ the sound discretion of the court.® Preferred creditors
cannot dictate as to who shall be appointed receiver.”

§ 273. Discharge of receiver.—The right to the discharge
of the receiver, upon payment of the mortgage debt, is a
clear legal one.®

 

1See $171; Central Trust Co. v. ® McCullough v. Merchants’ L. & T.
Wabash, St. L. & P. Ry. Co., 1 Railw. Co., 29 N. J. Eq. 217.
& Corp. L. J. 16; s.c. sud nom. At- ‘Richards yv. Chesapeake & Ohio
kins v. Wabash, St. L.& P. Ry. Co, R.R.Co., 1 Hughes 28, 32.

29 Fed. Rep. 161. * Milwaukee & M. R.R. Co. v. Sout-
* Meier v. Kansas Pacific Ry. Co., ter, 2 Wall. 510. Compare Jz re In-

5 Dillon 476, dianapolis, C. & L. F. R.R. Co., § Biss.
3 Ex parte Brown, 15 S.C. 518, 287 ; Chicago & V. R.R. Co. v. Fosdick,
4 See § 246. 106 U. S. 47.

5 Cincinnati, S. & C. Railroad Co. v.
Sloan, 31 0. S. 1.
CHAPTER XIII.
RECEIVERS’ CERTIFICATES.

§ 274. Concerning receivers’ certifi- ) § 283. To prevent forfeiture.

cates. 284. Order to issue certificates—No-
275. Nature and duration of receiv- tice.

ership. : 285. Debts of statutory receivers.
276, At whose instigation receivers | 286, Money borrowed to operate

will be appointed. road.
277. Trustees’ power to create a| 287, Application of the funds.

lien. : . 288. Receivers’ certificates non-ne-
278. Expenditures by mortgagee in gotiable,

possession.

I x ; 289. Conditions annexed to appoint-
279. Right to issue certificates rec- ment of receiver.

ognized. ; 290. Income applied to expenses. '
280. } Criticisms upon the issuance 291. Allowing back claims
281.§ of receivers’ certificates, 292. Unsecured prior aii
282. Power to make repairs. 293. Piineioe ee ,

 

$ 274. Concerning receivers’ certificates. Questions con-
cerning the power of the court to authorize receivers to
issue and sell certificates of indebtedness which shall con-
stitute a lien upon the property in the custody of the court,
and affecting the true character of such instruments, come
technically within the range of a treatise upon receivers.
As, however, it is usually the insolvency of the corporation
that calls this asserted power into being,—and it is, unfortu-
nately, becoming common practice for the courts to author-
ize the issuance of these insidious evidences of debt in rail-
road cases, where a receiver has been appointed with power
to manage the road,—a brief allusion to the functions of the
court in the premises, to the nature of the alleged power,
and to the legal characteristics of such certificates, may not
be inopportune,
224 RECEIVERS’ CERTIFICATES. § 275

S$ 275, Nature and duration of receivership.—Before enter-
ing upon a discussion or criticism concerning the issuance
of receivers’ certificates of debt, let us briefly recall to no-
tice the true legal character of a receivership.’ It is fun-
damental in the law that a receivership is a temporary
affair, created to subserve an existing emergency of a tem-
porary nature ; and when that purpose is accomplished, the
receivership is to cease. The idea that a court of equity,
in virtue of its prerogative in that behalf, is to take upon
itself the office of instituting a receivership which shall
be perpetual, and do the duty of the directors in con-°
trolling and enforcing the executive administration and
management of a business, for the profit and emolument of
interested parties, and not to serve a present exigency, has
never been entertained.? Shipman, J., said: “In general,
a receivership is ancillary or incidental to the main purpose
of the bill.”® Miller, J., observed :* “The appointment of
“receivers by a court to manage the affairs of a long line of
railroad, continued through five or six years, is one of those
judicial powers, the exercise of which can only be justified
by the pressure of an absolute necessity.”

We must keep in view, then, the fact, first, that a receiver
is appointed as a mere custodian to preserve and care for the
property in controversy ; and secondly, that the duration of
his term of office is temporary. It should be conceded that
it is foreign to the functions of the judiciary to take up and
complete unfinished business enterprises or contracts which
corporations have abandoned or found impossible of per-
formance. Such tasks would seem to be especially hope-
less when it is remembered that the judiciary is compelled
to act wholly through appointees or agents, and to base its
judgment and exercise its discretion upon facts which have

 

1 See 8§ 169, 170, ® Brassey v. New York & N.E, R.R.
? Vermont & C.R.R. Co.v. Vermont Co., 22 Blatchf. 79.
Cent. R.R. Co., 50 Vt. 570; S.C. 14 ‘Milwaukie & Minn. R.R. Co. v.
Am. Rail. Rep. 546. Soutter, 2 Wall. 510, 524.
§ 276 RECEIVERS’ CERTIFICATES. 225
been investigated and reported to it by others.t Manifestly,
there cannot be that intimate knowledge and close sym-
pathy between the court as the directing power, and the
insclvent corporation in the hands of a receiver, which suc-
cessful management of an important business enterprise
exacts.”

$ 276. At whose instigation receivers will be appointed.—
Let us briefly recall how railroad receivers acquire office.
The power of a court of chancery to appoint a receiver
pendente fete in foreclosure cases, is a part of its incidental
jurisdiction not depending upon any statute. Though the.
receiver takes possession and collects the rents and profits,
the title remains in the mortgagor.* Generally speaking,
receivers are appointed in railroad cases at the instigation
of the trustee of the mortgage, and even in these cases it
too often results that the remedy is worse than the disease.
The receivership jurisdiction is invoked on the theory that
it will Avevent irreparable injury to the property. Certain
losses, it is true, may be averted by the exercise of this juris-

 

such operations should be conducted
under the direction of this court, for so
long atime.” It is impossible to dis-

1In a case which came before the
Supreme Court of Georgia, an effort
was made to engage a court of chan-

cery, through its receiver, in the patent-
medicine business, but the appellate
court seemed disinclined to tolerate
the proceeding without “taking com-
petent medical advice.” Merrell v.
Pemberton, 62 Ga. 34.

2In an early case in New York
(Crane v. Ford, 1 Hopk. Ch. 114), it
appeared that a steam vessel was the
subject of litigation, and a receiver
had managed and sailed it for two
years. A motion was made for a di-
rection that the vessel be sold, The
court said: “ The vessel has sailed un-
der the direction of a receiver for two
years, and must be fitted out for an-
other season, er lie useless; and it is
highly inconvenient and unfit, that

guise the fact that too frequently the
purpose of receiverships in our modern
practice is to Jrevent creditors and in-
terested parties from invoking the aid
of the courts to enforce their rights.
The appointment is improperly used
as a shield against others, rather than
as an active instrumentality to accom-
plish, in and by itself, practical results
for the parties at whose instigation the
appointment is made.

3 United States Trust Co. v. N. Y,,
W. S. & B. Ry. Co., ror N. Y. 483;
Bank of Ogdensburgh v. Arnold, 5
Paige (N. Y.) 40; Hollenbeck v. Don-
nell, 94 N. Y. 342.

+ Keeney v. Home Ins, Co., 71 N.Y.

396.
226 RECEIVERS’ CERTIFICATES. § 277

diction, but zz other aspects the appointment works irrepara-
ble injury to the securities belonging to the parties at whose
instigation and for whose supposed benefit the receivership
was created. The courts do not, however, stop at foreclos-
ure receiverships. We find a case reported in New Jersey,
already adverted to, in which a receiver was appointed in
insolvency proceedings affecting the corporation, and subse-
quently authorized by order of the court to issue certificates
to raise money to make repairs upon the road.’ Even this
case, however, has been surpassed. The gyrations of the
courts upon this subject are, in some aspects, startling. In
Wabash, St. Louis & Pacific Railway Company v. Central
Trust Company,® receivers were appointed upon the peti-
tion of the insolvent corporation itself, and for a consider-
able period of time, sufficient to subserve the purposes of
certain railroad manipulators, creditors and various parties
interested as bondholders and otherwise in one of the most
extensive and complicated railway systems in the world,
were baffled by this ingenious contrivance ; and in addition
a quantity of receivers’ certificates were floated for doubtful
purposes.®

$ 277. Trustees’ power to create a lien —The appointment
of receivers in railroad cases when made on behalf of a
mortgagee, is not, in itself, so reprehensible as is their long
continuance in office, and the extra-judicial uses in which
such receiverships are constantly employed. Let us briefly
attempt to state the views advanced by the courts as a
justification for authorizing the issuance of receivers’ cer-
tificates. The rule is established, that when a trustee is au-
thorized or empowered to make outlays for the benefit of
his trust, he may create a lien upon the estate in his hands.
Thus, New v. Nicoll* sets forth a dictum to the effect that

 

1 Hoover v. Montclair & G. L. Ry. Co, v. Wabash, St. L. & P. Ry. Co.,
Co., 29 N. J. Eq. 4. See § 259. 1 Railw. & Corp. L. J. 16, per Gres-.

* 22 Fed. Rep. 272. ham, J.

? Compare, especially, Central Trust 473 N, Y, 131.
§ 277 RECEIVERS’ CERTIFICATES. 227

when a trustee is authorized to make an expenditure, and
has no trust funds with which to accomplish it, and the ex-
penditure is necessary for the protection, reparation, or
safety of the trust estate, and the trustee is not willing to
assume personal responsibility, he may, by express agree-
ment, make the expenditure a charge upon the trust estate.
In such a case the trustee could himself advance the money
to make the expenditure, and thus create a lien in his own
favor upon the trust estate; and he can,-by express con-
tract, transfer this lien to any other party who may, upon
the faith of the trust estate, make the expenditure.’ This
rule has been cited as being, in a certain sense, a justifica-
tion of the theory upon which the issuance of receivers’ cer-
tificates is predicated; but we fail to discover that it is
necessarily in point in favor of the practice, for in the trusts
referred to, the power to make the expenditures emanates
directly from the beneficial owners or the originators of the
trust, and is usually acknowledged and clear. In the case,
however, where receivers of corporations create prior liens
upon property by floating certificates, the right to issue
these obligations is often disputed, and consent is expressly
withheld by the equitable owners of the property, or by the
parties whose liens are to be impaired. Nevertheless, the
first liens of these persons are ruthlessly displaced solely by
the exercise of arbitrary judicial discretion. The courts be-
come self-constituted guardians of bondholders in respect
to advising them concerning what is essential for the pro-
tection and preservation of their securities, and directing
what shall be done to avoid forfeitures of contracts or
franchises, or to escape the annoyances incident to the in-
solvency of the corporation that issued the obligations.
Hence it is, that first liens upon railways are deposed, and

 

1 Citing Noyes v. Blakeman, 3 Sandf. Hun (N. Y.) 4. See, especially, Union
(N. Y.) 531, aff'd 6 N. Y.567; Randall Trust Co. v. Illinois Midland Ry. Co.,
v. Dusenbury, 39 N. Y. Superior 174, 117 U. S. 476; Morison v. Morison, 7
aff'd 63 N. Y. 645; Stanton v. King,8 DeG., M. & G. 222,
228 RECEIVERS’ CERTIFICATES. § 278

the properties often hopelessly encumbered by receivers’
obligations, issued ostensibly to preserve the very rights
which are thereby divested. True, the receiver is in theory
regarded as in effect the agent of the bondholders, but the
latter too often have little voice in controlling the receiv-
ers’ expenditures. Would it not be wiser to allow the
promptings of self-interest and of self-preservation to in-
spire the bondholders to protect themselves? Should not
the holders of such securities be treated as suz¢ zures? Isa
security-holder bound to accept the fatal relief which he
does not ask, and against the granting of which he earnestly
protests ?

$ 278. Expenditures by mortgagee in possession.—Under
the settled principles of the common law a mortgagee in
possession of the mortgaged estate, is allowed the expenses
of reasonable repairs. He is not, however, permitted to im-
prove the mortgagor out of the property, or to cripple his
right of redemption by placing permanent betterments upon
it, not essential for its preservation, though increasing its
value.’ This rule has also been invoked in cases of receiver-
ships in railroad foreclosures, the possession of the receiver
being considered that of the mortgagee; and it has been
cited as a justification for the issuance of receivers’ certifi-
cates. It should be noted that, in the cases instanced, the
mortgagee in possession is exercising in person the discre-
tion as to expenditures, and the outlays are charged against
the mortgagor, while in the cases where receivers’ certifi-
cates are issued the loss almost invariably falls upon the
mortgagee, and the latter is not allowed, otherwise than
constructively, to exercise the discretion as to the character
of the expenditures. Furthermore, the issuante of these
obnoxious certificates has been authorized in cases where
the receiver was not appointed upon the mortgagee’s pe-
tition, and the analogy of a mortgagee in possession had

 

* Moore v. Cable, 1 Johns, Ch, (N. Y.) 385; Sandon v, Hooper, 6 Beav. 246,
§ 279 RECEIVERS CERTIFICATES. 229

no application, The principle of the rule governing ex-
penditures by mortgagees is by no means as broad as the
conclusion sought to be drawn from it by advocates of the
right to issue receivers’ certificates.

§ 279. Right to issue certificates recognized.—T he jurisdic-
tion of the courts to authorize the issuance of receivers’ cer-
tificates is stated as follows in Wallace v. Loomis,’ by Mr.
Justice Bradley : “The power of a court of equity to ap-
point managing receivers of such property as a railroad,
when taken under its charge as a trust fund for the pay-
ment of incumbrances, and to authorize such receivers to
raise money necessary for the preservation and management
of the property, and make the same chargeable ‘as a lien
thereon for its repayment, cannot, at this day, be seriously
disputed. It is a part of that jurisdiction, always exercised
by the court, by which it is its duty to protect and preserve
the trust funds in its hands. It is, undoubtedly, a power to
be exercised with great caution, and, if possible, with the
consent or acquiescence of the parties interested in the
fund.”* The court, in Meyer v. Johnston,’ a leading and
very important case upon the subject, decided that it pos-
sessed power, after proper notice and hearing of interested
parties, to authorize the issuance of receivers’ certificates of
indebtedness creating a first lien, displacing other liens to
that extent upon the property of a railroad which the court
was operating through its receiver, whenever such a course
was necessary for the economical management of the prop-
erty. The court, however, seem to be conscious that the
power is a dangerous one, and say that certificates should
not be authorized unless a detailed statement is first pre-
pared specifying the items of the amount needed and the
purpose to which it is to be applied, supported by clear

 

197 U.S. 162.
2s, p, Union Trust Co. v. Illinois Midland Ry. Co., 117 U.S. 455.
3 53 Ala, 240.
230 RECEIVERS’ CERTIFICATES. § 279

proof of the correctness of the amount, and of the necessity
for raising the money. But the most advanced doctrine upon
this subject is embodied in a recent decision of the Supreme
Court of the United States. Mr. Justice Blatchford says,
in Union Trust Company v. Illinois Midland Railway
Company :! “ Property subject to liens and claims and debts
of various characters and ranks, which is brought within the
cognizance of a court of equity for administration, and con-
version into money, and distribution, is a trust fund. It is
to be preserved for those entitled to it. This must be done
by the hands of the court, through officers. The character
of the property gives character to the particular species of
preservation which it requires. Unimproved land may lie
idle, with only payment of taxes. Improved property should
be rented. Movable property that is not perishable may be
locked up and kept; but if perishable, it must be sold, by
way of preservation. A railroad, and its appurtenances, is a
peculiar species of property. Not only will its structures
deteriorate and decay and perish if not cared for and kept
up, but its business and good-will will pass away if it is not
run and kept in good order. Moreover, a railroad is a mat-
ter of public concern. The franchises and rights of the cor-
poration which constructed it were given not merely for
private gain to the corporators, but to furnish a public
highway ; and all persons who deal with the corporation as
creditors or holders of its obligations, must necessarily be
held to do so in the view, that, if it falls into insolvency and
its affairs come into a court of equity for adjustment, in-
volving the transfer of its franchises and property, by a sale,
into other hands, to have the purposes of its creation still
carried out, the court, while in charge of the property, has
the power, and, under some circumstances, it may be its
duty, to make such repairs as are necessary to keep the road
and its structures in a safe and proper condition to serve

 

1117 U.S. 455.
§ 280 RECEIVERS’ CERTIFICATES. 231
the public. Its power to do this does not depend on con-
sent, nor on prior notice. Consent is desirable, but is sel-
dom practicable, where the debts exceed the value of the
property.”?

§ 280. Criticisms upon the issuance of receivers’ certificates.
—Possibly we have reached too late a period in the growth
of our jurisprudence to successfully assail the doctrine of the
inherent right of courts of equity to authorize the issuance
and sale of receivers’ certificates of debt. Unfortunately it
has been assumed that this power existed, and it must be
confessed, with a faint shadow of technical justification.
The power has been exercised in repeated instances, though
the dangers likely to result from an abuse of it have beena
subject of anxious comment and deep solicitude on the part
of judges and litigants. The absence of landmarks or
fixed rules of positive law, framed to control the power of
the courts in issuing these certificates, results in leaving the
matter to be regulated by an unbridled and boundless judi-
cial discretion. This we consider the underlying cause of
the appalling evils that have resulted from the practice.
While it may seem unbecoming in an author to inveigh
against a practice which has received repeated judicial
sanction in the highest court of the land, yet, when we
consider the deplorable results heretofore achieved, and
which seem likely to accrue from a perpetuation of this ob-
noxious policy, and the murmurs of disapprobation which
the exercise of the power constantly awakens in judicial
and railroad circles, we feel constrained to protest. The

 

' Examine also Miltenberger v. Lo-
gansport Rway. Co.,106 U.S. 312; Bar-
ton v. Barbour, 104 U. S. 126; Burnham
v. Bowen, 111 U.S. 776; Meyer v. John-
ston, 53 Ala. 237; Hoover v. Montclair
& Greenwood Lake Ry. Co., 29 N. J.
Eq. 4; Fosdick v. Schall, 99 U. S. 254;
Bank of Montreal v. Chicago, C. & W.

R.R. Co., 7 Central L. J. 267; s. c. 48
Iowa 518; Douglass v. Cline, 12 Bush
(Ky.) 608; Woodruff v. Erie Railway
Co., 93 N. Y. 623. See note by Adel-
bert Hamilton in 23 Am. Law Reg. N.
S.,p.44. See Gibert v.Washington City,
V. M. & G. S, R.R. Co., 33 Gratt. (Va.)
603.
RECEIVERS’ CERTIFICATES. § 280

252
rule that the obligation of a contract shall not be impaired
has been again and again invoked by bondholders in oppo-
sition to this power to issue certificates, but it seems a hope-
less task to attempt to enforce observance of the rule when
the breach is effected under the guise of the exercise of ju-
dicial discretion. The courts are, apparently, able to accom-
plish results which are prohibited to the legislature. Some-
times the insolvent road is operated by the receiver at a
steady loss, merely to convenience the public; but, clearly,
is not this a taking of private property for public purposes
without just compensation ?! If, by reason of improvident
or unwise management, the property of a corporation is
likely to be forfeited or lost to it, we fail to discover that
this constitutes ground for equitable aid or interference.
The court will not make contracts for individuals, nor in-
terfere in cases where they have enlisted in improvident
schemes, nor will it aid in completing contracts which in-

dividuals have not the ability to carry out.

Yet forfeitures

and kindred losses are as likely to result to individuals as

 

‘In Douglass v. Cline, 12 Bush (Ky.)
630, the court said: ‘The mortgagees
accepted their securities with knowl-
edge that the railroad company, though,
technically speaking, a private corpora-
tion, was under obligations to the State
to render certain important public ser-
vices. They knew that the railroads
were, in a certain sense, public high-
ways, and that whoever owned them,
or held them in pledge, was bound to
see that they were at all times so oper-
ated as to subserve the public con-
venience.” And in Barton v. Barbour,
104 U. S. 135, Woods, J., said: “A
railroad is authorized to be constructed
more for the public good to be sub-
served than for private gain. As a
highway for public transportation, it is
a matter of public concern, and its
construction and management belong

primarily to the commonwealth, and
are only put into private hands to sub-
serve the public convenience and econ-
omy. But the public retain rights of
vast consequence in the road and its
appendages, with which neither the
company nor any creditor or mort-
gagee can interfere. They take their
rights, subject to the rights of the pub-
lic, and must be content to enjoy them
in subordination thereto. It is there-
fore a matter of public right by which
the courts, when they take possession
of the property, authorize the receiver,
or other officer in whose charge it is
placed, to carry on in the usual way
those active operations for which it was
designed and constructed, so that the
public may not suffer detriment by the
nonuser of the franchises,”
$ 280 RECEIVERS’ CERTIFICATES. 233

to corporations. Is there to be a special dispensation in
favor of the latter ?

We firmly believe that, practically, every exercise of this
asserted right to issue receivers’ certificates is a perversion
and abuse of power, and may, justly, be contemplated with
the gravest alarm. The discredit which litigation too fre-
quently brings upon the courts, and the profession, is attrib-
utable in part at least to the tendency of the judiciary to as-
sume foreign functions, which the machinery of justice
prove inadequate to discharge, and this is nowhere more
forcibly illustrated than in the cases where courts have at-
tempted to manage and operate railroads through the
medium of receivers, and to raise money to carry on the
business. The undue- tendency of our courts to supervise
and annul executive action, and to obtrude their judgment
and discretion into matters which, in theory, our govern-
ment contemplated should be within the domain of a co-
ordinate department, is in itself reprehensible.t But the
effort to make the judiciary, with its hampered restrictions,
its slavish adherence to forms, its endless delays, its free-
dom from individual responsibility, and its absence of per-
sonal pecuniary interest or enthusiasm in the enterprise,
the central moving impulse of a vast business concern, is
preposterous. The judiciary cannot, from the nature of
things, become an acceptable source of executive power.
Its purpose and duty in connection with actual litigation,
renders such a consummation unattainable. A tribunal is
created and trained to interpret statutes or contracts, or to
hear and determine controverted matters of law or of fact.
One of the secret springs of inspiration which entails suc-
cessful business management, z. ¢., self-interest, is wholly

 

1 The observation of a widely-known court to manage the government pend-
advocate, made during the great con- ing the settlement of the dispute, was
troversy over the title to the Presidency greeted by the profession as a capital
of the United States in 1876, suggest- thrust at the tendency of the-courts to
ing that a receiver be appointed by the assume extra-judicial functions.
234 RECEIVERS’ CERTIFICATES. § 281

absent in a court as an executive agent. Besides this, there
is no disinterested supervising power to regulate the action
of the courts, The executive and judiciary are, in such a
case, combined. Then the successful operation of a rail-
road exacts technical knowledge of a high character, which
only years of experience can bring, and with which the
judiciary is necessarily unfamiliar.

§ 281. — The court, as we have seen, holds its possession
and manifests its will through the instrumentality of a re-
ceiver. Frequently the receiver appointed is a lawyer, un-
acquainted with practical railroad affairs; too often it will
be found that the person selected to discharge the duties of
this important position participated in the management of
the corporate affairs resulting in insolvency. The court is
not likely to receive valuable practical advice from ap-
pointees of this character. Experience demonstrates that
receiverships are constantly employed by unscrupulous rail-
road operators as an effectual cloak or means of protection
against creditors, for the legal process of the latter is power-
less to disturb the possession of the court maintained through
its receiver.’ “ Incorporated rascality ” cannot invent a more
efficient method of baffling honest litigants than a receiver
in possession of corporate assets, authorized to float certifi-
cates, is found to be. ‘Too often the bad intention is hid-
den from sight, and the court misled by the plausible soph-
istry of eminent counsel. Usually the only interest which
the receiver has in the property, during his temporary em-
ployment, is the matter of his compensation, which is often
in no way dependent upon a meritorious discharge of his
duty. The receiver, while acting within his legitimate
sphere, under the direction of the court, incurs no personal
risk ; he does, or refrains from doing, the things which the
court directs or forbids; he is the arm, hand, agent, or in-
strument of the court; sometimes he is directed by one

 

'See §§ 237, 238.
§ 281 RECEIVERS’ CERTIFICATES.

235
judge, sometimes by another, and there is no single person
upon whom the blame of, or responsibility for, mismanage-
ment of the corporation can be fastened. We proclaim it
to be practically impossible, in the very nature of things, for
a court to successfully and intelligently manage the vast con-
cerns of arailroad. The many scandals upon the administra-
tion of justice which railroad receiverships have entailed, and
the severe losses and bitter disappointments experienced by
mortgagees and bondholders, whose first liens upon the prop-
erty have been displaced by insidious receivers certificates, ren-
derextremely difficult the task of treating, in a patient and dig-
nified manner, of the legal characteristics of such certificates.'

 

'Cases tllustrating abuses in re-
cetvershifs—The late Baxter, J., dep-
recated the appointment of railroad
receivers. He mentioned a railroad in
Georgia which had cost $15,000,000 ;
a receiver of the road, during three
years of mismanagement, issued $1,-
500,000 of certificates, and the road,
when sold, did not realize a sum suffi-
cient to liquidate these certificates. In
ordering the sale of a Western road, in
which $8,000,000 had been invested,
counsel requested that the court fix
the minimum price at a sum sufficient
to pay the expenses of the receiver and
his counsel. 11 Chicago Legal News 8.
In Vermont & Canada R.R. Co. v. The
Vermont Central R.R. Co., 50 Vt. 500,
569; S.c.14.Am. Railw. Rep. 497, 545,
the road was in the hands of a receiver
for fifteen years, and was turned over,
at the end of that time, hopelessly in-
solvent and loaded with millions of
debt. The receivers of the New York,
West Shore & Buffalo Railway Com-
pany held office for eighteen months.
During that period $4,131,512.34 of re-
ceivers’ certificates were floated. In
addition to this, $2,116,275.47 of re-
ceivers’ notes were issued. Claims
for labor and supplies furnished to the

road during the three months immedi-
ately preceding the appointment of
the receiver were also preferred in the
order of appointment. All the cer-_
tificates were outstanding, and $614,-
187.88 of the notes remained unpaid at
the close of the receivership. Under
the Haggerty Act, in New York State,
relating to the sequestration of cor-
porate property, the two receivers put
forward the modest claim of $750,-
000, as compensation for eighteen
months’ services—$375,000 each. The
court fortunately found reasons to dis-
allow this gigantic demand for com-
pensation (see United States Trust
Co. v. New York, West Shore & Buf-
falo Ry. Co., ror N. Y. 478), and the
receivers were awarded only $40,000
each. This case is remarkable in two
aspects : first, the issuance of notes by
receivers where the supply of certifi-
cates is exhausted; and, secondly, as
evidencing the extraordinary valuation
which receivers too often place upon
their services. The flagrant abuses

incident to railroad receiverships are

beginning to attract the attention of
the bench in many quarters. Thus
Mr. Justice Miller, one of the ablest
judges of our day, says, in a dissenting
236

Mr.

RECEIVERS’ CERTIFICATES.

§ 281

High,’ after observing that these certificates are

usually paid out of the proceeds of foreclosure before a
distribution to the mortgage bondholders, observes: ‘‘ The

power to thus create a new

lien or mortgage upon the

 

opinion in Barton v. Barbour, 104 U.
S. 137: “ The rapid absorption of the
business of the country of every char-
acter by corporations, while productive
of much good to the public, is begin-
ning also to develop many evils, not
the least of which arises from their fail-
ure to pay debts and perform the duties
which by the terms of their organiza-
tion they assumed. One of the most
efficient remedies for the failure to pay,
when it arises from inability, is to place
the corporation in the hands of a re-
ceiver, that its affairs may be wound
up, its debts discharged, and the re-
maining assets, if any there be, dis-
tributed among its stockholders. Of
the beneficial results of this remedy
there can be little doubt. When it is
applied with despatch, and the effects
of the insolvent corporation are faith-
fully used to meet its liabilities, and its
dead body is buried out of sight as
soon as possible, no objection can
be made to the procedure, and all
courts and good citizens should con-
tribute, as far as they may, to this de-
sirable object. In regard, however, to
a certain class of corporations,—a class
whose operations are as important to
the interests of the community and as
intimately connected with its business
and social habits as any other,—the
appointment of receivers, as well as the
power conferred on them, and the dura-
tion of their office, has made a prog-
ress, which, since it is wholly the work
of courts of chancery and not of legis-

latures, may well suggest a pause for,

consideration. It will not be necessary
to any observing mind to say that I
allude to railroad corporations. Of the
fifty or more who own or have owned

the many thousand miles of railway in
my judicial circuit, I think I speak
within limits in saying that hardly half
a dozen have escaped the hands of the
receiver. If these receivers had been
appointed to sell the roads, collect the
means of the companies, and pay their
debts, it might have been well enough.
But this was hardly ever done. It is
never done now. It is not the purpose
for which a receiver is appointed. He
generally takes the property out of the
hands of its owner, operates the road
in his own way, with an occasional
suggestion, from the court, which he
recognizes as a sort of partner in
the business; sometimes, though very
rarely, pays some money on the debts
of the corporation, but quite as often
adds to them, and injures prior credit-
ors by creating a new and prior lien
on the property pledged to them.
During all this time he is in the use of
the road and rolling stock, and perform-
ing the functions of a common carrier
of goods and passengers. He makes
contracts and incurs obligations, many
of which he fails to perform. The de-
cision that has just been announced
declares that for these failures he can-
not be sued in a court of law; that by
virtue of his receivership, he and all his
acts, and the business of the road, are
exempted from the operation of the
common law, and that all parties deal
with him on the implied understanding
that they abandon the right to have
their complaints tried by jury or by the
ordinary courts of justice, and can only
obtain such relief as may be had at the
hands of a master in chancery of the
court which appointed him.”
‘High on Receivers, 2d ed., § 398c.
§ 282 RECEIVERS CERTIFICATES. 237

property, and to give it priority over existing mortgages,
marks the extreme limit which courts of equity have ¢hus
far attained in the exercise of their extraordinary juris-
diction.” It would be refreshing to learn the nature of
the higher attainment that this jurisdiction might achieve,
and what new danger threatens to devour unfortunate bond-
holders.

§ 282. Power to make repairs—Expenses for needful re-
pairs constitute a favorite ground for permitting the issu-
ance of certificates of debt. In Hoover v. Montclair &
Greenwood Lake Railway Company,’ the application to is-
sue certificates showed that the railroad was in the hands of
a receiver in insolvency proceedings, and that the road could
not be safely handled or operated unless certain repairs
were made. The application was opposed. The court said
there was no doubt as to its duty under the circumstances,
The value of the trust estate, and the continued operation
of the road, depended, in great measure, upon the making
of the repairs. ‘It is,” said the chancellor, “incumbent
on the court to see to it that the receiver keeps up the
property by making any necessary repairs, and to that end
it may provide the means by pledge of the property, if
necessary.” Especially is it the duty of the court to make
the repairs in this case, where the legislature has imposed
upon it the obligation of operating the road for the public
convenience.”? Ina late New Jersey case, it is said: ‘I
think that it must be held that the receiver of an insolvent
railroad corporation has authority, as a thing necessarily
incident to the duties imposed upon him, to make all such
contracts for labor and supplies as are reasonably neces-

‘sary to enable him to perform the duties of his appoint-

 

129 N. J. Eq. 4. North, 2 Phillips 216; Jerome v. Mc-
? Citing Morison v. Morison, 7 DeG., Carter, 94 U.S. 734.
M. & G. 214; Stanton v. Alabama & 5s, Pp. Ex parte Mitchell, 12 S, C.
C. R.R. Co., 2 Woods 506; Bright v. 83; Meyer v. Johnston, 53 Ala, 237.
238 RECEIVERS’ CERTIFICATES. ) 283
* .
ment, and that his contracts for such purposes bind the

trust.”!

§ 283. To prevent forfeiture—Another ground for the is-
suance of these certificates is to prevent a forfeiture. In
Kennedy v. St. Paul & Pacific Railroad Company,” in order to
save a valuable land-grant in favor of the company from laps-
ing a receiver was appointed by Judge Dillon, at the in-
stance of bondholders, whose principal security was these
lands, and the receiver was empowered to borrow money to
complete the road, his debentures issued for that purpose
being made a lien on the road and lands of the company.®
The question of the validity of certificates issued for
a somewhat similar purpose came up in the Supreme
Court of the United States. ‘It would be superfluous,”
said Mr. Justice Strong, in Jerome v. McCarter,‘ “to spend
much time in considering the power of the court to confer
the authority upon its receiver that it attempted to confer.
As a. court of equity, having the mortgaged property in
charge, it was its plain duty to preserve it, not only for the
benefit of the lien creditors, but also for the benefit of the
company, whose possession the court had displaced. Un-
der the provisions of the acts of Congress granting the
lands covered by the mortgages, the lands reverted to the
United States, unless the ship-canal should be finished
within a fixed period, and that period was passing away
when the order was granted to the receiver to raise money

 

1 Lehigh Coal & Nav. Co. v. Central
R.R. Co., 41 N. J. Eq. 167, 175.

2 2 Dillon 448.

® See § 256. In the course of the
opinion, the learned judge said (p. 454):
“Tt is manifest that unless a receiver is
appointed, no further work will be done
on the extension lines, and that the
land-grant, which is the only security
of any considerable value which the
plaintiffs and other bondholders have

for their large advances, will lapse
and be wholly lost. In order to save
this land-grant, the road must be com-
pleted by December third ensuing ; and
it seems to me that the exigencies of
the case are such as, under the circum-
stances, to warrant the court, upon the
application of the parties chiefly inter-
ested, to appoint a receiver, and to
clothe him with the powers desired.”

“94 U. S. 734, 738.
§ 284 RECEIVERS’ CERTIFICATES. 239

for completing the canal by the issue of certificates secured
by his mortgage. The canal was unfinished, and there
were in the receiver’s hands no funds to finish it. Hence,
there was a necessity for making the order which the court
made,—a necessity attending the administration of the trust
the court had undertaken. The order was necessary alike
for the lien creditors and for the mortgagors, Whether
the action of the court could make the receiver’s mortgage
superior in right to the mortgages which existed when it
was made, it is needless to inquire. None of the creditors
secured by those other mortgages objected to the order
when it was made, though they were all then in court.
None of them object to its lien or its priority now. And
we think the appellants, either as representatives of their
assignors, or of general creditors, cannot be heard to ob-
ject. Beyond doubt, they would not be entitled to a re-
turn of the property discharged from liability for the re-
ceiver’s certificates remaining unpaid, even if all the other
mortgages were satisfied. As against them, the certificates
are certainly charges upon the property, and they have,
therefore, no right to complain of the decree, which gives
the certificates priority to other liens.”

§ 284. Order to issue certificates—Notice.—An order direct-
ing repairs to be made for the preservation of a railroad
property in the hands of a receiver, to be paid for with cer-
tificates, should, according to some of the authorities, only
be made upon motion, and after a proper investigation and
hearing on the part of those interested. Indeed, it was
expressly assumed in the leading case of Meyer v. John-
ston,” that the certificates would be authorized only upon
due notice, and after a full hearing. But even this sup-
posed safeguard of notice to parties likely to be affected,
will not always be rigidly enforced. Blatchford, J., said:

 

1 Ex parte Mitchell, 12 S. C. 83. 753 Ala, 237,
240 RECEIVERS’ CERTIFICATES. §§ 285-287

“Though prior notice to persons interested, by notifying
them as parties, first requiring them to be made parties, if
they are not, is generally the better way, yet many circum-
stances may be judicially equivalent to prior notice.”?

§ 285. Debts of statutory receivers.—It has been held in
Tennessee that statutory receivers of railroads have no
power to contract debts to be paid otherwise than out of
the earnings of the road, and that there was no obligation
on the part of the State to continue the receivers in power
until the indebtedness of the receivership was paid.?

§ 286. Money borrowed to operate road.—Money neces-
sary for the management of a railroad borrowed by the
officers of the road while acting as receivers under an order
of the court giving them power ‘‘to continue in the posses-
sion and management of the property,” it was held should
be repaid out of the funds in court realized from the in-
come of the road while in the receiver’s hands? We can-
not refrain from quoting Caldwell, J., who, after referring
to the power to issue certificates, said: ‘‘This court has
uniformly refused to arm its receivers with such a danger-
ous power. When the road cannot be kept running with-
out its exercise, except to a very limited extent, the safe
and sound practice is to discharge the receiver or stop run-
ning the road and speed the foreclosure.” 4

§ 287. Application of the funds.—Parties advancing money
on receivers’ certificates are under no obligation to look
after the application of the money advanced to the receiv-
ers, and will not be prejudiced by any unfaithfulness to
their trust on the part of the receivers, The proceeds of

 

1 Union Trust Co. v. Illinois Midland * Credit Co. v. Arkansas Cent. R.R.
Ry. Co., 117 U.S. 434, 456. See Mil- Co., 15 Fed. Rep. 49.
tenberger v. Logansport Ry, Co., 106 5 Stanton v. Alabama & Chattanooga

U. S. 286, 311. R.R. Co., 2 Woods 516; Union Trust
2 State v. Edgefield & Ky. R.R. Co., Co. v. Illinois Midland Ry. Co. 117 U.
6 B. J. Lea (Tenn.) 353. S. 434-461.

* Ex parte Carolina Nat. Bank, 18
S. C. 289.
$§ 288, 289 ‘RECEIVERS’ CERTIFICATES.

241
the certificates may be used to make up deficiency in income,
to pay operating expenses,’ to pay taxes,” make repairs,® and
pay rent.‘

$ 288. Receivers’ certificates non-negotiable. — Receivers’
certificates do not, however, have the quality of negotiable
instruments by the law merchant. Power conferred upon
receivers to issue certificates does not authorize the issuance
of a bond or other negotiable instrument which shall be.
good in the hands of a dona fide holder for value, no mat-
ter what vice or infirmity may have atténded its original
creation. The paper issued must be governed by the au-
thority under which it is issued, and not by the form the
receivers may choose to give it. In Union Trust Com-
pany v. Chicago & Lake Huron Railroad Company,’ Brown,
J., observed : ‘We believe the courts of this country have,
without exception, held certificates of this nature to be non-
negotiable.” Mr. Justice Blatchford has also said: “The
certificates are not negotiable instruments,’* And the re-
ceiver cannot appoint an agent to negotiate them for him.

Their issuance is a personal trust.®

§ 289. Conditions annexed to appointment of receiver.—
“We have no doubt,” say the court in Fosdick v. Schall,°

 

1 Swann v. Clark, 110 U.S. 602; Tur-
ner v. Peoria, etc. R.R. Co., 95 IIl.
134; Hoover v. Montclair, etc, Ry.
Co., 29 N. J. Eq. 4; Stanton v. Ala-
bama, etc. R.R. Co., 2 Woods 506. But
compare Metropolitan Trust Co. v. Ton-
awanda Valley, etc. R. R., 103 N.Y. 245.

2 Union Trust Co. v. Illinois Mid-
land Ry. Co., 117 U. S. 434; Hum-
phreys v. Allen, ror Ill. 490.

3 Stanton v. Alabama & Chattanooga
R.R. Co., 2 Woods 506; Credit Co.
(Limited) of London v. Arkansas Cen-
tral R.R. Co., 15 Fed. Rep. 46.

4Coe v. New Jersey Midland Ry,
Co., 27 N. J. Eq. 37.

16

5 Stanton v. Alabama & Chattancoga
R.R. Co., 2 Woods 515; Turner v.
Peoria & S. R.R. Co., 95 Ill. 134;
Bank of Montreal v. Chicago, C. & W.
R.R. Co., 48 Iowa 518; Union Trust
Co. v. Chicago, etc. R.R. Co., 7 Fed.
Rep. 513.

6 7 Fed. Rep. 515.

7 Union Trust Co. v. Illinois Mid-
land Ry. Co., 117 U.S. 456.

®Union Trust Co. v. Chicago & L.
H. R.R. Co., 7 Fed. Rep. 513.

°99 U. S. 251; S. P. Union Trust
Co. v. Souther, 107 U. S. 594. See
Miltenberger v. Logansport Ry. Co.,
106 U.S. 286.
242 RECEIVERS’ CERTIFICATES. § 290

“that when a court of chancery is asked by railroad mort-
gagees to appoint a receiver of railroad property, pending
proceedings for foreclosure, the court, in the exercise of a
sound judicial discretion, may, as a condition of issuing
the necessary order, impose such terms in reference to the
payment from the income, during the receivership, of out-
standing debts for labor, supplies, equipment, or permanent
improvement of the mortgaged property, as may, under
the circumstances of the particular case, appear to be rea-
sonable.” !

$ 290. Income applied to expenses.—In Fosdick v. Schall?
the view is advanced that railroad companies do business
largely upon credit, and, when embarrassed, debts for labor,
supplies, equipments, and improvements are permitted to
accumulate in order that bonded interest may be paid and
a foreclosure averted. ‘In this way,” says Chief Justice
Waite, “the daily and monthly earnings, which ordinarily
should go to pay the daily and monthly expenses, are kept
from those to whom in equity they belong, and used to pay
the mortgage debt... .. Every railroad mortgagee in ac-
cepting his security impliedly agrees that the current debts,
made in the ordinary course of business, shall be paid from
the current receipts before he has any claim upon the in-
come.”* In Union Trust Company v. Illinois Midland
Railway Company, certificates were issued to replace
earnings diverted from paying for operating expenses and
ordinary repairs, to pay for betterments; and the views
applied in Burnham v. Bowen? are followed, to the éffect
that when the current income of a railroad in the hands
of a receiver is diverted to the improvement of the prop-
erty by the receiver, and debts for operating expenses are

 

' See United States Trust Co. v, New °99 U.S. 252.
York, W. S. & Buffalo R.R. Co., 25 ®s, Pp. Burnham v. Bowen, rir U.S.
Fed. Rep. 800; and compare Metropol- 780.
itan Trust Co. v. Tonawanda Valley, 4117 U.S. 462,
etc. R.R. Co., 103 N. Y. 245. Sr11 U.S. 776,
§§ 291, 292 RECEIVERS’ CERTIFICATES, 243

not paid, provision should be made, in foreclosing a mort-
gage on the road, to pay such debts out of the proceeds of
the sale of the property.’

$ 291. Allowing back claims.—The court, in the exercise
of an equitable discretion, may require the receiver of a
railroad to pay the claims of operatives and supply-men,
owing at the time of his appointment, and to hold the
property subject to such claims.?

§ 292. Unsecured prior claims.—In Metropolitan Trust
Company v. Tonawanda Valley & Cuba Railroad Com-
pany,® it was expressly held by the New York Court of
Appeals that the lien of the mortgagees of a railroad
could not be impaired or affected by claims of em-
ployés for wages due when the receiver in foreclosure
was appointed, and that the receiver had no power to
create prior liens upon the road by the issuance of cer-
tificates. Danforth, J., said: ‘“‘“We are unable to dis-
cover any principle upon which the claims of the em-
ployés for labor performed before the appointment of
the receiver can be so extended as to diminish, or impair,
or postpone, the lien of the mortgage... . . The argument
in its support is that the value of the mortgage lien has
been enhanced by the labor of the workman. It is easy to
see that, under such a plea, the lienor might be entirely de-
feated, and the foreclosure of his mortgage rendered inop-
erative and useless. Such a result, except upon his consent,
the courts have no power to sanction. It is going a great
ways in that direction to permit, as it is true courts have
sometimes permitted, a receiver of an insolvent railroad
corporation to pay for materials and labor procured by
him after his appointment, necessary to the running of the

 

1 See also Union Trust Co. v.Souther, 103 N. Y. 248, 249; reversing 4o
107 U.S. 591. Hun (N. Y.) 80,

?Turner v. Indianapolis, B. & W.
Ry. Co., 8 Biss, 315.
244 RECEIVERS’ CERTIFICATES. § 293

road it may be, but not to the winding up of the affairs of
the corporation. The propriety of that practice we are not
called upon to review, but... . no case has been cited
where an unsecured creditor, however meritorious the con-
sideration of his claim, has been given priority over a lien
contracted for, and in force when his debt was created.”

§ 293. Claims for labor.—A decree appointing a receiver
for a railroad, and giving priority to claims for “labor in
operating the road,” was held to include proper compen-
sation for counsel for the receiver.’

 

1 Bayliss v. La Fayette, Muncie & B. Ry. Co., 9 Biss. 90.
CHAPTER XIV.

EXECUTIONS AFFECTING CORPORATIONS,

§ 294. Concerning executions, § 301. Process against corporate fran-
295. Executions against private cor- chises.
porations. 302. What passes under sale of fran-
296. Real estate. chise.
: : 303. Statutes authorizing sale of fran-
297. Property liable to execution. chises.
298. Property -in custody of re- 304. Shares of stock.
Coy el 305. Priority of lien.
299. Subject to a mortgage. 306. Executions under Pennsylvania
300, Executions affecting public cor- practice. .
porations. 307. Rolling stock. _ ee

$§ 294. Concerning executions.—It is not exclusively through
receiverships that creditors are enabled to realize upon
claims against corporations, Process of execution may be
invoked. By means of an execution practical effect is usu-
ally given to a judgment ;! executio est finds et fructus
legis. At common law all the tangible property of a de-
fendant was subject to seizure on execution, “ excepting
such things as the humanity of the law preserves to a
debtor.”* These exemptions are generally founded upon
Statutes, and are personal privileges* which have little ap-
plication to corporations. Bleckley, J., said: ‘‘ Whatever
belongs to a corporation is subject to be applied to the pay-
ment of its debts. It has no exempt property. In this
State only the heads of families are entitled to withhold

 

1 See Handy v. Dobbin, 12 Johns, 3 Handy v. Dobbin, 12 Johns. (N. Y.)
(N. Y.) 220. 220.

2 In Twinam v. Swart, 4 Lans. (N. 4 See Twinam v. Swart, 4 Lans. (N.
Y.) 264, Potter, J., said: “Prima face, Y.) 263.
all property is liable to execution.”
246 EXECUTIONS AFFECTING CORPORATIONS. §§ 295-297

any of their assets from creditors. All other debtors must
pay if they can,.”?!

$ 295. Executions against private corporations.—The cor+
rectness of the general proposition that the property of cor-
porations, formed for the prosecution of objects of personal
benefit or advantage, may, like the property belonging to
individuals, be seized, sold, and appropriated to the pay-
ment of corporate debts, does not admit of question.” And
it is held in Massachusetts that a member of the corpora-
tion, who is a creditor, may secure his demand by attach-
ment or levy on corporate property, although he is person-
ally liable by statute to satisfy other judgments against the
corporation.?

§ 296. Real estate.— Process of execution is not limited to
personal property. In a case before the New York Court
of Appeals, Allen, J., uses this language : ‘‘ The estate and
interest of the association in real property, whether a mere
easement or a right of possession or title in fee, was the sub-
ject of a.sale as property distinguished from the incorporeal
franchise of the company under the act of incorporation.” 4
As has elsewhere appeared, the title to real estate does not
now revert to the grantor upon dissolution, but vests in the
receiver or liquidator for the benefit of creditors and stock-
holders.®

§ 297. Property liable to execution—An easement owned
by a corporation it is said may, as distinguished from a

 

' City of Atlanta v. Grant, 57 Ga. 346.

» Gooch v, McGee, 83 N.C. 59; S.C.
35 Am. Rep. 560; State of Maryland v.
Bank of Maryland, 6 Gill & J. (Md.)
205; Evangelical Lutheran St. J. O.
Home v. Buffalo Hydraulic Assn., 64
N. Y. 561; Regina v. Victoria Park
Co., 41 E. C. L. 544; S.C. 1 Q. B. 288;
State v. Rives, 5 Ired. (N. C.) Law 297 ;
Peirce v. Partridge, 3 Met. (Mass.) 44.

5 Peirce v. Partridge,3 Met.(Mass.)44.

“ Evangelical Lutheran, etc. Home
vy. Buffalo Hydraulic Assn., 64 N. Y.
565; S. P. State v. Rives, 5 Ired. (N.
C.) Law 297. The chancellor observed,
in American Dock & Imp. Co. v. Trus-
tees of Public Schools, 39 N. J. Eq. 448 :
“A railroad company may buy land in ‘
fee and hold it; and, if it becomes in-
solvent, such property will be assets for
the payment of its debts.”

5 See § 202,
§§'298, 299 EXECUTIONS AFFECTING CORPORATIONS. 247

franchise, be sold under execution.1_ Money, bank bills, or
any evidences of debt issued by a moneyed corporation,
may also be taken.? And unsatisfied bonds of a railroad,
received by it in payment of a debt, may be seized on exe-
cution.® Statutes enlarging the scope of executions against
private corporations have been enacted in many States.

§ 298. Property in custody of receiver—A sheriff may be
required to answer in contempt for levying an execution
upon property in the hands of a receiver.* Application
should be made to the court in which the receiver was ap-
pointed,® asking that the property be released from the
custody of the court, if for any good reason the creditor.
believes that he has a legal right to proceed against it.

$ 299. Subject to a mortgage.—Corporate property which
is subject to a mortgage may be seized on execution by a
creditor. The mortgagee may proceed in equity to protect
his rights, either by taking possession under the mortgage,
or enjoining the creditor from proceeding to sale, upon.
proof that the security is manifestly inadequate.® But the’
mortgagee must himself seek the protection; the debtor
cannot shield itself or its property from execution creditors
under the protection of the mortgage.’ Equity may aid
the creditor by sequestrating property or income.®

 

1 Evangelical Lutheran, etc. Home v.
Buffalo Hydraulic Assn., 4 Hun (N. Y.)
419; aff'd 64 N. Y. 561.

2» Compare Turner v. Fendall, 1

Cranch 117; Holmes v. Nuncaster, 12
Johns. (N. Y.) 395.
- 8 Hetherington v. Hayden, 11 Iowa
335.
4Skinner v. Maxwell, 68 N.C. 400.
See Coe v. Columbus, P. & I. R.R.
Co., 10 O. S. 372. See § 237.

5 Robinson vy. Atlantic & G. W. Ry.
Co., 66 Pa. St. 160.

6 See Coe v. Peacock, 14 O. S. 190;

Coe v. Knox County Bank, 1o O. S.
412; Coe v. The Columbus, P. & I.
R.R. Co, 10 O. S. 372; Lane v.
Baughman, 17 O. S, 642. But com-
pare Mcllrath v. Snure, 22 Minn. 391;
Wilder v. Shea, 13 Bush (Ky.) 128.
™Boyd v. Chesapeake & Ohio Canal |
Co., 17 Md. 195. :
"See Covington Drawbridge Co. v.
Shepherd, 21 How. 124; Oakland Ry.
Co. v. Keenan, 56 Pa. St. 198; Loder
v. N. Y., U. & O. R.R. Co., 4 Hun (N.
Y.) 22; Vicksburg & M. R.R. Co, v.
McCutchen,52 Miss.645. See Chap. XV.
248 EXECUTIONS AFFECTING CORPORATIONS. $f 300, 301

$ 300. Executions affecting public corporations.—It has al-
ready been shown that property held by municipal corpo-
rations for public purposes cannot be seized by creditors."
To permit seizures in such cases would be, in effect, to tol-
erate interference by the courts with the due discharge of
governmental functions.? If the corporate franchises can
only be exercised on a certain lot of ground, then the lot
is an incident of the corporation, and can no more be sold
under execution than could the corporation itself.* The
strictly private property of a municipal corporation, or
property owned by it as a mere investment of funds,* may,
however, be seized on execution.> In other words, the
creditor may take property which is not needed by sucha
corporation to enable it to perform its duty to the public.®
In Meriwether v. Garrett,’ Chief Justice Waite said : “What
is the property of a municipal corporation which, on its
dissolution, the courts can reach and apply to the payment
of its debts? We answer, it is the private property of the
corporation, that is, such as it held in its own right for
profit, or as a source of revenue, not charged with any pub-
lic trust or use, and funds in its possession unappropriated
to any specific purpose.”

$ 301. Process against corporate franchises—At common

 

' See § 63; Klein v. New Orleans, 99 seized. Egerton v. Third Municipality

U.S. 150; The Fidelity, 16 Blatchf.
571; Brinckerhoff v. Board of Educa-
tion, 2 Daly (N. Y.) 443; Darlington
v, Mayor of New York, 31 N. Y. 193;
Leonard v. City of Brooklyn, 71 N. Y.
500; City of Rochester v. Town of
Rush, 80 N. Y. 308; Davenport vy.
Peoria M. & IF. Insurance Co., 17 Iowa
276,

2 An execution levy upon the reve-
nues of a county in the hands of its
treasurer is illegal. Gilman v. Contra
Costa Co., 8 Cal. 52. And taxes due
a municipal corporation cannot be

of New Orleans, 1 La. Ann. 435.

* City of Palestine v. Barnes, 50 Tex-
as 538; Gue v. Tide Water Canal Co.,
24 How. 263; Plymouth R.R. Co. v.
Colwell, 39 Pa. St. 337; James v.
Pontiac & G. P. R. Co., 8 Mich. 91.

4 New Orleans v. Home Mutual Ins.
Co., 23 La. Ann. 61,

* Holladay v. Frisbie, 15 Cal. 630.

“Plymouth R.R. Co, y. Colwell, 39
Pa. St. 337. Compare American Dock &
Imp. Co. v. Trustees of Public Schools,
39 N. J..Eq. 410; Covington Draw-
bridge Co. v. Shepherd, 21 How, 112.

Tyo2 U.S, 518,
$ 301 EXECUTIONS AFFECTING CORPORATIONS,

249
law, and in the absence of statutory provisions, the franchise
of a corporation is not subject to execution and sale for the
payment of corporate debts.’ ‘‘ The franchise to be a cor-
poration,” said Hoar, J., in Commonwealth v. Smith,”
‘clearly cannot be transferred by any corporate body, of
its own will. Such a franchise is not, in its own nature,
transmissible.” Again it is said: ““The franchise of be-
coming and being a corporation, in its nature, is incom-
municable by the act of the parties, and incapable of pass-
ing by assignment.”* Chief Justice Taney observed: “It
is very clear that the franchise or right to take toll on
boats going through the canal would not pass to the pur-
chaser under this execution. The franchise being an in-
corporeal hereditament, cannot, upon the settled principles
of the common law, be seized under a ferz faczas. If it can
be done in any of the States, it must be under a statutory
provision of the State, and there is no statute of Maryland

 

"Wood v. Truckee Turnpike Co., 24
Cal. 474; Randolph v. Larned, 27 N.
J. Eq. 557; Thomas v. Armstrong, 7
Cal. 286; Stewart v. Jones, 40 Mo. 140;
Ammant v. New Alexandria & P.
Turnpike Co., 13 S. & R. (Pa.) 210;
Susquehanna Canal Co. v. Bonham, 9

“W.& S,. (Pa.) 27; Coe v. Columbus,
P. & I. Railroad Co., 10 Ohio St. 372;
Commonwealth v. Tenth Massachu-
setts Turnpike Co., 5 Cush. (Mass.)
509; Youngman v. Elmira & W. Rail-
road Co., 65 Pa. St. 278; Plymouth
R.R. Co. v. Colwell, 39 Pa. St. 337;
Gue v. Tide Water Canal Co., 24 How.
263; Memphis & L. R. R.R. Co. v.
Railroad Commissioners, 112 U. S.
609; City of Palestine v. Barnes, 50
Texas 538. See Mahoney v. Spring
Valley Water Works Co., 52 Cal. 161.
See §12. The right of eminent do-
main is not usually transferable. See
Mahoney v. Spring Valley Water Works
Co., 52 Cal. 159; Mayor, etc. of Wor-

cester v. Norwich & W. R.R. Co., 109
Mass. 103.

? to Allen (Mass.) 455.

* Memphis & L. R. R.R. Co. v. Rail-
road Commissioners, 112 U. S. 619.
In New Orleans, S. F. & L. R.R. Co.
v. Delamore, 114 U. S. 509, Mr. Jus-
tice Woods said: “The authority to
mortgage the franchises of a railroad
company necessarily implies the power
to bring the franchises so mortgaged
to sale, and to transfer them with the
corporeal property of the company to
the purchaser. It could not be held,
that when a mortgage on a railroad
and its franchises was authorized by
law, that the attempt of the mortgagee
to. enforce the mortgage would destroy
the main value of the property by the
destruction of its franchises.” See
Branch v. Jesup, 106 U. S, 468, 479;
Pierce v. Milwaukee & St. P. R.R. Co.,
24 Wis. 551; Randolph v. Wilmington
& R. R.R. Co,, 11 Phila, (Pa.) 502. |
250 EXECUTIONS AFFECTING CORPORATIONS. § 301
changing the common law in this respect.” Again, in the
course of the same opinion, it is said: ‘‘ It would be against
the principles of equity to allow a single creditor to destroy
a fund to which other creditors had a right to look for pay-
ment, and equally against the principles of equity to per-
mit him to destroy the value of the property of the stock-
holders, by dissevering from the franchise property which
was essential to its useful existence.”* The Supreme
Court of Pennsylvania used this language: ‘‘ The spirit of
the decision in Ammant v. New Alexandria & Pittsburg
Turnpike Company® seems to be, that privileges granted
to corporations to construct turnpike roads, canals, etc., are
conferred with a view to the public use and accommoda-
tion, and that they cannot voluntarily deprive themselves
of the lands and real estate and franchises which are neces-
sary for that purpose; nor can they be taken from them
by execution.”* ‘The road with all its appurtenances,”
remarks Sharswood, J., in the more recent case of Young-
man v. Elmira & Williamsport Railroad Company,° “ be-
ing necessary to the exercise of the franchises granted by
the sale, could not be levied on and sold under an execu-
tion on a judgment against the-corporation.”® The prac-

 

1 Gue v. Tide Water Canal Co., 24
How. 263.

2 In Virginia a creditor may compel
a decree for the leasing of a railroad to
create a fund to pay debts. Winches-
ter & S.R.R. Co. v. Colfelt, 27 Gratt.
(Va.) 777. And in Georgia a railroad
property, together with the right to
use it, may be sold under a judgment
at law. City of Atlanta v. Grant, 57
Ga. 346.

213S.&R. (Pa.) 210.

4 Susquehanna Canal Co. v. Bon-
ham, 9 Watts & S, (Pa.) 28. In Hall
v. Sullivan Railroad Co., 21 Law Re-
porter 140; Ss. C. 2 Red. Am. Rail.
Cases, 621; S.C. 1 Brunner’s Collected

Cases, 615, Mr. Justice Curtis said:
“The franchise to be a corporation is,
therefore, not a subject of sale and
transfer, unless the law, by some posi-
tive provision, has made it so, and
pointed out the modes in which such
sale and transfer may be effected.”

5 65 Pa. St. 278, 286.

®In Roper v. McWhorter, 77 Va.
218, the court say: “The exercise of
the ferry franchise in this case was,
therefore, a personal trust which could
not be transferred without the consent
of the sovereign power. ‘It may be
considered as settled,’ says Chancellor
Zabriskie in Black v. Delaware & Rari-
tan Canal Co., 22 N. J. Eq. 399, ‘that
§$ 302 EXECUTIONS AFFECTING CORPORATIONS,

251
titioner must be careful to keep in view, in cases where
it is sought to acquire corporate privileges by transfer,
the rules of construction which apply to corporate charters.
Chief Justice Black said: ‘‘When the State means to
clothe a corporate body with a portion of her own sover-
eignty, and to disarm herself to that extent of the power
which belongs to her, it is so easy to say so that we will
never believe it to be meant when it is not said.....
In the construction of a charter, to be in doubt is to be
resolved; and every resolution which springs from doubt
is against the corporation.”*: The Supreme: Court of the
United States declare in equally emphatic terms that every
reasonable doubt is to be resolved adversely to the corpora-
tion: “Nothing is to be taken as conceded but what is
given in unmistakable terms, or by an implication equally
clear. The affirmative must be shown. Silence is nega-
tion, and doubt is fatal to the claim. This doctrine is vital
to the public welfare. It is axiomatic in the jurisprudence
of this court.” *

$ 302. What passes under sale of franchise.— Under a
sale of the property and franchises of a railroad corpora-
tion under a decree founded upon a mortgage which in:

terms covers the franchises,

or under a process upon a

 

a corporation,—and the same may be
said of a guasz corporate body,—cannot
lease or alien any franchise necessary
to perform its obligations and duties to
the State without legislative authority.’
Dill. on Mun. Corp. (3d ed.), §§ 96,
575, 909, 910, 912; Thomas v. Rail-
road Co., 11 Otto 72. And in Min-
turn v. Larue, 23 How. 436, Mr. Justice
Nelson, delivering the opinion of the
whole court, says it is a well-settled rule
of construction of grants by the legis-
lature to corporations, whether public
or private, that only such powers and
rights can be exercised under them as
are clearly comprehended within the

words of the act, or derived therefrom
by necessary implication, regard being
had to the objects of the grant. Any
ambiguity or doubt arising out of the
terms used by the legislature must be
resolved in favor of the public. This
principle has been so often applied in
the construction of corporate powers,
that we need not stop to refer to au-
thorities. Somerville v. Wimbish, 7
Gratt. (Va.) 229.”

* Penn. R.R. Co. v. Canal Commrs.,
21 Pa. St. 22.

? Fertilizing Co. v. Hyde Park, 97
U.S, 666,
252 EXECUTIONS AFFECTING CORPORATIONS. $$ 303, 304
money judgment against the company, immunity from tax-
ation upon the property of the company provided in the
act of incorporation does not accompany the property in
‘its transfer to the purchaser.!' The franchise to be a coypo-
ration is distinct from the franchise, as a corporation, to
maintain a railway ; the latter franchise may be mortgaged
without the former, and may pass to a purchaser at a fore-
closure sale.?

$ 303. Statutes authorizing sales of franchises.—The au-
thority to sell the franchise of a corporation—as, for in-
stance, a plank-road corporation—is derived solely from
statute, and the sale can be made in no other mode than
that pointed out by the statute.®

§ 304. Shares of stock.—It has been observed: ‘“ Where
property is of so intangible a nature that there can be no
change of possession, as shares in a corporation, and it can-
not be known whether they are attached or not, the sale of
them under execution is a mode of transfer not authorized
by law.”* In some of our States, however, statutes have
been enacted which enable creditors to attach stock or seize
it on execution ;° and in Connecticut an equitable interest
in shares may be attached and sold on execution the same
as a legal interest.®

 

1 Morgan v. Louisiana, 93 U. S. 217.
See § 446.

2 Memphis & L. R. R.R. Co. v. Rail-
road Commissioners, 112 U.S. 609,

3 James v. Pontiac & G, P. R. Co., 8
Mich. 91. See Titcomb v. Union Ma-
rine, etc. Ins. Co., 8 Mass. 326; Howe v.
Starkweather, 17 Mass. 240; Stamford
Bank v. Ferris, 17 Conn, 259.

4Compare Foster v. Potter, 37 Mo.
525; Howe v. Starkweather, 17 Mass,
243; Johns v. Johns, 1 O. S. 350;
Arnold v. Ruggles, 1 R. I. 165,

5 See Chesapeake & O. R.R. Co. v.
Paine, 29 Gratt. (Va.) 502; Weaver v.
Huntingdon, etc. R.R. Co., 50 Pa. St.

314; Mechanics’ Bank v, Merchants’
Bank, 45 Mo. 513; Stamford Bank v.
Ferris, 17 Conn. 260; Williams vy. Me-
chanics’ Bank, 5 Blatchf. 59.

® Middletown Savings Bank v. Jar-
vis, 33 Conn. 372. In Mechanics’ Bank
v. New York & N. H. R.R. Co., 13 N.
Y. 627, the court say: “Certificates of
stock are not securities for money in
any sense, much less are they negoti-
able securities. They are simply the
muniments and evidence of the holder’s
title to a given share in the property
and franchises of the corporation of
which he is a member,”
§§ 305-307 EXECUTIONS AFFECTING CORPORATIONS. 253

§ 305. Priority of lien—Where attachments have been
levied upon corporate assets, subsequent proceedings in
bankruptcy against the corporation will not disturb the
lien so acquired.'

§ 306. Executions under Pennsylvania practice—In Penn-
sylvania the act awarding execution against corporations?
is held to supersede the remedy by sequestration,® but the
proceeds of the sheriff’s sale of the property, franchises, etc.,
are to be distributed amongst all the creditors* in case of
insolvency.®

$ 307. Rolling stock.—There is much controversy as to
whether rolling stock of a railroad is real or personal estate,
and as to whether or not it is included in mortgages cover-
ing the realty. The subject is in some States regulated by
statute.° There is, however, a respectable line of authori-
ties holding that such stock may be seized and sold on exe-
cution, the same as other personal property.*. In Wiscon-
sin a judgment is held to be a lien upon the rolling stock
of a railroad, which is made a fixture by statute, and on a
bill in equity filed to satisfy the judgment, a sale of it will
pass title to the purchaser.* Other cases hold that this class
of property is included in a mortgage of the road and fran-
chises, and is not subject to execution ;*® in other words,

 

1 Jn re Glen Iron Works, 17 Fed.
Rep. 324, affi’d 20 Fed. Rep. 675.

2 Act of April 7, 1870.

2 Act of June 16, 1836.

4 Bayard’s Appeal, 72 Pa. St. 453.

5 See Philadelphia & B.C. R.R. Co.’s
Appeal, 70 Pa. St. 355.

® See Chicago & N. W. Ry. Co. v.
Borough of Ft. Howard, 21 Wis. 44.

7 Compare Randall v. Elwell, 52 N.
Y. 522; Boston C. & M. R.R. Co. v.
Gilmore, 37 N. H. 410; Pierce v. Em-
ery, 32 N. H. 484; Coe v. Columbus,
P. & I. Railroad Co., 10 O. S. 372;
Beardsley v. Ontario Bank, 31 Barb,

(N. Y.) 619; Minnesota Co. v. St. Paul
Co., 2 Wall. 609; Hoyle v. Plattsburgh
& M. R.R. Co., 54 N. Y. 314; Stevens
v. Buffalo, etc. R.R. Co., 31 Barb, (N.
Y.) 591; Williamson v. N. J. Southern
R.R. Co., 29 N. J. Eq. 311.

® Railroad Company v. James, 6
Wall. 750.

° Examine Phillips v. Winslow, 18
B. Mon. (Ky.) 431; Macon & W.R.R.
Co. v. Parker, 9 Ga. 377; Covey v.
Pittsburg, etc. R.R. Co., 3 Phila. (Pa.)
173; Youngman v. Elmira, etc. R.R.
Co., 65 Pa. St. 278.
254 EXECUTIONS AFFECTING CORPORATIONS. § 307

that rolling stock is to be deemed a fixture." In New
Hampshire locomotive engines and cars of a railroad are
liable to seizure and sale on execution when not in actual
use.” Local statutes and the particular words employed in
railroad mortgages so largely affect the question that little
satisfaction could be gained from any extended discussion
of it. The theory embodied in some of the cases that all the
property owned by railroad companies, and which is neces-
sary for the discharge of their public duties, is vested in
them in trust for the public ; that the franchise of the cor-
poration is the principal thing, to which the track, depots,
engines, cars, and the like are mere incidents ; and that all
these constitute one thing, no part of which can be severed,
seized, or sold as personal property to pay corporate debts,
is certainly not gaining the ascendency.

‘

 

' Farmers’ Loan & Trust Co.v.Hen- well, 52 N. Y. 525; Hoyle v. Platts-
drickson, 25 Barb. (N. Y.) 485; over- burgh & M. R.R. Co., 54.N. Y. 321.
ruled Stevens v. Buffalo, etc. R.R. Co., * Boston, C. & M. R.R. Co. v. Gil-
31 Barb, (N. Y.) 591; Randall v. El- more, 37 N. H. 410,
CHAPTER XV.

SEQUESTRATION PROCEEDINGS,

§ 308. Sequestration process. § 314. Sequestration receiver as com-

309. Sequestration in New York. plainant. «
310, Jurisdiction of chancery to se-| 315. Sequestration affecting personal
questrate property. liability.
311. Jurisdiction to appoint receiver.| 316. Distribution of moneys in se-
questration.

312. Notice of application for receiver.

313. Judgment to sustain sequestra-
tion.

317. Sequestration does not effect
dissolution,

$ 308. Sequestration process.—Sequestration, in the prac-
tice of the civil law, is a process devised to take judicial
custody of the ves or persona in controversy, to abide the
event of the suit. It may be applied to either real or personal
property which is involved in litigation;’ and sometimes
even to persons, as, for instance, to protect a married woman
from cruelty during divorce proceedings, or to secure an
infant from ill-treatment by his parents. ‘The process of
sequestration,” says Mr. Hinde,? “is a writ or commission
issuing under the Great Seal, sometimes directed to the
sheriff, or (which is most usual) to certain persons of the
plaintiff's own naming, empowering him or them, to enter
upon, possess, and sequester the real and personal estate
and effects of the defendant (or some particular part or
parcel of the lands), and to take, receive, and sequester the
rents, issues, and profits thereof, and keep the same in their

 

1 A sequestrator of the rents of real
estate, appointed in a divorce suit, ac-
quires no title, but is simply entitled to
the possession as against the defend-
ant. Such an appointee has no such
title to the real estate as will sustain

an action to annul a fraudulent convey-
ance. Foster v. Townshend, 68 N. Y.
203; but see Donnelly v. West, 17
Hun (N. Y.) 565.

* Hinde’s Chan. Prac., p. 127.
256 SEQUESTRATION PROCEEDINGS. § 308

hands, or pay them in such manner, and to such persons,
as the court shall, in its discretion, appoint, until the par-
ties shall have appeared to or answered the defendant's bill,
or performed some other matter which has been ordered
and enjoined by the court, in the process specifically men-
tioned, and for not doing whereof, he is in contempt.”
Choses in action may be sequestered.'!| The remedy was
used to enforce decrees in chancery prior to the enlarge-
ment of the purposes of the writ of execution,’ and also as
a process for contempt. It is said in Massachusetts that
the sequestration takes effect from the filing of the bill.’
In Jones v. Boston Mill Corporation,’ Parker, C. J., ob-
served: “If a distréngas, sequestration, or other form of
process should become necessary to the due and complete
execution of a decree against a corporation, this court is
authorized by the statute to devise and issue such process,
and there can be no doubt, that in all other respects, our
corporations are among the most suitable objects for the
application of chancery powers, in such cases as by the
statute are brought within this jurisdiction.” The writ of
sequestration has been held to be in full force in Maryland,
both as a mesne process against a party in contempt, as
well as a judicial writ to enforce the performance of a de-
cree, and in its latter office may be said to be analogous
to an execution at law.° The term sequestration has been
applied in New York and other States to proceedings of
an equitable nature instituted by the courts, to appropriate
corporate rights and assets to the payment of debts, and
generally to the liquidation of the affairs of insolvent cor-

 

! White v. Geraerdt, 1 Edw. Ch. (N. 44 Pick. (Mass.) 511.
Y.) 336; Grew v. Breed, 12 Met. 5 Keighler v. Ward, 8 Md. 254. It
(Mass.) 363; Wilson v. Metcalfe, 1 seems doubtful whether, under the early
Beav. 269. practice, sequestrators could take pos-
2 See Roberts v. Stoner, 18 Mo. 484. session of the books and papers of a
* Atlas Bank v. Nahant Bank, 23 corporation, See Lowten v. Mayor,
Pick. (Mass.) 489. etc. of Colchester, 2 Meriv. 395.
§ 309 SEQUESTRATION PROCEEDINGS. 257
porations. Corporate franchises and incomes, as we have
seen, could not, at common law, be reached by execution,!
and hence the writ of sequestration was formerly more re-
sorted to than it has been since the scope of the writ of
execution was extended. For instance, a turnpike road
could not be levied upon by execution. A remedy in the
nature of a sequestration to reach the net income of such a
property was suggested in Pennsylvania.*> In Pennsylva-
nia, the statutory remedy of sequestration has been super-
seded by execution® in corporation cases. We may ob-
serve that the statutory provisions regulating sequestration
proceedings as affecting corporate associations, are some-
times adverted to as being mere re-enactments of the
common law, except as to matters of detail. It was con-
sidered in Pennsylvania to be no ground for refusing a
writ of sequistianion that the corporation was entirely

without assets.‘

§ 309. Sequestration in New York.—The absence of in-
herent equity jurisdiction in the courts to adjudge the dis-

 

1 See §§ 301, 303.

? Ammant v. New Alexandria & P.
Turnpike Co. 13 S. & R. (Pa.) 210.
See Leedom v. Plymouth R.R. Co., 5
W. & S. (Pa.) 265. In McKim v.
‘Odom, 3 Bland Ch. (Md.) 422, Chan-
cellor Bland says that “evils and
embarrassments must arise from a
‘rigid adherence to the notion that
_such a corporation can only be forced
to respond to a suit against it by dzs-
tringas and sequestration of its prop-
erty. Take the case of a turnpike
road company that had refused to an-
swer a bill in chancery. The road it-
self could not be taken and closed by
virtue of a dzstréngas or sequestration ;
because, as one of the highways of
the Republic, it could not, nor ought
not, to be obstructed by any process
whatever against those whose only in-
terest in it is the toll they are allowed

17

to exact in consideration of keeping it
in repair, Consequently, in this in-
stance, the only method by which the
court could effectually levy upon its
property, as a means of enforcing an
answer, would be to appoint a seques-
trator or receiver to take the place of
the company’s toll-gatherer, at each
gate along the whole line of the road.”

*Bayard’s Appeal, 72 Pa. St. 453;
Philadelphia & B. C. R.R. Co.’s Ap-
peal, 70 Pa. St. 355. Compare Oakland’
Railway Co. v. Keenan, 56 Pa. St. 202,

4 Reid v. Northwestern R.R. Co., 32
Pa. St. 257. In London & Canadian
L. & A. Co. v. Morphy, 12 Am. & Eng.
Corp. Cas. 53; S.C. Io Ont. Rep.
86, the court said that the writ of
sequestration ought properly to be ex-
tended, by legislation, so as to enable

‘the court to seize for creditors a seat

in a stock exchange.
258 ; SEQUESTRATION PROCEEDINGS.  §§ 310, 311

solution of a corporation, and appoint a receiver, has already
been a subject of comment.’ This curious defect inequity
jurisprudence promoted, at least in part, the enactment of
an elaborate series of statutes regulating the general subject
of receiverships and sequestration proceedings in corpora-
tion cases in New York State, and these statutes have been
extensively followed in other States. By the New York
Code of Civil Procedure,’ it is provided that a judgment
creditor of a corporation, who has issued execution to the
county where the corporation did business, or had its prin-
cipal office, and procured a return of the execution unsatis-
fied, can maintain an action to procure a judgment seques-
trating the property of the corporation, and dividing it
among its fair and honest creditors.? The theory of con-
struction, applicable to the sequestration statutes in New
York State, has been a subject of allusion.‘

§ 310. Jurisdiction of chancery to sequestrate property.—
As already intimated, it was held, at an early day in New
York State, that the jurisdiction of chancery did not ex-
tend to the sequestration of the property of a corporation
‘by means of a receiver, or to the winding up of its affairs,
or to control or restrain the usurpation of franchises by cor-
porate bodies, or by persons claiming without right to ex-
ercise corporate powers.® The jurisdiction to sequestrate
the property of a corporation was conferred upon the
chancery court in that State by statute in 1825, and was re-
enacted in the section of the Code ® to which we have just
referred.

§ 311. Jurisdiction to appoint receiver.—If the appointment
of a receiver in sequestration proceedings under the New

 

1See § 172 andChaps, XVIL, XVIII. York, W. S. & B. R.R. Co., ror N.Y.
2§ 1784, 483; citing Attorney General v. Utica
aCompare Reid v. Northwestern Ins. Co., 2 Johns, Ch. (N. Y.) 371;
RR. Co., 32 Pa. St. 257; Judsonv. Atty. General v. Bank of Niagara,
Rossie Galena Co., 9 Paige (N. Y.) 598. Hopk. (N. Y.) 354. Compare Brinck-
' 4See § 182. erhoff v. Bostwick, 88 N. Y. 59.
4 United States Trust Co. v. New ®§ 1784.
$$ 312, 313. SEQUESTRATION PROCEEDINGS. 259

York Code is held to be binding upon the corporation, no
other person can question it; a misnomer will not avail,
and the jurisdiction of the court is not considered to be de-
pendent upon the absolute truth of the allegations of the
petition if the facts essential to enable the court to act are
set forth and passed upon.!. The Supreme Court of New
York has succeeded to the power originally conferred upon
the court of chancery, as to the right to act under the
statute providing for sequestration.”

§ 312. Notice of application for receiver—In New York
State, before a receiver can legally be appointed in seques-
tration proceedings, all the papers in the action must be
served upon the attorney-general, otherwise the order ap-
pointing the receiver will be void.? Possibly the failure to
give this notice may be cured by an order xunc pro tunc,
at least it seems such an order would render the receiver-
ship effectual from the day of its entry.*

The discussion has already revealed the general rule that
an application for a receiver of a corporation will not be
granted ex parte.®

§ 313. Judgment to sustain sequestration.—In New York,
the judgment upon which it is sought to base an action for
sequestration © under the Code, must be in every sense a
final one. Hence, where the defendant corporation applied
to open the judgment, and had been allowed to come in and
defend, but the judgment was ordered to stand as security
for any ultimate recovery, it was considered to be no longer
a final judgment, and sequestration proceedings founded

 

' Whittlesey v. Frantz, 74 N. Y. 457. (N. Y.) 522. But compare Whitney v.

? Bangs, Receiver, v. Duckinfield, 18
N. Y. 592;. Whittlesey v. Frantz, 74
N. Y. 460.

3 Whitney: v. N. Y. & Atlantic R.R.
Co., 5 N. Y. Civ: Pro. 118; 8. C. 32
Hun (N. Y.).164.

4 Morrison.v. Menhaden Co., 37 Hun

N. ¥. & Atlantic R.R. Co., 5 N. Y.
‘Civ. Pro. 118; S.C. 32 Hun (N. Y.)
164.

* Devoe v. Ithaca & O. R.R. Co., 5
Paige (N. Y.) 521. See § 176,

6 Bangs v. McIntosh, 23 Barb. (N.
Y.) 591.
260 SEQUESTRATION PROCEEDINGS.  §§ 314, 315

upon it fell! Where a motion is made for the appoint-
ment of a receiver in sequestration, and the proceeding is
opposed upon the ground that the judgment was collusively
obtained, and the application is thereupon suspended to
afford the defendant an opportunity to apply to the court
to open the judgment, and: for leave to defend the action,
if the defendant fails to make such application the receiver
will be appointed. :

$ 314. Sequestration receiver as " complainait, —We have
already shown ® that a receiver of a manufacturing corpora-
tion, appointed in sequestration proceedings, cannot main-
tain an action against its stockholders to enforce their per-
sonal liability.* The receiver is the immediate representa-
tive of the corporation, and takes the property subject to
corporate disabilities.® It is said in Pennsylvania that a
writ of sequestration operates like a commission of bank-
ruptcy, vesting the property of the insolvent corporation in
the sequestrator for the common good of the common
creditors in the same manner in which a bankrupt’s estate
is vested in assignees.© The general rights of receivers
as complainants have been already noticed.”

§ 315. Sequestration affecting personal liability. —A stock-
holder, we may observe, is not released from his liability for
a debt of the corporation arising from the failure of other
stockholders to pay up all the capital, by the fact that its
property was sequestrated, a’ receiver appointed, and its
officers enjoined from doing business four years before suit
was brought, there’ having been no judgment of dissolution

 

?Rodbourn v. Utica I. & E. Ry. 129,distinguishing Story v. Furman, 25 ‘
Co., 28 Hun (N. Y.) 369. Sees. Pp. N. Yy214.

Mott v. Union Bank, 38 N. Y. 18, 5 Curtis v. Leavitt, 15 N.Y. 12,

* Loder v. New York,U.& O.R.R. © Craddocks v. Ins, Co., § Phila. (Pa.)
Co., 4 Hun (N. Y,) 23. 149.

® See § 233. 7 See §§ 90, 93, 224, 229.

4 Farnsworth v. Wood, 91 N. Y. 308. * Hollingshead vy, Woodward, 35
See Cuykendall v. Corning, 88 N. Y. Hun (N. Y.) 410, Compare Kincaid

v, Dwinelle, 59 N. Y. 548.
$§ 316, 317. SEQUESTRATION PROCEEDINGS. 261

§ 316. Distribution of moneys in sequestration—Moneys
received by a sequestrator of a corporation are to be dis-
tributed among its creditors, as in case of the insolvency of
an individual! And where relief by execution is substi-
tuted for the remedy of sequestration, the rule in Pennsyl-
vania is, that there must be equality of distribution.’

§ 317. Sequestration does not effect dissolution—A_ cor-
poration, as has appeared, is not necessarily dissolved by
sequestration proceedings under the New York statute.’
It operates to interrupt and suspend its ordinary business,
but does not necessarily affect the corporate franchise,* and
if the assets prove more than sufficient to liquidate its lia-
bilities, the surplus goes . back to the corporation where it
legally belongs. The corporation need not await the final
distribution, for on paying 1 its creditors, it is entitled to have
the action for sequestration discontinued and the receiver
discharged.° |

1 Steiner’s Appeal,, 27 Pa. St. 313. 2 Parry 1 v. American Opera. Co.,.

: Bayard’ s Appeal, 72 Pa. St. 453 Civ. Pro. (N. Y) 197; Mann v. Pole

’See Mann v. Pentz, 3 N. Y. 415; 3N.Y. 419.

Kincaid v. Dwinelle, 59 N. Y. 548; 5 Angell. v. Silsbury, 19 How. Pr.
Hollingshead ,v. Woodward, 35 Hun (N. Y.) 48.
(N. Y.) 413.

 
CHAPTER XVI.

FOREIGN CORPORATIONS.

-§ 318, Foreign corporations. § 327. Protecting home creditors.
319. Jurisdiction‘ of chancery. 328. Powers of corporation in for-
320. Stockholders suing foreign cor- eign State.
porations. 329. Chartered by two States.
321. Remedies of resident stock-| 330. Telegraph companies.
holdets. 331. Local auxiliaries of foreign cor-
322. Attachments affecting stock of, porations.
or property held by, foreign | 332. Receivership of foreign corpo-
corporations. ration.
323. Domicil of corporation. 333. Aiding foreign receiver.
324. Notice of foreign laws. 334. Citizenship of members imma-
325. Forfeiting franchises of foreign terial.
corporations. 335. Controversies affecting internal
326. Effect of foreign dissolution, @ management.

 

§ 318. Foreign corporations.—Very important questions
affecting foreign corporations, and concerning the juris-
diction of the courts over the assets and officers of these
organizations, arise in corporate insolvency and dissolution
proceedings. There are three reasons why our official re-
ports are prolific of cases affecting foreign associations of
every form: first, because of the large number of States
which compose our Union, the corporate organizations of
each State being, in the main, treated as foreign associa-
tions as regards all the other States; secondly, by reason
of the fact that capital from wealthy European countries,
clothed in corporate form, is constantly seeking investment
in business enterprises in our new world; and thirdly, be-
cause burdens by way of taxation, and restrictions and lia-
bilities in various forms, are in some cases imposed upon
domestic corporate associations, which can be avoided by
transacting business through the medium of a foreign
§ 318 FOREIGN CORPORATIONS.

263
organization. It is familiar practice for parties to seek a
foreign State, where the laws favor loose forms of organ-
ization, in which to incorporate, with the intention of car-
rying on the business in the home State or in other States.
West Virginia is, at the present writing, the banner State
among those in which parties entering upon precarious cor-
porate schemes find it reasonably safe to incorporate! It
would not be feasible in our present discussion to attempt
extended treatment of all the general principles of law gov-
erning corporations doing business in foreign countries, or
in States from which no chartered powers have been de-
rived. The subject is a broad. one, whether. the contro-
versy arise in the home courts or in a foreign jurisdiction,
and the cases upon many of the points involved are at vari-
ance, But there are certain features of this law germane
to our subject at which we will be forced to glance. Else-
where? it has been revealed that foreign corporations may by
comity sue in our courts.’ Thus foreign organizations may
maintain actions of ejectment,‘ real actions,> proceedings to

 

1 In Merrick v. Van Santvoord, 34 N.
Y¥.214, Porter, J.,referring to our numer-
ous State boundaries, said: “ Hitherto
corporate enterprise has not been tram-
melled by unfriendly legislation. No
jealousy of competition, or rivalry of
adverse interest, has been permitted to
convert State lines into barriers of ob-
struction to the free course of general
commerce. Its avenues have been
open to all. In this country our mate-
rial interests are so interwoven that

the union of the States is due, in its:

continuance, if not in its origin, as
much to. commercial as to political

necessity. The citizens of each. claim.

a birthright in the advantages and re-
sources of all.” Nevertheless barriers,
as formidable as the ancient Chinese
wall, are being constructed in many
States against foreign organizations.

* See §§ 39, 93. ;
* Paul v. Virginia, 8 Wall. 168; Amer-

ican Colonization Society v. Gartrell, 23
Ga. 448; Hibernia Nat. Bank v. La-
combe, 84 N.Y. 367; Bank of Augusta v. »
Earle, 13 Peters 538; Freeman’s Bank
v. Ruckman, 16 Gratt. (Va.) 126; Lewis
v. Bank of Kentucky, 12 Ohio 132;
Christian Union v.. Yount, ror U. S.
352; Bard v. Poole, 12 N. Y. 495;
Savage Mfg. Co. v. Armstrong, 17 Me.
34; Mutual Benefit Life Ins. Co. v.
Davis, 12 N. Y. 569; Importing & Ex-
porting Co, v. Locke, 50 Ala. 332;
Newby v. Von Oppen, L. R.7 Q. B.
293; Nat. Bank of St. Charles v. De
Bernales, 1 Car. & P. 569; Utley v.
The Clark-Gardner L. M. Co., 4 Col.
371; Lycoming Fire Ins, Co. v. Lang-
ley, 62 Md. 196,

4 Sedgwick & Wait on Trial of Title
to Land (2d ed.),-§ 195.

5 See American Mutual Life Ins. Co.
v. Owen, 15 Gray (Mass.) 493: °
264 FOREIGN CORPORATIONS. § 318

enforce repayment of loans, and suits against agents for
moneys had and received to; the use of the corporation.”
Chief Justice Taney said in a leading and much-cited case :*
‘We think it is well settled, that by the law of comity among
nations, a corporation created by one sovereignty is permitted
to make contracts in another, and to sue in its courts; and
that the same law of comity prevails among the several
sovereignties of this Union.”* As foreign corporations are
permitted to prosecute suits, it follows that such organiza-
tions may be proceeded against by creditors and others
in the courts;> and, as we have shown, it lies within the
power of the legislature to declare what shall constitute
sufficient service of process upon such corporations, The.
jurisdiction must, it is said, be authorized by some provision
- of statute.” In a corporate litigation in Mississippi it is
said that while it is true that corporations are artificial per-
sons, existing only in contemplation of law, and that they
must dwell in the place of their creation, and cannot mi-
grate to another State, yet such corporations, like natural
persons, are liable to be sued, in transitory actions, arising
ex contractu or ex delicto in any State where legal service
of process can be had.* There is no good reason, declare

 

‘ Leasure v. Union Mutual Life Ins. Co., 15S, & R. (Pa.) 176; Libbey v.
Co., 91 Pa. St. 491;, American Mutual Hodgdon, 9 N. H. 394; St. Louis Per-
Life Ins. Co. v. Owen, 15 Gray:(Mass.): petual Ins, Co. v. Cohen, 9 Mo. 441.

491. * See §§ 62, 113; Pope v. Terre Haute
* United States Express Co, v.Lucas, Car Mfg. Co., 87 N. ¥. 137. The
36 Ind. 361. rights of foreign receivers have been:
* Bank of Augusta v, Earle, 13 Peters noticed (see § 189), and will be adverted
519, 592. to- again.
*Compare Christian Union y. Yount, ” Lathrop v. Union Pacifie. Ry. Co.,
tor U.S. 352-356. r MacA. (D.C.) 238. See St. Clair v.

* Newby v. Von Oppen, L.R. 7 Q.B. Cox,.106 U.S. 350.
293; Lafayette Ins. Co, v. French; 18. *N.O.,,J. & GN. R.R. Co. v. Wal-
How. 407; North Missouri:R.R.Co.v, lace, 50° Miss. 244,;, Libbey v. Hodg-
Akers, 4 Kans, 453;.N. O:, J. & G.N. don, 9 N. H, 394; North Mo. R.R.
R.R. Co. v. Wallace, 50 Miss. 244; Co, v. Akers, 4 Kans. 453; City Fire
City Fire Ins. Co. vy. Carrugi, 41 Ga. Ins. Co. v, Carrugi, 41 Ga. 660,
660; Bushel v. Commonwealth Ins,
$ 319 FOREIGN CORPORATIONS. 265

the courts of Vermont, why artificial persons should not
be liable to suit in the courts of another State as well as
natural persons.’

§ 319. Jurisdiction of chancery—Allusion has been made
to the subject of the general jurisdiction of chancery affect-
ing corporations.” There was formerly a theory advanced
that a foreign corporation could not maintain proceedings
in court. But the contention did not prevail. In Hen-
riques v. Dutch West India Company,*? a suit brought by
a Dutch corporation was sustained in England, both by
the King’s Bench and the House of Lords, in the teeth of
this objection. Chancellor Kent, speaking of a bill filed
by a foreign corporation, said: “This Court ought to be
as freely open to such suitors as a Court of law, and it
would be most unreasonable and unjust to deny them that
privilege. They might well exclaim: ‘Quod genus hoc
hominum?.... hospitio prohtbemur arene.”* Ina
case in Tennessee® we find the proposition set forth that a
court of chancery may administer the effects of a foreign
insolvent corporation within the State, and make distribu-
tion among the domestic creditors, and may enjoin the
prosecution of suits in other chancery courts, so that all the
litigation may be conducted in an insolvency proceeding.
This, as we shall show, would certainly seem to define the
extreme limits of equity jurisdiction as affecting foreign as-
sociations. We may observe at the outset that chancery
will not, ordinarily, attempt to interfere with lands located

 

1 Day v. Essex Co. Bank, 13 Vt. 101. 32 Ld. Raym. 1532; 8.G. 1 Str. 612.
The terms “ any private corporation” 4 Silver Lake Bank v.North, 4 Johns,
and “any incorporated company” in Ch. (N. Y.) 372. The right of a for-
the Texas statutes relating ta suits eign corporation to sue may be sus-
against corporations, are considered to pended by a state of war. Examine
be broad enough to include foreign Society for Propagation of Gospel v.
corporations.. Angerhoefer v. Brad- Wheeler, 2 Gall. 105.
street Co., 22 Fed. Rep. 305. ® Smith v. St. Louis Mut. Life Ins.

2 See §§ 41, 42, 310, 311. Co., 6 Lea (Tenn.) 564.
266 FOREIGN CORPORATIONS. § 319

in another State! And, as has appeared, a court of equity
will not try, in a collateral way, the question of a violation
of its charter by a foreign corporation? Nor will it neces-
sarily compel a distribution of the assets of a foreign cor-
poration among its stockholders, even when the trustees re-
side in the jurisdiction of the forum ;® nor, as elsewhere
shown, will it undertake to settle a dispute as to who are
the dona fide stockholders of a foreign corporation.* In
Massachusetts it is even held that a foreign construction
company cannot enforce specific performance of a contract
against a foreign railroad corporation and a citizen of
Massachusetts, to deliver bonds and stock in payment of
work to be done by the construction company in another
State, although the railroad company had an office in Mas-
sachusetts and had appeared by counsel.® So, a court of
chancery has no jurisdiction to compel a corporation to go
into a foreign State and specifically execute a contract re-
quiring it to open ditches and erect cattle-guards, nor has
the court power to enforce any such decree by attachment
or sequestration,® Ina recent suit in New Jersey, brought
‘by stockholders of a New York corporation against such

corporation and another organization to which it had leased, _

its road, lands, etc., all of which were out of the jurisdiction,
seeking relief in regard to the transactions of those corpora-
tions with each other, the court, on demurrer, declined to
take jurisdiction, on the ground that the courts of New
York were the proper forum for the litigation.” It is held

 

1 Examine Port Royal R.R. Co. v. |? Redmond v. Enfield Manf. Co., 13
Hammond, 58 Ga. 523; Peoplev. Cen- Abb. Pr. N.S. (N. Y.) 332.
tral R.R. Co. of N.J., 42 N. Y. 283; 4 Wilkins v. Thorne, 60 Md. 253.
Hager v.. Stevens, 2 Halst. Ch. (N. J.) ’ Kansas & E. R.R., etc. Co. v. To-
374; and compare Cragin v. Lovell, 88 peka, S, & W. R.R. Co., 135 Mass. 34.
N. Y. 258; Watts v. Kinney, 23 Wend. ° The Port Royal R.R. Co. v. Ham-
(N. Y.) 4845; City Ins. Co. v. Com- mond, 58 Ga. 523.
mercial Bank, 68 Ill. 354. ™ Gregory v. N. Y., L. E.& W.R.R.
. ? Silver Lake Bank v. North, 4 Johns. Co., 40 N, J. Eq. 38.
Ch, (N. Y.) 371, per Chancellor Kent.
§. 320 FOREIGN CORPORATIONS, 267
in Pennsylvania that a court of. equity can exercise no ju-
risdiction in that State to compel stockholders of a foreign
corporation residing within the State to pay a stock sub-
scription to such corporation on the application of a cred-
itor. Under the New York Code an action brought
by non-resident and resident: stockholders against a foreign
corporation for an account, and to set aside as void a pur-
chase of another corporation’s property, was dismissed as
to the non-resident plaintiffs and sustained as to a resident
plaintiff.?

We apprehend that the cases cited abundantly illustrate
the limitations upon chancery jurisdiction affecting foreign
organizations.

§ 320. Stockholder suing foreign corporations.—The gener-
ally recognized rule is, that the courts of a State will not
entertain a suit brought by a stockholder with a view to
affect the acts of a foreign corporation, as the court pos-
sesses ‘(no power to control the action of the company,
and no means of securing obedience to any injunction or
other decree.”* In a case in New Jersey already cited,* the
chancellor used these words: “It is almost too obvious
for remark, that this’ court cannot regulate the. internal
affairs of foreign corporations, nor can it enforce its decrees
outside of this State.” ®

 

1 Bank of Virginia v. Adams, 1 Pars.
Eq. Cas. (Pa.} 534.. See Morris v. Ste-
vens, 6 Phila. (Pa.) 488, per Sharswood,
J. In order to obtain a judgment 2x per-
sonam against a’ foreign: corporation,
the record should show that the corpo-
ration was engaged in business in the
State, and that the service was made
upon the agent in charge of such busi-
ness. See St. Clair v. Cox, 106 U. S.
359 359-

* Ervin v. Oregon Ry. & Nav. Co., 28
Hun (N.Y.) 269; S. Cc. again, 35 Hun
(N. Y.) 544.

3 Williston v. Michigan, S. & N.I.
R.R. Co., 95 Mass. (13 Allen) 406.

4 Gregory v. New York, L. E. & W.
R.R. Co,, 40 N. J. Eq. 44.

’-See Cumberland Coal Co. v. Hoff-
man Coal Co., 30 Barb. (N. Y.) 171.
In Howell v. Chicago & N. W. Rway.:
Co., 51 Barb. (N. Y.) 378, 385, Ingra-
ham, J., said: “I do not mean to be
understood, that in no cases should
the courts exercise jurisdiction; but
even if the power: exists to compel a
foreign corporation to come into our

‘courts and become a party to litigation
268

FOREIGN CORPORATIONS. §§ 321, 322

§ 321. Remedies of resident stockholders.—The question of
the plaintiffs’ residence often assumes an important bearing
on the right to proceed against a foreign corporation. An
injunction to restrain a foreign corporation from using the
proceeds of an issue of stock, alleged to be illegal and void,
and appointing a receiver of such proceeds, was allowed in
New York at the suit of stockholders residing in that
State.’ An action brought in the same State against the
directors of a foreign corporation to compel them to apply
its future earnings in paying past-due dividends on its pre-
ferred stock, was sustained.”

Non-residents cannot, as a rule, maintain a suit against a
foreign corporation.2 The courts will not attempt to ex-
tend aid to litigants whom it is under no obligation to
serve, or willingly proceed, except possibly in aid of a home
creditor, against an organization chartered and domiciled in
a foreign jurisdiction beyond the reach of its process,

§ 322. Attachments affecting stock of, or property held by,
foreign corporations.—Shares of the stock of a foreign cor-
poration, owned by a non-resident defendant, cannot be
reached by attachment, although the officers of the corpora-
tion may be within the State.* And a debtor’s personal

 

here, still, where the cause of action Co., 53 Barb. (N. Y.) 513; S.C. 4 Abb.

arises abroad, where it affects only the
internal government of the corporation,
where the judgment, if rendered, can-
not be in any way enforced against
them, except by injunction against in-
dividual members of the corporation,
and the party has an ample remedy in
the State where the corporation has a
legal existence, the courts here may
well decline exercising an equitable
jurisdiction. in such a case.” But see
Ervin v. Oregon Ry. & Mav. Co., 62
How. Pr. (N. Y.) 490; Cunningham v,
Pell, 5 Paige (N. Y.) 697.

1 Fisk v. Chicago, R. I. & P.R.R.

Pr. N.S. (N. Y.) 378.

* Prouty v. Mich. Southern & N. 1.
R.R., 1 Hun (N. Y.) 655; S.c.4 T. &
C. 230. See also 85 N. Y. 273. Board-
man v. Lake Shore-& Mich. So. Ry.
Co., 84 N. Y. 157. But see Williston
v. Mich, Southern & N.I.R.R., 13 Al-
len (Mass.) 400.

* Smith v. Mutual Life Ins. Co., 14
Allen (Mass.) 336. See Brooks v. Mexi-
can Nat. Const. Co., 18 J. & S. (N. Y.)
281 ; Lathrop v. Union Pacific Ry. Co.,
1 MacAr. (D. C.) 234.

“Plimpton v. Bigelow, 93 N. Y.
592.
§ 323

FOREIGN CORPORATIONS. 269
property in the possession of a Massachusetts corporation
cannot be attached by service of the process upon the
treasurer of the corporation in Rhode Island. Ames, C.
J., said: ‘‘ The primary purpose of an attachment on mesne
process of any sort, is to compel the appearance of the de-
fendant ; and the jurisdiction of the court issuing the pro-
cess is obtained by an attachment, through its jurisdiction
over his property, attached whilst within its jurisdictional
limits. The personal property of a debtor, in the hands of
the Massachusetts manufacturing corporation, is certainly
no more within the jurisdiction of the courts of this State,
than real estate situated within that Commonwealth. An
attachment here, of the one, would be as unsuitable and
fruitless for the purpose of compelling the appearance of
the debtor, as am attachment of the other.”+ On the other
hand, in Kansas, a foreign corporation may be garnisheed
for a debt due to one of its employés, who is not a resident
of the State, and this although the debt was contracted out-
side of the State.’

§ 323. Domicil of corporation —It is important in this con-
nection to keep in mind the rules of law applicable to the
subject of the domicil of a corporation. The New York
Court of Appeals say : ‘‘ We regard the principle to be too
firmly settled by repeated adjudications of the Federal and
State courts to admit of further controversy, that a cor-
poration has its domicil and residence alone within the
bounds of the sovereignty which created it, and that it is in-
capable of passing personally beyond that jurisdiction.” ®

 

1 Taft v. Mills, 5 R.1. 393. Compare
Moore v. Gennett, 2 Tenn. Ch. 375;
Gold v. Housatonic R.R. Co., 1 Gray
(Mass.) 425.

7 Burlington & M. R. RR. €o. v.
Thompson, 31 Kansas 180.

. * Plimpton v. Bigelow, 93 N. Y. 598;
citing Bank of Augusta v. Earle, 13 Pet.
519; Lafayette Ins. Co. v. French, 18
How. 404; Merrick v. Van Santvoord,

34 N. Y. 208; Stevens v. Phoenix Ins.
Co., 41 N. Y. 150; Myer v. Liverpool,
L. & G. Ins. Co., 40 Md. 595. See § 13.
See also Aspinwall v. Ohio & Miss,R.R.
Co., 20 Ind. ‘492; Chafee v. Fourth
Nat. Bank, 71 Me. 529; Ohio & Miss.
R.R. Co. v. Wheeler, 1 Black 286;
Dart v. Farmers’ Bank, 27 Barb. (N.
Y.) 337; Balt. & Ohio R.R. ‘Co. v.
Glenn, 28 Md. 287.
270 FOREIGN CORPORATIONS. § 323

Nevertheless, as has been demonstrated, a corporation may
sue and be sued in a State other than that of its domicil,
where it does business and has an officer representing it,
who may be served with process in such other State. The
State may practically exclude a foreign corporation; it
may restrict it to particular localities, or exact such security
‘for the: performance of its contracts as will best promote
the public interest. The whole matter rests in its discre-
tion.? But a State cannot tax a foreign corporation upon
a principle different from that under which it may tax a
domestic corporation.2? The Chief Justice of New Jersey
said: “It is not denied that the corporate existence of a
company is recognized, not by right, but of grace, in foreign
jurisdictions, nor that each government has the competence
to refuse to recognize such existence, except on.its own
conditions. The principle is universally acknowledged.
Hence, laws requiring insurance companies and other for-
eign corporations to file bonds and submit to other ex-
actions, aS a prerequisite to their admission in an incorpo-
rated capacity, into the State. Such laws, when rightfully
‘made, are evidently mere police regulations, designed to
protect the citizens of the State in which they are enacted
from loss. or imposition, and on this ground their legality
cannot be drawn in question. But atax law, having revenue
for its object, is based upon a principle entirely different.
The right to tax for revenue is the right of the government
to take so much of the property of the person or company
upon whom the tax falls, as such government may deem
necessary for its public wants. The act of taking the prop-
erty, therefore, must of necessity be an acknowledgment of

 

'Gibbs v. Queen Ins. Co., 63 N.Y. ®* Paul v. Virginia, 8 Wall. 168 ; West-
114; S.C. 20 Am. Rep. 513; Lafayette ern Union Tel. Co. v. Mayer, 28 O. S,
Ins. Co, v. French, 18 How. 404; 539, and cases cited.

Fithian v. N. Y. & Erie R.R. Co., 31 * Erie Railway Co. v. State, 31 N. J.
Pa. St. 114; Brauser v. New England Law 531, 543.
Fire Ins, Co,, 21 Wis. 506, See 8 14.
§ 324 FOREIGN CORPORATIONS. BT

the legal status of the person or company whose property
is taken. To assert that the company whose property is
thus taken has no rights but such as the government taking
it chooses to confer, is to assert that such company has
no title to its property but such as may be conceded to
it by the taxing power. It seems to be utterly inconsistent
with legal principles which have always been deemed
axiomatic, to hold that a government can recognize the legal
existence of a foreign corporation for the purpose of tax-
ation, and at the same time can deny such legal existence
for the purpose of depriving it of those rights which belong
to every individual or company known to the law. Such
a doctrine would obviously offer the entire property of
foreign corporations as a prize to the rapacity of any State
in whose territories it might be, or over which it might
happen to be carried.” *

A corporation may be deemed to have oe domicils
when a just construction of a statute so requires.”

§ 324. Notice of foreign laws.—Knowledge of the powers
contained in the charter of a corporation existing in another
State, must be imputed to a citizen of New York purchas-
ing property the title to which is derived from a convey-
ance or assignment made by such corporation. But, ac-
cording to the observation of a New York judge, citizens
of that State are not bound or presumed to know the laws
of another State which are of a general character, although
such laws may abridge the powers of all corporations with-
in that State.2 When we recall the fact that many of
our corporations are formed under general laws, it would
seem to result, from an observance of the principle last
stated, that a person dealing with a foreign corporation
would rarely be affected with notice of either the powers

 

1 Erie Railway Co. 'v. “State, 31 N, Co., 140 Mass. 350; Atty. Genl. v. Bay
J. Eq. 531, 543. . £ ‘State Mining’ Co., 99 Mass. 153.
? Ricker v. ‘American Loan & Trust 3 Hoyt v. Thompson, 19 N. Y. 207.
272 FOREIGN CORPORATIONS. §§ 325-327

granted to, or the limitations affecting such a body, which
is confessedly an undesirable result.

§ 325, Forfeiting franchises of foreign corporations, — The
State or country which has created a corporation, and in
which it was domiciled, should, manifestly, have a voice in
the forfeiture or destruction of the charter. Hence it is
held that the courts of Alabama have no jurisdiction to
adjudge a forfeiture of the franchises of a Georgia corpora-
tion.’

§ 326. Effect of foreign dissolution.—The tendency of the
courts to aid or prefer home creditors of corporations is
sometimes manifested in dissolution cases. The Supreme
Court of Illinois recently said: “Whatever may be the
effect of a decree of dissolution in the State creating the
corporation, it may nevertheless be regarded as at least a de
facto corporation here, for the purpose of enabling credit-
ors to reach its effects in this State.”* The court con-
sidered this view as not only eminently just to home credit-
ors, but as placing all corporations doing business in the
State upon the same footing in this respect. This view is
substantially recognized in The City Itisurance Company v.
The Commercial Bank,’ where the court used this language :
“There is nothing in the comity which exists between
States that makes it improper our courts should afford
this remedy (attachment), notwithstanding the fact that, by
the local laws of the State which created this corporation,
its effects are in the hands of a receiver.”

§ 327. Protecting home creditors,—In Tinkham v. Borst,
the Supreme Court of New York observe that they “en-
tertain no doubt but that creditors of dissolved insolvent

 

‘Importing & Exporting Co. of Ga, "Life Assn. of America v. Fassett,
v. Locke, 50 Ala. 335. See Society 102 III. 325.
for Propagation of Gospel, etc. v. New 568 Tll. 348, 351.
Haven, 8 Wheat. 464; Wilkins vy. 431 Barb, (N. Y.) 412.
Thorne, 60 Md. 258. See §§ 335, 340.
§ 328 FOREIGN CORPORATIONS, 273
corporations have a lien on the assets for the payment of
their debts.” It was suggested in that case that a New
Jersey receiver was the proper plaintiff, the corporation be-
ing chartered by that State. But Mullin, J., said : “Where
a fund exists in this State which our own citizens are en-
titled to have applied to the payment of their debts, the
courts will detain and appropriate the fund, although the
persons holding it may be accountable to a foreign juris-

diction in reference to it.’’!

§ 328. Powers of corporation in foreign State ——A corpora-
tion, as we have said, possesses only such powers as its
charter confers, or the statutes of its own State bestow.
Thus, it was held that a foreign corporation gained no ad-
ditional powers by doing business in Rhode Island, for that
State did not confer any rights upon it, but merely allowed
it, as a matter of comity, to exercise, within the State bor-
ders, such powers as it already possessed. Hence, where
it appeared as a fact that a New York corporation could
not, by reason of statutory inhibition, make an assignment
in contemplation of insolvency, such an instrument cannot
be upheld, though assignments by corporations are permit-
ted in Rhode Island.* Where there is no restriction in the
charter itself, and the policy of the State does not forbid, a for-
eign corporation may purchase and hold real estate.* So such
a corporation may take a mortgage upon real property,®

 

1Compare National Trust ‘Co. v.
Miller, 33 N. J. Eq. 159; Matter of
Waite, 99 N. Y. 440.

2 See Chap. VIII., §118; Harris v.
Thompson, 15 Barb. (N. Y.) 62; Rob-
inson v. Bank of Attica, 21 N. Y. 406;
Sibell v. Remsen, 33 N. Y. 95.

3 Pierce v. Crompton, 13 R. I. 312.

4 Christian Union v. Young, 101 U.
S. 352; Claremont Bridge Co. v. Royce,
42 Vt. 730; State v. Boston, Concord

18

& M. R.R. Co., 25 Vt. 433; Cowell v.
Springs Co., 1o0 U. S. 55; Lumbard
vy. Aldrich, 8 N. H. 31.

' American Mat. Life Ins. Co. v.
‘Owen, 15 Gray (Mass.) 491; National
Trust Co. v. Murphy, 30 N. J. Eq. 408 ;,
Silver Lake Bank v. ‘North, 4 Johns..
Ch. (N. Y.) 370; Lebanon Savings
Bank v. Hollenbeck, 29 Minn. 322;
New York Dry Dock v. Hicks, 5 McL.
II.
274 FOREIGN CORPORATIONS. § 329

and enforce it,1 and may lease property suitable for its
business.”

§ 329. Chartered by two States.—A corporation chartered
and organized under the laws of two States, may lawfully
hold its meetings and transact its corporate business in
either State.2 To hold otherwise would be to require that
every meeting of its stockholders or directors should be held
twice, and its business transacted twice in order to make it
valid and effectual. Where a corporation operates in more
than one State, it may do so either under a license from such
other State,® or by virtue of an actual reincorporation. And
such a license is, as a rule, revocable. But it seems that an
action cannot be maintained in Massachusetts against a
railroad corporation operating a continuous road in that
State and Connecticut, under the laws of both States, for
the death of a person caused by the negligence of the cor-
poration in Connecticut, the laws of that State not afford-

ing a like remedy.°

 

1Teasure v. Union Mutual Life Ins,
Co., 91 Pa, St. 491; American Mutual
Life Ins, Co. v. Owen, 15 Gray (Mass.)
491.

e Black v. Delaware & R. Canal Co.,
22 N. J. Eq. 130, 422; Steamboat Co.
vy. McCutcheon, 13 Pa. St. 13; North-
ern Transp. Co. v. Chicago, 7 Biss. 45.

3 Covington & C. Bridge Co. v. Mayer,
31 O. S. 325; Graham v. Boston, H. &
E. R.R. Co., 118 U.S. 162. See § 445.

4 No State law regulating commerce
going beyond the borders of the State
is constitutional. Wabash, St. L. & P.
Ry. Co, v. Illinois, 118 U. S. 557; S.C.

1 Ry. & Corp. L. J. 3; Erie Railway
Co. v. State, 31 N. J. Law 531. In
State Treasurer v. Auditor General, 46
Mich. 234, the learned Cooley, J., said,
however. “ If two States should incor-
porate the same persons for the same

. purpose, with identical powers, there

would, in contemplation of law, be two
corporations, deriving their authority
from different sources. This would be
altogether a different thing from one
State granting the charter, and the
other giving permission for the exercise
of the franchises within its limits.’’

® Doyle v. Continental Ins. Co., 94
U.S. 535.

° Davis v. New York & New Eng-
land R.R. Co., 143 Mass. 301; S. C.
58 Am. Rep. 138. Mr. Irving Browne,
in a note to this case, says the adjudi-
cations may be classified as follows: 1.
Where the statutes in both States give.
the remedy, the suit is maintainable
in either State. Morris v. Chicago, R.
I, & P. Ry. Co., 65 Iowa 727; 5. c. 54
Am. Rep. 39; Boyce v. Wabash Ry.
Co., 63 lowa 70; S.C, 50 Am. Rep.730;
Leonard v. Columbia Steam Nav. Co.,
84 N.Y. 50; S.C, 38 Am. Rep. 491;
§§ 330, 331 FOREIGN CORPORATIONS. 275

§ 330. Telegraph companies.—The telegraph is considered
to be an instrument of commerce, and telegraph companies
are subject to the regulating power of Congress in respect
to their foreign and interstate business.! Chief Justice
Waite said: ‘‘A telegraph company occupies the same re-
lation to commerce as a carrier of messages that a railroad
company does as a carrier of goods. Both companies are
instruments of commerce, and their business is commerce
itself. They do their transportation in different ways, and
their liabilities are, in some ‘respects, different, but they are
both indispensable to those engaged to any considerable ex:
tent in commercial pursuits.” ?

§ 331. Local auxiliaries of foreign corporations.—The con-
tention has been put forth that a State would not allow cor-
porations organized under general incorporation laws to be-
come mere auxiliary organizations and agencies of foreign
corporations that may desire to do business in the State.
It was urged that such a line of policy “ would contravene
the policy and objects” of the State law. The Court of
Appeals of Maryland said: “In this we do not concur.
We know of no policy of the State, provided everything

 

Knight v. West Jersey R.R. Co., 108
Pa, St. 250; S. C. 56 Am. Rep. 200.
Contra, holding that the accident and
place of suit must be in the same State,
Willis v. Mo. Pac. Ry. Co., 61 Texas
432; S.C. 48 Am. Rep. 301; McCar-
thy v. Chicago, R. I. & P. R.R. Co., 18
Kans. 46; S.C. 26 Am. Rep. 742. 2.
Where the State in which the accident
occurred gives the remedy, but the State
where suit is brought does not, the suit
is not maintainable. Vawter v. Mo. Pac.
R.R. Co., 84 Mo, 679; S. Cc. 54 Am.
Rep. 105; Taylor’s Admr. v. Penn. Co.,
78 Ky. 348; S. C. 39 Am. Rep. 244.
Contra, Herrick v. Minneapolis & St.
L. Ry. Co., 31 Minn. 11; S.C. 47 Am.
Rep. 771. 3. Where the State in
which the suit is brought gives the

remedy, but the State in which the ac-
cident occurred does not, the suit is not
maintainable. Limekiller v. Hannibal
& St. J. R.R. Co., 33 Kans. 83; s.c.
52 Am. Rep. 523; Debevoise v. New
York, L. E, & W. R.R. Co., 98 N. Y.
377; S. C. 50 Am. Rep. 683; Hyde v.
Wabash, St. L. & P. Ry. Co., 61 Iowa
441; S.C. 47 Am. Rep. 820; Willis v.
Mo. Pac. Ry. Co., 61 Texas 432; S. C.
48 Am. Rep. 301; Le Forest v. Tolman,
117 Mass, 109; S, C. 19 Am. Rep.
400.

1 Pensacola Telegraph Co. v. West-
ern Union Tel. Co., 96 U.S.1; Ameri-
can Union Tel. Co. v. Western Union
Tel. Co., 67 Ala, 26.

® Telegraph Co. v. Texas,'105 U. S.

460, 464.
276 FOREIGN CORPORATIONS. § 332

be fair, that would be contravened. The general incorpora-
tion law provides that foreign corporations, and especially
telegraph companies, may do business within this State ;
and, of course, they are allowed to acquire and hold the
necessary property in the State to enable them to prosecute
and conduct their business. Whether they hold their prop-
erty in their own names, or that of auxiliary local corpora-
tions organized for the purpose, is a matter of convenience
or policy that the corporations determine for themselves.” *

§ 332. Receivership of foreign corporation.—Elsewhere we
have seen that a receiver may be appointed to preserve the
property and effects of a foreign corporation for the benefit
of creditors and shareholders.* Especially will this be done
where the assets are endangered by reason of the insolvency
of the officers? Generally some fraud must be shown to
induce equity to interfere on an application to appoint a re-
ceiver of a foreign corporation.* It seems, however, that such
a receiver may be appointed where the corporation has ap-
peared in the action by an attorney, and is shown to be in-
solvent and has discontinued the exercise of its corporate
franchises,’ and it is considered no objection to the appoint-
ment of a receiver that the corporation is chartered by more
than one State. In Rhode Island the Supreme Court has _
no power to appoint a statutory receiver of the estate of a
foreign corporation doing business in that State,” and in ap-
plications for a receivership of a foreign corporation it must
be remembered that the acts of the corporation are, in the
main, to be judged by the law of the place of its creation.

 

' Day v, Postal Telegraph Co., 66 * De Bemer v. Drew, 39 How. Pr.

‘Md. 369. (N. Y.) 466.
2? De Bemer v, Drew, 57 Barb, (N. 6 State v. Northern Central Ry. Co.,
Y.) 438. See §§ 188, 340, 18 Md. 193.
3 Redmond v. Hoge, 3 Hun (N. Y.) " Stafford y. American Mills Co. 13
171, : R. I, 310. See Pub. Laws R. L., Chap.
4 See Redmond v. Enfield Mfg. Co., 723, § 2, June 20, 1878.
13 Abb, Pr. N.S. (N. Y.) 332. * O’Brien v. Chicago, R. I. & P. RR.

Co., 4 Abb. Pr. N. S.(N. Y.) 381.
§§ 333-335 FOREIGN CORPORATIONS, 27%
Though the corporation may be in the hands of a liquida-
tor in its home jurisdiction, this does not necessarily pre-
clude creditors in other jurisdictions from pressing their
claims to judgment.*

$ 333. Aiding foreign receiver,—_Independent of statutory
provision and simply as a matter of comity, the New Jersey
Court of Chancery will extend its aid to the receiver of a
foreign corporation for the purpose of enabling him to. get
the possession of property which should, in equity, be ap-
plied in payment of its debts.* A foreign receiver may bé
substituted as complainant,? due regard being had to the
rights of home creditors.*

$ 334. Citizenship of members immaterial.—A corporation
has no other individuality than its corporate capacity. Its
local status, as we have said, is not dependent upon the citi-
zenship of the individuals composing the corporation.®

§ 335. Controversies affecting internal management.—A
controversy between stockholders of a corporation on the
one side and those claiming to be stockholders and officers
on the other, is a controversy relating to the internal man-
agement of the corporation, and must, as already stated, be
determined by the courts of the State in which the corpora-

 

1 Henry v. Stuart, 14 Phila, (Pa.) r1o.

2 National Trust Co. v. Miller, 33 N.
J. Eq. 159; Bidlack v. Mason, 26 N. J.
Eq. 230. Compare Matter of Waite,
99 N. Y. 440; O’Dea vy. O’Dea, 101 N.
Y. 34.

* National Trust Co. v. Murphy, 30
N. J. Eq. 408.

4 See § 326.

5 Educational Society v. Varney, 54

N. H. 376. See §§5, 9, 323. Compare .

Portsmouth Livery Co. v. Watson, Io
Mass. 91. In Louisville, C. & C. R.R.
Co. v. Letson, 2 How. 558, Justice Wayne
said: “A corporation created by and
doing business in « particular State, is

to be deemed to all intents and pur-
poses as a person, although an artilicial
person, an inhabitant of the same State,
for the purposes of its incorporation,
capable of being treated as a citizen of
that State, as much as a natural person.
Like a citizen it makes contracts, and
though in regard to what it may do in
some particulars it differs from a nat-
ural person, and in this especially, the
manner in which it can sue and be sued,
it is substantially, within the meaning
of the law, a citizen of the State which
created it, and where its business is
done, for all the purposes of suing and
being sued.”
278 FOREIGN CORPORATIONS. § 335

tion was created. If any attempt to obtain jurisdiction is
made, the corporation should be joined as a party to the
suit.” It is considered anomalous for the courts of one State,
otherwise than in exceptional cases, to entertain jurisdiction
of proceedings looking to the dissolution and distribution
of the assets of a corporatioh organized in another State.®

 

? Wilkins v. Thorne, 60 Md. 258. Y.) 222; Davenport v. Dows, 18 Wall.
* Wilkins v. Thorne, 60 Md. 258, 626; Greaves v. Gouge, 69 N. Y.
Compare Booth v. Robinson, 55 Md. 154.
420; Robinson v. Smith, 3 Paige (N. 5 See §§ 325, 340.
§ 336.
337:
338.
339:
340.

341.
342.

343-

344.
345.

346.
347.
348.

349.
352.

351.

352.
353-

CHAPTER XVII.

DISSOLUTION

Liability of corporation to disso-
lution.

Termination of corporate exist-
ence— How effected.

Forfeiture and repeal of charter
—Distinction.

No dissolution or forfeiture in
equity independent of statute.

Proceedings in foreign jurisdic-
tion.

Chartered in different States.

Construction of dissolution stat-
utes.

Practice and procedure in New
York.

English winding-up act.

Dissolution by expiration of char-
ter.

Term of duration.

Title upon expiration of charter.

Effect of repeal on property
rights of corporation.

Reversion for nonuser.

Abandonment a question of in-
tention.

Dissolution by act of the legis-
lature.

Repeal of charter a dissolution.

Nature of power of repeal.

 

§ 354.
355.
356.

357-
358.

359.
360.

361.

362.
363.
364.

365.
366.

367.
368.

369.
370.

371.
372.
575:

374.

AND WINDING UP.

No repeal by implication.

Character of act of dissolution.

Insolvency does not work disso-
lution.

Test of insolvency. ;

Dissolution by act of the parties.

Power of majority.

Dissolution not effected by sur-
render without acceptance.

Power of directors affecting dis-
solution.

Effect of resignation of officers,

Misconduct of officers.

Neglect to exercise corporate
powers,

Illegal action.

Suspension of business,

Continuing losing enterprise.

Right to discontinue business.

Dissolution by death of mem-
bers.

Exclusive ownership in one per-
son,

By consolidation,
What does not effect dissolution.

Enjoining exercise of corporate
functions,
Wrong complained of remedied.

“A corporation never can dissolve itself so as to defeat any of the just rights of its cred-
itors."—Brown v, Union Insurance Co., 3 La, Ann, 182.

‘‘ The property of corporations is held in trust for creditors, and may be pursued by them
into whosesoever hands it may come, as well after as before the dissolution of the corporation,
unless it may have come to the hands of bona fide purchasers."—Blatch/ord, a in Fisk v.
Onion Pacific Railroad Co., 10 Blatch/. 519.

-§ 336. Liability of corporation to dissolution.—The special
and important branch of our subject relating to the disso-
lution and winding up of corporations will next command

attention.

A corporation, by the very terms and nature of
§ 337

280 DISSOLUTION AND WINDING UP.

its political existence, is subject to dissolution by a surrender
of its corporate franchises, or by a forfeiture of them for
wilful misuser or nonuser. Every creditor must be pre-
sumed to understand and to contract with reference to the
nature and incidents of such a body politic. Whoever
enters into contracts with a corporation ‘exposes himself
to losses which might arise from its dissolution, as he would
with natural persons by their death.” The fact that cor-
porate obligations are outstanding will not save it from
dissolution. It would be a new doctrine to the law that
the existence of a private contract of a corporation should
force upon it a perpetuity of existence contrary to public.
policy and the nature and objects of its charter.”

$ 337. Termination of corporate existence —How effected.—
Private corporations may, by the common law, lose. their
legal existence by the act of the legislature ; possibly, in
certain cases, by the death of all their members ;* by a fail-
ure to comply with conditions upon which the continued
existence of the corporation depends ;‘ by the expiration

 

"Read v. Frankfort Bank, 23 Me.
321.

?Mumma v. Potomac Co., 8 Peters
281; Washington & B. Turnpike Road
Co. v. The State, 19 Md. 239. In Mum-
mav. Potomac Co.,8 Peters 285, Story,
J., said: “ The dissolution of the corpo-
ration .. . . cannot, in any just sense,
be considered, within the clause of the
Constitution of the United States on
this subject, an impairing of the obli-
gation of the contracts. of the com-
pany by those States, any more than
the death of a private person can be
said to impair the obligation of his
contracts. The obligation of those con-
tracts survives; and the creditors may
enforce their claims against any prop-
erty belonging to the corporation, which
has not passed into the hands of fona
Jide purchasers,”

®Jn Boston Glass Manufactory v.
Langdon, 24 Pick. (Mass.) 52, Mor-
ton, J., said: “ As all the original stock-
holders are not deceased, the cor-
poration cannot be dissolved for the
want of members to sustain and exer-
cise the corporate powers. Besides,
this mode of dissolution cannot apply
to pecuniary or business corporations.
The shares, being property, pass by as-
signment, bequest, or descent, and must
ever remain the property of some per-
sons, who of necessity must be mem-
bers of the corporation as long as it
may exist.” See § 369; Russell v.
M’Lellan, 14 Pick. (Mass.) 68; but
compare Blackwell vy. The State, 36
Ark, 188,

‘In Brooklyn Steam Transit Co. v.
City of Brooklyn, 78 N. Y. 520, Earl,
J., said : “ The general principle is not
$ 337 DISSOLUTION AND WINDING UP. 281
of the charter; by a forfeiture of the franchises declared by
a judgment of a competent tribunal; or by a surrender of
the charter.’ It seems that allusion is nowhere made in the
earlier authorities to any other mode of dissolution,’ but in
our modern practice resort is constantly had to special dis-
solution statutes.

A corporation, as we have seen,’ owes its life to the
sovereign power, and under what circumstances it shall
forfeit or be deprived of that life, depends upon the same.

power.!

Hence it is that forfeiture> or dissolution of a

corporation will not be decreed in a foreign jurisdiction.®

 

disputed that a corporation, by omit-
ting to perform a duty imposed by its
charter, or to comply with its provi-
sions, does not zfso facto lose its corpo-
rate character or cease to be a corpo-
ration, but simply exposes itself to the
hazard of being deprived of its corpo-
rate character and franchises by the
judgment of the court in an action in-
stituted for that purpose by the attor-
ney-general in behalf of the people;
but it cannot be denied that the legis-
lature has the power to provide that a
corporation may lose its corporate ex-
istence without the intervention of the
eourts by any omission of duty or vio-
lation of its charter, or default as to
limitations imposed; and whether the
‘legislature has intended so to provide
in any case depends upon the construc-
tion of the language used. Here the
language used shows that the legisla-
ture intended to make the continued.
existence of the plaintiff as a corpora-
tion depend upon its compliance with
the requirements of . . . . the original
act. In case of non-compliance, the
act itself was to cease to have any op-
eration, and all the powers, rights, and
franchises thereby granted were to be
“deemed. forfeited and terminated.”
There was to be not merely a cause of
forfeiture which could be enforced in

an action instituted by the attorney-
general, but the powers, rights, and
franchises were to: be taken and treated
as: forfeited and terminated. At the
end of the time limited, the corporation
was to come to an end, as if that were
the time limited in its charter for its
corporate existence.” As stated in an-
other case, “the statute executed it-
self,” and “needed no action or judicial
procedure to declare or complete a for-
feiture of the charter, and loss of cor-
porate powers.” Matter of Brooklyn,
W. & N. Ry. Co., 72 N. ¥. 249; S. P.
Matter of Brooklyn, W. & N. Ry. Co.,
75.N. Y.-337.

1See Folger v. Columbian Ins. Co.,
99 Mass. 274; Boston Glass Manufac-
tory v. Langdon, 24 Pick, (Mass.) 53; 2
Kent’s Comm. 305, 313, 314; Barclay
v. Talman, 4 Edw. Ch. (N. Y.) 124, and

note. See § 369.
® See Oakes v. Hill, 14 Pick. (Mass.)
446

§ See §5;. State Treasurer v. Auditor
General, 46 Mich. 234.

*Denike v. New York & R. Lime,
etc. Co., 80 N. Y. 605.

® See § 325; Importing & Exporting
Co. of Ga. v. Locke, go Ala. 335.

6 See Society for Propagation of Gos-
pel v.. New Haven, 8 Wheat. 464; Wil-
kins v. Thorne, 60 Md. 258,
§ 338

It is said in an early case in New York, that if a corpora-
tion consists of several integral parts, and some of them
are gone, and the remaining parts have no power to supply
the deficiency, the corporation is dissolved.’ It is believed
that these general sweeping statements concerning dissolu-
tion by loss of parts are misleading. It is very doubtful
whether, under the modern view, a loss of some integral
parts constitutes a dissolution of a corporate body for all
purposes. It is especially not easy to see how the doctrine
can be true of a corporation having capital stock. The
powers are suspended or dormant.?_ It has also been asserted
that if a corporation suffers acts to be done which have the
effect of destroying the end and object for which it was
created, this is equivalent to a surrender of its rights.? It
would seem to us, however, that this condition of affairs
merely affords grounds for proceedings to forfeit the char-
ter or wind up the corporate body.*

282 DISSOLUTION AND WINDING UP.

§ 338. Forfeiture and repeal of charter—Distinction.—It is
considered that there is not the faintest resemblance be-
tween the forfeiture and the repeal of a charter, except that
dissolution of the corporation is the consequence in both
cases. One is a legislative and the other a judicial act.
The power of the legislature and the power of the court

 

! Philips v. Wickham, 1 Paige (N. Y.)
596.
?See Goulding v. Clark, 34 N. H.
148. Lord Kenyon said in The King v.
Pasmore, 3 T. R. 241: “Corporations
are the creatures of the Crown ; and on
their dissolution their franchises revert
to the Crown. But if the King choose
that all their rights shall be revived, it
is competent to him to do so, either
with the old or new corporators; and
thereby no person is injured, nor is any
rule of law infringed. And by the new
charter the King did not consider the
old corporation as dissolved to a7 pur-

poses ; but he granted those rights to
a new set of men, and superadded such
other powers as he deemed necessary.”
See Chap. XXI,

* Moore v. Whitcomb, 48 Mo. 543.
See Slee v. Bloom, 19 Johns, (N. Y.)
456.

4 The reader may note that the com-
mon-law methods of winding up the
affairs of extinct corporations are not,
as a rule, abolished by the statutes al-
lowing a limited continuance of some
of their powers for special purposes.
School Dist. No. 3 v. Greenfield, (N.
H.) 7 East. Rep. zor.
§ 339 DISSOLUTION AND WINDING UP. 283

are based on different foundations; are bestowed for differ-
ent purposes, depend upon different principles ; are exercised
in different ways, and the acts are valid or void for differ-
ent reasons.!. The effort will be made to eliminate, as far
as practicable, from the present discussion, questions con-
cerning the forfeiture of corporate rights, and to consider
the authorities relating to this latter branch of our subject
in a succeeding chapter.2 The observation may be ven-
tured in passing, that the reserved power of repeal of a
charter can be exercised by the legislature at pleasure ;* but
in the absence of such a reservation the charter can only be
judicially forfeited for cause.* If the reserved power is to
be exercised in case of neglect to act or abuse of corporate
power, the legislature is not necessarily, according to some
cases, the sole judge, but judicial inquiry as to the propriety
of the forfeiture may be had.°

$ 339. No dissolution or forfeiture in equity independent of
statute——We may, at the outset, recall attention to the

 

1 Black, J., in Erie & North East
Railroad Co. v. Casey, 26 Pa. St. 321.

® See Chap. XIX. .

3 Thornton v. Marginal Freight Ry.
Co., 123 Mass. 32; Lothrop v. Sted-
man,13 Blatchf.134; S.c. 42 Conn.583 ;
Western North Carolina R.R. Co. v.
Rollins, 82 N.C. 523 ; McLaren v. Pen-
nington, 1 Paige (N. Y.) 102; Mobile
& O. R.R. Co. v. State, 29 Ala. 573.
Shipman, J., said, in Lothrop v. Sted-
man, 42 Conn. 590, S. C. 13 Blatchf. 142:
“The legislature has the right to exer-
cise its power summarily and at will,
and its action, being a legislative and
not a judicial act, cannot be reviewed
by the courts, unless it should exercise
its power so wantonly and causelessly as
palpably to violate the principles of
natural justice, and in such a case a re-
peal, like other legislative acts which
do thus palpably violate the principles

of natural justice, may be reviewed by
courts.” See Loan Association v. To-
peka, 20 Wall. 663; Day v. Savadge,
Hob. 85 [212]; London v. Wood, 12
Mod. 688, In 1783, when a bill was in-.
troduced in Parliament for the purpose
of remodelling the charter of the East
India Company, Lord Thurlow charac-
terized it as “an atrocious violation of
private property.” See Regents of Uni-
versity of Maryland v. Williams, 9 Gill
& J. (Md.) 409.

4Miller v. State, 15 Wall. 478;
Campbell v. Miss. Union Bank, 7 Miss,
653; State v. Northern Cent. Ry. Co.,
44 Md. 131, 164.

5 Compare Crease v. Babcock, 23
Pick. (Mass.) 334; Commonwealth v.
Pittsburg & C, R.R. Co., 58 Pa. St. 46;
Mobile & O. R.R. Co. v. State, 29 Ala.
573; Flint v. F. Plank R. Co. v. Wood-
hull, 25 Mich. 99. Seé § 404,
284 DISSOLUTION AND WINDING UP. § 339
familiar principle that, in the absence of a statute con-
ferring jurisdiction, a court of chancery has no power,
at the suit of an individual, to determine a question
as to whether a forfeiture of a corporate franchise has
occurred by reason of a violation of the charter.* In
State v. Merchants’ Insurance & Trust Company,’ this
language is used: ‘By the common law the forfeiture
of a charter can be enforced in a court of law only; and
the proceeding to repeal it is by a scéve faczas, or an in-
formation in the nature of a writ of guo warranto. A sctre
facias is the proper remedy where there is a legal existing
body capable of acting, but which had been guilty of an
abuse of the power intrusted to it; a guo warvanto, where
there is a body corporate de facto, which takes upon itself
to act as a body corporate, but which, from some defect in
its constitution, cannot legally exercise the power it affects to
use.® But a court of chancery, unless especially empowered
by statute, cannot decree a forfeiture, though it may hold
trustees of a corporation accountable for an abuse of
trust.”* Hence it is held that a court of equity has no
jurisdiction to. restrain a navigation company from collect-
ing tolls on the streams to which its charter refers, on the
ground that it had failed to improve the streams in the
manner prescribed by its charter, or to keep them in order.®
The only mode of proceeding against a corporation in such
a case was declared to be by guo warranto at the suit of
the State.° Barrett, J., a careful and able judge, said in a

 

"Strong v. McCagg, 55 Wis. 627; 484; The King v. Pasmore, 3 T. R.

Bayless v. Orne, 1 Freem. Ch. (Miss.)
161; Folger v. Columbian Ins. Co., 99
Mass. 267; Hardon v. Newton, 14
Blatchf. 378; French Bank Case, 53
Cal. 495; Howe v. Deuel, 43 Barb. (N.
Y.) 504; Belmont v. Erie Railway Co.,
52 Barb. (N. Y.) 637. See §§ 172, 174.

» 8 Humph. (Tenn.) 252.

* Citing Society for Propagation
of Gospel v. New Haven, 8 Wheat.

245.

‘ See Fountain Ferry T. R. Co. v. Jew-
ell, 8 B. Mon. (Ky.) 142; Baker v. Admr.
of Backus, 32 Hl. 79; Hodges v. New
England Screw Co.,1 R.1. 312; Dodge
v. Woolsey, 18 How, 331. But compare
People v. College of California, 38 Cal.
166.

* Pixley v. Roanoke Nav. Co., 75 Va.
320;

‘Ibid. See § 57.
§ 340 DISSOLUTION AND WINDING UP. 285
case in New York, that no inherent powers existed in a
court of equity which would enable a stockholder to wind
up the business of a corporation.’ And it was held in Ver-
planck v. Mercantile Insurance Company,’ that the appoint-
ment of a receiver was not only a disfranchisement of its
officers, but worked a dissolution of the corporation. This
latter statement is, however, manifestly inexact, for we
have elsewhere shown that a corporation may be regarded
as continuing in existence for many purposes, notwith-
standing the appointment of a receiver.’

§ 340. Proceedings in foreign jurisdiction—It has already
been made manifest that a court will not decree the forfeit-
ure of the franchises of a foreign corporation,‘ or attempt
to dissolve it, or assume general control of its assets.® But,
as we have seen,° the court may appoint a receiver to pre-
serve the property of an embarrassed foreign corporation
from waste or destruction.? Our courts will not presume
that the executive authority of a foreign government has
power, without legislative or judicial sanction or approval,

to annul or dissolve a corporation.®

 

' Bliven v. Peru Steel & Iron Co., 60
How. Pr. (N. Y.) 280. Citing Howe v.
Deuel, 43 Barb. (N. Y.) 505; Ramsey
v. Erie Railway Co., 7 Abb. Pr. N.S.
(N. Y.) 181; Gilman v. The Greenpoint
Sugar Co., 4 Lans. (N. Y.) 483; Galvey
v. United States Steam Sugar Refining
Co., 36 Barb. (N. Y.) 256; Denike v.
New York & R. L. & C. Co., 80 N. Y.
599.

* 2 Patpe (N. Y.) 446.

3 See §36. This language is used in
People v. College of California, 38 Cal.
172, 173: “When the statute prescribes

‘aparticular'method for dissolving a cor-
poration, that method must, of course,
be pursued ; but our conclusion is, that
in the absence of any statutory provi-
sion defining the mode, a corporation
aggregate may surrender its franchise

by proper proceedings for that pur-
pose.”

4 See §§ 325, 335; Importing & Ex-
porting Co. of Ga. v. Locke, 50 Ala.
335:

5 Wilkins v. Thorne, 60 Md. 258.
See Barclay v. Talman, 4 Edw. Ch. (N.
Y.) 124 and zofe,; Murray v. Vander-
bilt, 39 Barb. (N. Y,) 140.

® See §§ 188, 332.

1 Murray v. Vanderbilt, 39 Barb. (N.
Y.) 140; Redmond v. Hoge, 3 Hun
(N. Y.) 171. :

® Leav. American A. & P. Canal Co.,
3 Abb, Pr. N.S.(N.Y.) 1. In Hart
v. Boston, Hartford & Erie R.R. Co.,
4o Conn. 539, it appeared that the rail-
road company was in bankruptcy.
Park, J., said: “ We think the bank-
ruptcy proceedings cannot operate to
286 DISSOLUTION AND WINDING UP. §§ 341-343

§ 341. Chartered in different States——A corporation which
has received similar charters from different States may be
dissolved and wound up in any one State without its fran-

chise in the other States being affected.’

§ 342. Construction of dissolution statutes.—The statutory
proceeding in New York for winding up an insolvent cor-
poration being summary in character, it is considered that
the statute must be closely followed and all its provisions
complied with,” otherwise applications under it will not be
effectual.2 In Matter of Pyrolusite Manganese Company,‘
the petition for voluntary dissolution was held to be in-
sufficient because it did not show that the dissolution would
be beneficial to the stockholders, and the order to show
cause was considered fatally defective, in that the form pre-
scribed by statute was not followed. Daniels, J., said:
“The rule in all statutory proceedings is that they must
conform to the requirements made by the statute provid-
ing for them, and if they fail to do that, then the court
does not acquire jurisdiction over the proceeding, and it
will have no authority to make any adjudication affecting
the rights of the parties designed to be controlled by it.”*®

§ 343. Practice and procedure in New York.—By section
1786 of the New York Code of Civil Procedure, an action

 

impair the right of this State to dissolve
a corporation created by the laws of
this State. What this State gave in
this respect, this State can take away,
notwithstanding the United States may
have acquired jurisdiction over the prop-
erty of the corporation sought to be dis-
solved. The jurisdiction of the two
governments is separate and distinct.
The one may have the right, by insti-
tuting proceedings in bankruptcy, to
wind up the affairs of a corporation
and distribute its effects among its
creditors; but it belongs to the other
to annul the charter which it gave, and

its right in this respect must be exclu-
sive and supreme.”

1 Hart v. Boston, H. & E. R.R. Co.,
40 Conn, 524. See § 329 and compare
Graham v. Boston, H. & E. R.R.Co.,
118 U. S. 162; Covington & C, Bridge
Co. v. Mayer, 31 O. S. 325.

* Ex parte Dubois, 15 How. Pr. (N.
Y.) 7.

®s, Pp. Chamberlain v. Rochester S.
P, V. Co., 7 Hun (N. Y.) 557. See
§ 343.

“29 Hun (N. Y.) 420, 432.

* Citing Sharp v. Speir, 4 Hill (N. Y.)
76; Matter of Valentine, 72 N. Y. 184,
§ 343 DISSOLUTION AND WINDING UP. 287
for the dissolution of a corporation, provided for in § 1785
of the Code, may be maintained by the attorney-general in
the name of the people of the State. Whenever a creditor
or stockholder desires to bring such an action, he may sub-
mit to the attorney-general a written statement of facts,
verified by oath, showing grounds for an action under
$1785, and if the attorney-general omits for sixty days
after such submission to commence an action specified in
that section, then, and not otherwise, such creditor or stock-
holder may apply to the proper court for leave to com-
mence such an action, and on obtaining leave, may main-
tain the same accordingly. The word “creditor” in these
sections of the Code is believed to mean judgment credit-
or, and not a creditor at large.t It is manifestly inex-
pedient to give zz extenso the various statutory provisions
in New York State relating to the management of corpo-
rations. We may, however, state that in New York a pro-
ceeding for a voluntary dissolution should proceed from
the company or its board of trustees.* It may be further
observed, that a petition for the voluntary dissolution of a
corporation must state facts showing that the dissolution
will be beneficial to the interests of the stockholders. It is

 

1See Paulsen v. Van Steenbergh, 65
How. Pr. (N. Y.) 342; Cole v. Knick-
erbocker Life Ins. Co., 23 Hun (N. Y.)
255, appeal dismissed 91 N.Y. 641; Bel-
knap v. North America Life Ins. Co., 11
Hun (N. Y.) 282. Section 1785 of the
New York Code of Civil Procedure,
above referred to, provides as follows:
“In either of the following cases, an
action to procure a judgment, dissolv-
ing a corporation, created by or under
the laws of the State, and forfeiting its
corporate rights, privileges, and fran-
chises, may be maintained, as pre-
scribed in the next section.

“1, Where the corporation has re-
mained insolvent for at least one year.

“2, Where it has neglected or re-
fused,-for at least one year, to pay and
discharge its notes or other evidences
of debt.

“3. Where it has suspended its or-
dinary and lawful business for at least
one year.

“4. If it has banking powers, or
power to make loans on pledges or de-
posits, or to make insurances, where it
becomes insolvent or unable to pay its
debts, or has violated any provisions of
the act, by or under which it was in-
corporated, or of any other act binding
upon it.”

*Compare Bliven v. Peru Steel and
Iron Co., 9 Abb. N.C, (N. Y.) 205,
288

DISSOLUTION AND WINDING UP.

§ 343

not sufficient to allege that the parties differ as to the man-
agement of the affairs of the company, and that the peti-
tioners, who own one-half of the shares of the corporate
stock, are convinced that if the methods and plans of the
other parties in relation to the management of the corpora-
tion be carried into effect, the result will be the financial

ruin of the corporation.’

 

1 Matter of Pyrolusite Manganese Co.,
29 Hun (N. Y.) 429; S. C. 3 Civ. Pro.
Rep. (N. Y.) 270. By the New York
Code of Civil Procedure, it is provided :

Ҥ 2419. If a majority of the direct-
ors, trustees, or other officers, having
the management of the concerns of a
corporation created by or under the
laws of the State, discover that the
stock, effects, and other property there-
of are not sufficient to pay all just de-
mands, for which it is liable, or to
afford a reasonable security to those
who may deal with it; or if, for any
reason, they deem it beneficial to the
interest of the stockholders, that the
corporation should be dissolved; they
may present a petition to the Supreme
Court, or to a superior city court of the
city where the principal office of the
corporation is located, praying for a
final order dissolving the corporation,
as prescribed in this title.

Ҥ 2420. If a corporation, created
under a general statute of the State
for the formation of corporations, has
an even number of trustees or direct-
ors, who are equally divided 1especting
the management of its affairs, and the
entire steck of the corporation is, at
that time, owned by the trustees, or di-
rectors, or is so divided, that one-half
thereof is owned or controlled by per-
sons favoring the course of one-half of
the trustees or directors, and one-half
by persons favoring the course of the
other half of them, the trustees or di-
rectors, or one or more of them, may
present a petition as prescribed in the

last section. But this section does not
apply to a savings bank, a trust com-
pany, a safe deposit company, or a
corporation formed to rent safes in
burglar and fire-proof vaults, or for the
construction or operation of a railroad,
or for aiding in the construction there-
of, or for carrying on the business of
banking or insurance, or intended to
derive a profit from the loan or use of
money.

“82421. The petition must show
that the case is one of those specified
in the last two sections, and must state
the reasons, which induce the petitioner
or petitioners to desire the dissolution
of the corporation. A schedule must
be annexed to the petition, containing
the following matters, as far as the
petitioner or petitioners know, or have
the means of knowing the same:

“1. A full and true account of all
the creditors of the corporation, and of
all unsatisfied engagements, entered
into by, and subsisting against, the
corporation.

“2, A statement of the name and
place of residence of each creditor, and
of each person with whom such an
engagement was made, and to whom it
is to be performed, if known; or, if
either is not known, a statement of that
fact.

“3, A statement of the sum owing
to each creditor, or other person speci-
fied in the last subdivision, and the
nature of each debt, demand, or other
engagement.

“4, A statement of the true cause
§ 343 DISSOLUTION AND WINDING UP. 289

We have already discussed at some length the im-
portant principle of law that the assets of an involved or
stranded corporation constitute a trust fund for the pay-
ment of just claims against the corporate body. Yet, cred-
itors too often complain, with much reason, that this doc-
trine is in practice almost a myth. Certainly in New York
the proceedings for closing up insolvent or unsuccessful
corporations, so as to preserve the trust fund for equal dis-
tribution among all the just and honest creditors and claim-
ants, are manifestly imperfect. ‘The officers may, it is true,
petition for a voluntary dissolution ; but often they neglect
to do so, and at best this is a proceetling requiring several
months before it is completed, and the fund is not abso-
lutely secure during its progress. Then, as has appeared,
an application may be made to the attorney-general for
leave to bring a suit to wind up -the corporation, but in

 

and consideration of the indebtedness

to each creditor.

«5. A full, just, and true inventory
of all the property of the corporation,
and of all the books, vouchers, and se-
curities, relating thereto.

“6. A statement of .each incum-
brance upon the property of the corpo-
ration, by judgment, mortgage, pledge,
or otherwise.

“7, A full, just, and true account of |

the capital stock of the corporation,
specifying the name of each stockhold-
er; his residence, if it is known, or if it
is not known, stating that fact; the
number of shares belonging to him;
the amount paid in upon his .shares ;
and the amount still due thereupon.”

An affidavit made by each of the pe-
titioners, to the. effect that the matters
of fact set forth in the petition and
schedules are just and true, and dis-
closing the means of.knowledge, should
be annexed, The petition should be
presented in the judicial district where
the corporation has its principal place

-be rendered ineffectual.

of business, and upon it-an order to
show cause may be issued. A copy of
this order must be published, and it
Must be,served on creditors and stoek-
holders. After a hearing before a
court or referee and report, a final
order may .be made “dissolving the
corporation and appointing one or more
receivers of its property. Upon the

,entry of the order, the corporation is

dissolved.” The practitioner is, warned
to carefully examine and faithfully ob-
serve all the various provisions of these
statutes, otherwise his proceedings may
See Cham-
berlain v. Rochester Ss. P. V. Co. 7
Hun (N.-Y.) 557; Matter of Dubois,
15 How. Pr. (N. Y.) 7. There can
be no ‘temporary receiver in this pro-
ceeding. Matter of French Mfg. Co.,
12 Hun (N. Y.) 488; Chamberlain v.
Rochester S. P. V. Co., 7 Hun (N. Y)
557; Matter of E..M. Boynton Saw &
File Cq, 34 Hun (N. Y.) 369; Matter
of Waterbury, 8 Paige (N. Y.) 380.
+See Chap. VII.
290 DISSOLUTION AND WINDING UP. § 344

such a suit insolvency must be shown extending over a
period of one year. Creditors are not likely to lie supinely
by and allow a year of corporate insolvency to expire be-
fore seizing upon the effects of the organization by execu-
tion or attachment, and thereby destroying the trust fund.
Ingenious, and in our judgment unsafe, subterfuges are oc-
casionally resorted to by corporation lawyers with a view
to supplement these imperfectly framed statutes and to
speedily secure a receiver. Thus, friendly judgments are
entered and executions issued sufficient in amount to cover
the assets of the corporation; then a further judgment is
procured and execution issued, and the assets being all held
under the former executions, the latter one is returned un-
satisfied, and a receiver is then appointed in sequestration
proceedings. This receiver thereupon demands the prop-
erty held under the former friendly executions, and it is
surrendered, or the prior executions are recalled. Another
‘scheme that has been devised involves the sale of the cor-
porate assets, say to a director, who resides out of the
State. The execution is issued, and the sheriff returns it
no property found. A receiver is then procured, and the
director, not desiring to stand suit, surrenders the assets to
the receiver. It is difficult to utter words of commenda-
tion concerning either the provisions of these statutes or
the novel proceedings devised to supplement or circumvent
them.

§ 344. English winding-up act—In England an act is in
force for winding up corporations’ and joint stock com-
panies by voluntary dissolution. In substance it provides
that a company may be wound up, ‘‘(1) Whenever the
period, if any, fixed for the duration of the company by
the articles of association expires, or whenever the event,
if any occurs, upon the occurrence of which it is provided

 

1 Stat. 25 & 26 Vict., Chap. 89, § 129.
§ 345 DISSOLUTION AND WINDING UP. 291
by the articles of association that the company is to be dis-
solved, and the company in general meeting has passed a
resolution requiring the company to be wound up volun-
tarily. (2) Whenever the company has passed a special res-
olution requiring the company to be wound up voluntarily.
(3) Whenever the company has passed an extraordinary
resolution to the effect that it has been proved to their sat-
isfaction that the company cannot by reason of its liabil-
ities continue its business, and that it is advisable to wind
up the same.” Many cases, construing the provisions of
this act and illustrating the practice, may be found in the
English reports ;* but the subject is of little practical im-
portance in this country.

§ 345. Dissolution by expiration of charter—The principle
that a corporation remains zz esse until formally adjudged
dissolved by judicial decree, is not, in the nature of things,
applicable to a dissolution by expiration of the charter. In
the latter case the dissolution is declared by act of the
legislature.* The limited time of existence has expired,
- and no judicial determination of that fact is requisite. The
corporation is de facto dead.?

 

! See Jz re Pen-y-Van Colliery Co.,L. Story, J., said: “Many of our banks

R. 6 Chan. Div. 477 ; Jn re Commercial
Bank of India, L. R. 6 Eq. 517; luz ve
Bradford Navigation Co., L. R. 10 Eq.
331; Jz re United Service Co., L. R.
7 Eq. 76; Jw re Exmouth Docks Co.,
L. R. 17 Eq. 181.

? Sturges v..Vanderbilt, 73 N. Y. 390;
Ashville Div. No. 15 v. Aston, 92 N.
C. 578; Bank of Galliopolis v. Trimble,
6 B. Mon. (Ky.) 599.

3 People v. Walker, 17 N. Y. 503;
Greely v. Smith, 3 Story C. C. 658;
Eagle Chair Co. v. Kelsey, 23 Kans.
635; Krutz v. Paola Town Co., 20
Kans. 397; Bank of Mississippi v.
Wrenn, 11 Miss. 791. See Merrill
y. Suffolk Bank, 31 Me. 57. In
Greely v. Smith, 3 Story C. C. 658,

are, by law, limited to a term of years
for their corporate existence, and if
there is no saving when the term ex-
pires, the corporation is de facto dead.”
If an act of incorporation fixes a def-
inite time in which the charter shall
expire, when that time arrives the cor-
poration is dissolved. When, however,
its continuance beyond a fixed time is
made to depend upon the performance
of a certain condition, the non-per-
formance is considered to constitute
merely a ground for forfeiture, which
can only be taken advantage of by the
State. La Grange & M.R.R. Co. v.
Rainey, 7 Coldw. (Tenn.) 420. See

§§ 57, 58.
292 DISSOLUTION AND WINDING UP. $$ 346, 347

§ 346. Term of duration.—The word “until,” in an act
continuing a corporate charter “until the first day of Jan-
uary,” is exclusive in its meaning. The charter expires on
the thirty-first day of December.’

§ 347. Title upon expiration of charter.—In a case before
the United States Supreme Court, Mr. Justice Campbell
said :* “The common law of Great Britain was deficient in
supplying the instrumentalities for a speedy and just settle-
ment of the affairs of an insolvent corporation whose char-
ter had been forfeited by a judicial sentence.” This ob-
servation.certainly finds justification in the earlier cases, for,
as is elsewhere shown, upon dissolution, corporate real es-
tate reverted to the grantors, personalty vested in the King
or people, while debts to and from the corporation were
extinguished. These harsh and unreasonable rules, as we
shall see, have been circumvented and superseded by means
of statutory enactments and the enforcement of equitable
principles. It has been considered that if it is a reasonable
incident to the life of a corporation that it should contract
debts, it is a reasonable incident to its dissolution that it
should pay them.? Thus, in New York, during the life of
a corporation, the body corporate is the legal owner of the
property pertaining to the corporation, but, upon the ex-
piration of the charter, the legal title vests in the trustees
in office at the time,.in trust for the creditors and stock-
holders.4 The stockholders are merely cesturs que trustent

 

1 People v. Walker, 17-N. Y. 502.

2 Bacon v. Robertson, 18 How.
483.

3 National Bank v. Insurance Co.,,
104 U.S. 75.

4Central City Savings Bank v.
Walker, 66 N. ¥. 428. See §192. In
Mickles v. The Rochester City Bank,
11 Paige (N. Y.) 128, Chancellor Wal-
worth said: “The stockholders of a
corporation are neither tenants in com-

mon of the corporate property nor co-
partners, either before or after the dis-
solution of the corporation. Before the
dissolution, the whole title is in the cor-
poration itself, as the legal owner; and
upon its dissolution, if no other provi-
sion is made, the whole title vests in
the directors or trustees then in office,
under the general provision contained
in-the.revised statutes on that subject
@ R.S. 601, §9).”
§$ 348, 349 DISSOLUTION AND WINDING UP, 293
entitled to share ratably in the property after the payment
of debts.

§ 348. Effect- of repeal on property rights of corporation. —
Questions frequently come up affecting the rights of cred-
itors and stockholders as: respects the assets and effects of
the corporation where the legislature has recalled the char-
ter. In Greenwood v. Freight Company,’.a case in which.
a charter had been repealed, Miller, J., said: ‘“ Personal and.
real property acquired by the corporation during its lawful
existence, rights of contract, or choses in action so: acquired,
and which do not in their nature depend upon the general
powers conferred by the charter, are not destroyed by such
a repeal; and the courts may, if the legislature does not:
provide some special remedy, enforce such rights by the
means within their power. The rights of the shareholders:
of such a corporation, to their interest in its property, are:
not annihilated by such a repeal,-and'there must remain in:
the courts the power to protect those rights.”

$349. Reversion for nonuser.—We have seen that at
common law, upon the dissolution of a corporation, the
title to its real estate reverted to the grantors or their heirs,®
but that this rule is now practically obsolete in. this coun-
try, the creditors and shareholders being éntitled. to the
benefit of all the corporate assets.* And hence, where-
land which was deeded, not: by way of gift, but for a con-
sideration, to be used in establishing, an academy, has re-

 

'r05 U.S. 19.

ag, p, Thornton v. Marginal Freight
Ry. Co., 123 Mass. 34, and cases cited ;

Read v. Frankfort’ Bank, 23 Me. 321.
Comipare People v. National Trust Co. “
82. N. Y. 283. Speaking’ of a repeal,
Doe, C. J., says: ‘ The corporate prop-
exty rémnaifiing’ iti existence could not
be confiscated by a legislative detree,
and the right of the stockholders to a

distribution of the assets through the:

agency of a trustee, or receiver, or other
légal process, could not be denied with-
out a repudiation of constitutional!
duty.”” Ashuelot R.R. Co, v. Elliot,
58 N. H. 455.

3 State v. Rives, 5 Ired. (N. C.) Law
297; Bingham’ v, Weiderwax, 1 N. Y.
509. ; :

* See $202, Owen v. Smith, 3r
Barb. (N. Y.) 641; Heath v. Barmore;
50'N. Y. 302.
294 DISSOLUTION AND WINDING UP. $9 350-352

verted by reason of nonuser, such land goes to the parties
who contributed it for the benefit of the academy in the
ratio of their several contributions, and does not revert to
the grantor who sold and received pay for it.

§ 350. Abandonment a question of intention—The ques-
tion whether a franchise has been abandoned is one of in-
tention, and such intention, to constitute an abandonment,
must be clearly indicated by facts or circumstances, Non-
user, even for twenty years, although a fact which may be
used in determining the question, is not, fer se, conclusive
evidence of abandonment.?

§ 351. Dissolution by act of the legislature—The dissolu-
tion of a corporation by an act of the legislature deprives
it of its corporate existence.? The repeal of a private ac-
cepted charter is unconstitutional, as impairing the obliga-
tion of a contract, unless the legislature reserved the right
to alter or repeal it. Where this reservation exists, the
right of repeal is most sweeping. The legislature “need
give no reason for its action in the matter. The validity
of such action does not depend on the necessity for it, or
on the soundness of the reasons which prompted it.”

$ 352. Repeal of charter a dissolution.—Speaking of a re-
peal, Morton, J., said, in a case in Massachusetts: “ When
the charter is repealed, it has ceased to have force as a
charter. It has expired. This is its d¢ssolution.”® All
rights under the defunct corporation are fixed at its disso-

 

1 Clark v. Chelsea Academy, 56 Vt.
734.

? Raritan Water Power Co. v.
Veghte, 21 N. J. Eq. 463.

3 Merrill v. Suffolk Bank, 31 Me. 57.

4 See Wales v. Stetson, 2 Mass. 143;
Stevens v. Rutland & B. R.R. Co., 29
Vt. 545; Dartmouth College v. Wood-
ward, 4 Wheat. 518; Fletcher v. Peck,
6 Cranch 87; Greenwood v. Freight

Co., 105 U. S. 17; Lothrop v. Sted-
man, 42 Conn. 583; Zabriskie v. Hack-
ensack & N. Y. R.R. Co., 18 N. J. Eq.
178; Sinking Fund Cases, 99 U. S.
737 ; New Orleans Gas Co. v. Louisiana
Light Co., 115 U. S. 650,

* Greenwood v. Freight Co., 105 U.
S. 17.

aoe v. Babcock, 23 Pick. (Mass.)
349.
§§ 353-356 DISSOLUTION AND WINDING UP. 295

lution, though, as we have seen, there may be a qualified
prolongation of its existence for the purpose of administer-.
ing its estate.!

§ 353. Nature of power of repeal—The reserved power of
repealing or amending a charter is, manifestly, a legislative
power.” The franchise can only be granted by the legisla-
ture,* and any alteration or extension of it must emanate
from the same source. While the courts may decree a
forfeiture or dissolution, the repealing power is not vested
in them. The reservation is a “retention not of judicial
or executive, but of legislative power.”

$ 354. No repeal by implication.—Repeals by implication
will not be favored. Hence, it was held that the erection
of a fire department in Philadelphia did not operate as a
dissolution of existing incorporated fire companies,* even
though it created a want of objects for the time being
upon which the power of the corporations could be exer-
cised as fire companies.

$ 355. Character of act of dissolution,—The act of volun-
tary dissolution, like the act of association, is not a corpo-
rate act, but an act of the members of the corporation.’ In
accomplishing such an end the officers act as trustees of the
members rather than as corporate functionaries.

§ 356. Insolvency does not work dissolution—The posses-
sion of property is not essential to the existence of a cor-
poration.® Its insolvency cannot, therefore, extinguish its
legal existence.” Nor can the assignment of all its property

 

1 See §348; Greenwood v. Freight 5 Lauman v. Lebanon Valley R.R.
Co., 105 U. S. 17; Merrill v. Suffolk Co., 30 Pa. St. 42, 49.

Bank, 31 Me. 57. 6 Boston Glass Manufactory v. Lang-
2 Ashuelot R.R. Co. v. Elliot, 58 N. don, 24 Pick. (Mass.) 53; 2 Kent’s
H. 451. Comm. 249. See § 364.
% See §15. 7 See Nimmons v. Tappan, 2 Sweeny

4Commonwealth v. Reliance Fire (N. Y.) 659; Moran v. Lydecker, 27
Co., 31 Leg. Int. 46. Hun (N. Y.) 582; New York Marbled
296 DISSOLUTION AND WINDING UP. § 356
to pay its debts, or for any other purpose, have that effect.
A company may exist after its property is gone.* A cor-
poration does not forfeit its charter by reason of an impair-
ment of its capital.2 We may observe, however, that in-
solvency or nonuser of a franchise may be ground for
judicially declaring a corporation dissolved. So, in New
York, the neglect of a corporation for more than a year to
pay its debts is, as already shown, sufficient to justify pro-
ceedings for its dissolution ; and such proceedings may be
instituted by a stockholder of a manufacturing company.‘

 

Iron Works v. Smith, 4 Duer (N. Y.)
362. Cullen, J., said, in Moran v. Ly-
decker, 27 Hun (N. Y.) 585: “I know
of no principle of law, nor of any stat-
ute, by which insolvency is, Jer se; a
forfeiture of corporate rights.”

1 Bruffett v, Great Western R.R.
Co., 25 Ill. 353; S. P. Kincaid v. Dwin-
elle, 37 N. Y. Superior 336; Moseby v.
Burrow, 52 Texas 396; De Camp v.
Alward, 52 Ind. 468; Rollins v. Clay,
33 Me. 132; Reichwald v. Commercial
Hotel Co., 106 Ill. 439; Troy & Rutland
R.R. Co, v. Kerr, 17 Barb. (N. Y.) 581;
Kansas City Hotel Co. v. Sauer, 65 Mo.
279; State v. Merchant, 37 O. S. 251.

3 Swan v. Howard, 3 Edw. Ch. (N.
Y.) 287. The court said in a Massa-
chusetts case: ‘‘ The corporation, not-
withstanding the proceedings in insol-
vency, may have assets sufficient to pay
all their debts ; and then no impediment
would exist, before a surrender pursu-

ant to law, or a forfeiture ascertained

and declared by a proper judicial pro-
ceeding, from resuming their business.
Or if their capital is impaired or wholly
gone, this seems to be no reason, be-
fore such surrender or forfeiture, to pre-
vent the members from furnishing re-
newed capital, and then proceeding to
use the corporate powers.” Coburn v.
Boston Papier Maché Mfg. Co., 10
Gray (Mass.) 245.

8Nimmons v. Tappan, 2 Sweeny
(N. Y.) 652; State v. Bank of South
Carolina, « Spears (S. C.) 466; People
v. Washington & Warren Bank, 6
Cowen (N. Y.) 216; State v. Seneca
Co. Bank, 5 Ohio St. 171; Commercial:
Bank of Natchez v. State, 14 Miss. 617 ;
State v. Real Estate Bank, 5 Ark. 595.

4 Kittredge v. Kellogg Bridge Co., 8
Abb. N. C. (N. Y.) 168. See People v.
Troy House Co., 44 Barb. (N. Y.) 625.
In Barclay v. Talman, 4 Edw. Ch. (N.
Y.) 129, the vice-chancellor could find
no authority to the effect “ that a volun-
tary assignment by a corporation of all’
its property, for specific purposes, is
ztpso facto a dissolution as between the
stockholders and corporators. Such an
act may lay the foundation for a pro-
ceeding to vacate the charter and dis-
solve the corporation. Insolvency may
be a sufficient cause for a similar pro-
ceeding at the instance of stockholders
or creditors, So, nonuser and misuser
of the corporate powers may be cause
of forfeiture when the government by
its proper officer will proceed to recall
the charter or grant of its franchises,
This can only be accomplished in any”
of the supposed cases by’ a'direct pro-
ceeding taken against the corporation
itself in its corporate name; and until
judgment or decrée of a competent tri-
bunal ousting it of its corporate rights
¥ 357 DISSOLUTION AND WINDING UP. 297

$ 357. Test of insolvency.—In Re European Life Assur-
ance Society, a proceeding to wind up an insurance com-
pany, it is said: “The court is bound to exercise that ju-
risdiction of winding up if it is of opinion upon hearing the-
whole case that it is just and equitable—not that it is pru-
dent, but that it is just and equitable—that the company
should be wound up. And in my view of the law of the
case, it would be just and equitable to wind up a company
like this assurance company, if it were made out to my sat-
isfaction that it is, not in any technical sense, but plainly
and commercially insolvent; that is to say, that its assets:
are such, and its existing liabilities are such, as'to make it.
reasonably certain—as to make the court feel ‘satisfied—that-
the existing and’ probable assets would be insufficient to:
meet the existing liabilities, I take it that the court has:
nothing whatever to do with any question of future liabili-
ties, that it has nothing whatever to do with the question
of thé probability whether any business which the company
may carry on to-morrow or hereafter will be profitable or
unprofitable. That is 4 matter for those who may choose
to be the customers of the company and for the sharehold-
ers to consider. Ihave to look at the case simply with.
reference to the solvency or insolvency of the company,
and, in doing that, I have to deal with the company ex-
actly as it stood on the day to which the evidence relates,.
. which I assume to represent substantially the state

in which the company stands now. I must take it as if
all the business which the company ever intended to do
was then done, as if its business were confined to its éxist-
ing contracts, and as if it did not mean to enter into one
single fresh contract or do anything more.”* As already
revealed in this discussion,®? a corporation is considered to’

 

and pronouncing it dissolved, the cor- TL. R. 9 Eq. 128,
poration remains for all the legitimate * See §§ 28-35.
purposes of its creation.” 38 Sée'§§ 28, 32:
§ 358

be insolvent when it is unable to satisfy its debts from its
own means,

§ 358. Dissolution by act of the parties.—A dissolution of
a corporation cannot generally be effected by the simple
acts of the parties. True, in the case of Webster v. Tur-
ner, it was said that if the stockholders of a corporation
disposed of its entire property by unanimous resolution and
declared the corporation dissolved, this was equivalent to a
surrender of its corporate rights, there being no creditors,
But we can scarcely accept this case as embodying a cor-
rect general statement of the law governing the subject of
the dissolution of corporations. Evidently the idea the
court intended to express was, that where every person in-
terested in the corporation, or affected in any way, con-
sented to the action taken, including the passage of the
resolution in question, such action was practically effectual
for the purposes of a dissolution because there were no per-
sons left to complain. Theoretically speaking, we fail to
see how the action above indicated effected a dissolution.
There is no acceptance of a surrender of the charter by the
State and no judgment of dissolution rendered by any
court.® Still, we concede that authority may occasionally
be found to the effect that a corporation which has done or
suffered acts equivalent to a direct surrender is thereby dis-
solved, at least for certain purposes.”

298 DISSOLUTION AND WINDING UP.

 

up all its affairs, pay off its debts, and
distribute its property, and for that

112 Hun (N. Y.) 264.
° Moseby v. Burrow, 52 Texas 396;

N. Y. Marbled Iron Works v. Smith, 4
Duer (N. Y.) 362; Kincaid v, Dwinelle,
37 N.Y. Superior 329. In Irvin v. Ore-
gon Steam Nav. Co., 22 Hun (N. Y.)
599, the court say: “ The only effect of
the resolution of dissolution would be,
it seems to us, to deprive the corpora-
tion of the power of engaging in new
business, and to leave it clothed with
full power, so far as necessary to close

purpose, the board of directors con-
tinued to exist.”

> Compare in this general connec-
tion Slee v. Bloom, 19 Johns. (N. Y.)
474; People v. Bank of Hudson, 6
Cow. (N. Y.) 217; Briggs v. Penni-
man, 8 Cow. (N. Y.) 387; Bank of
Poughkeepsie v. Ibbotson, 24 Wend.
(N. Y.) 473; Bradt v. Benedict, 17 N,
Y. 96; Bruce v. Platt, 80 N. Y. 379.
§ 359 DISSOLUTION AND WINDING UP. 299

A banking corporation is not dissolved by a resolution
of its board of directors to go into liquidation and surren-
der its franchises! Smith, J., said: ‘‘ Nothing but an act
of the legislature repealing its charter, or a decree of a com-
petent court, can dissolve a corporation so as to preclude
suits and actions against it to enforce its debts and liabili-
ties.”* And a portion of the stockholders of a manufac-
turing corporation cannot surrender its franchises and work

a dissolution.®

$ 359. Power of majority—Some confusion exists in the
authorities as to the power of a majority of the stockhold-
ers to precipitate a dissolution. There seems to be respect-
able authority in favor of their right to effect a surrender
of the corporate franchises* where the period of corporate
existence is not. arbitrarily fixed.® In Treadwell v. Salis-
bury Manufacturing Company,’ Bigelow, J., observed:
“We entertain no doubt of the right of a corporation,

 

1 Lake Ontario Nat. Bank v. Onon-
daga Co. Bank, 7 Hun (N. Y.) 549.

? Lake Ontario Nat. Bank v. Onon-
daga Co. Bank, 7 Hun (N. Y.) 551;
s. P. Kincaid v. Dwinelle, 59 N. Y.
552. See Curien v. Santini, 16 La,
Ann. 27.

§ Denike v. N. Y. & R. L. & C. Co.,
80 N.Y. 599. In Houston v. Jefferson
College, 63 Pa. St. 437, the court said :
“The general right of a private corpo-
ration to surrender its franchises may
possibly have exceptions, but undoubt-
edly it is the rule. This is generally
described .as an inherent right, which
would necessarily defeat any attempt
by legislation to enforce upon a corpo-
ration qualities of perpetuity. Such a
thing would be impossible in the na-
ture of things. Corporations, like in-
dividuals, die by the decay or loss of
their vital functions, and this effectually
defies authority to render them per-
petual. A surrender of a franchise

is the voluntary death of the corpora-
tion, and is one mode by which it may
cease to exist.” See Mumma v. Poto-
mac Co., 8 Peters 287; Savage v.
Walshe, 26 Ala. 619; Enfield Toll
Bridge Co. v. Conn. River Co., 7 Conn.
45; Webster v. Turner, 12 Hun (N. Y.)
264; La Grange & Memphis R.R. Co.
v. Rainey, 7 Coldw. (Tenn.) 420; Slee
v. Bloom, 19 Johns. (N. Y.) 456.

“Compare Black v. Delaware & R.
Canal Co., 22 N. J. Eq. 130; Wilson v.
Proprs. of Central Bridge, 9 R. I. 590;
Treadwell v. Salisbury Manf. Co., 7
Gray (Mass.) 393; Bank of Switzer-
land v. Bank of Turkey, 5 L. T. Rep.
N.S. 549; Lauman v. Lebanon Valley
R.R. Co., 30 Pa. St. 42; Hancock v.
Holbrook, 9 Fed. Rep. 353. Examine
Revere v. Boston Copper Co., 15 Pick.
(Mass.) 351.

5 Compare Kean v. Johnson, 9 N. J.
Eq. 401.

§ 7 Gray (Mass.) 404.
300 DISSOLUTION AND WINDING UP. §. 360

established solely for trading and manufacturing purposes,
by a vote of the majority of their stockholders, to wind up’
their affairs and close their business, if in the exercise of a
sound discretion they deem it expedient so to do.” The
practitioner will discover that this is often debatable
ground, and dissenting minorities have frequently assailed.
the right of a majority to wind up a prosperous concern.
In Denike v. New York & Rosendale Lime & Cement
Company,’ the New York Court of Appeals said, as regards
a special kind of corporation: ‘There is no statute in this
State which authorizes a portion of the stockholders to
maintain an action to dissolve a manufacturing corporation,
and I know of no decision holding that they can.”

$ 360. Dissolution not effected: by surrender without ac-
ceptance.—As already intimated,’ the general rule undoubt-
edly is, that a corporation cannot, even by unanimous vote
of its members, effect its own dissolution, by surrender or
otherwise, without the assent of the legislature of the State
creating it? A resolution of the directors in favor of dis-
solution cannot, as we have seen,‘ accomplish that object
in the absénce of a decree of court.5 Morton, J., said, in a
case before the Supreme Court of Massachusetts : ® “The sur-
render of a charter can only be made by some formal solemn
act of the corporation, and will be of no avail until accepted
by the government. There must be the same agreement
of the parties to dissolve that there was to form the compact.
It is the acceptance which gives efficacy to the surrender.”*

 

180 N, Y. 606, ° Boston Glass Manufactory v. Lang-

2 See § 358. don, 24 Pick. (Mass.) 53.

® Wilson-v. Central Bridge Co., oR. 7 See Mechanics’ Bank v. Heard, 37
I. 599. See Kincaid v. Dwinelle, 37 N, Ga. 401; Wilson v. Proprs. of Central
Y. Superior 331; Moseby v. Burrow, Bridge, 9 R. I. 590; Ward v. Sea Ins.
52 Texas 396. Co., 7 Paige (N. Y.) 294; Boston Glass

4 See § 358. Manufactory v. Langdon, 24 Pick:

® Lake Ontario Nat. Bank v. Onon-’ (Mass.) 49; Polar Star Lodge v. Polar
daga Co. Bank, 7 Hun (N. Y.):549: Star Lodge; 16 La, Ann. 53; Portland
§§ 361, 362 DISSOLUTION AND WINDING UP. 301

The usual method of consummating a surrender is by
judicial decree.*

$ 361. Power of directors affecting dissolution.—‘‘ Boards
of directors are agents of the corporation to manage its
affairs, and carry out the purpose and object of its forma-
tion, and not to inflict upon it political death.”* And acts
which change the nature and business of a corporation from
the purposes for which it was created, are not within the
powers of the directors. So the officers of a Copereane
popes which is ceccaeel to the Ihasiness’ purposes of its
organization.®

§ 362. Effect of resignation of officers—The resignation
of its officers does not operate to destroy the existence of
a corporation, Officers and agents are necessary to the
management of the affairs of such an organization, but the
corporation may have, and does have, an existence, Zer se,
so as to maintain succession and hold and preserve its fran-
chises, though its functions may be temporarily suspended

for the want of means of action.‘

 

Dry Dock & Ins. Co. v. Trustees of
Portland, 12 B. Mon. (Ky.) 77; Norris
v. Mayor, etc. of Smithville, 1 Swan
(Tenn.) 164; The King v. Amery, 2 T.
R. 530; The King v. Grey, 8 Mod. 358.

1 See West v. Carolina Life Ins. Co.,
31 Ark. 476; Wilson v. Proprs. of Cen-
‘tral Bridge, 9 R. 1. 590; La Grange &
M.R.R. Co. v, Rainey, 7 Coldw. (Tenn.)

438; Mechanics’ Bank v. Heard, 37
‘Ga. gor. Compare Revere v. Boston
Copper Co., 15 Pick. (Mass.) 351.

2 Abbot v. American Hard Rubber
Co., 33 Barb. (N. Y.) 578, 591.

3 Buford v. Keokuk N. L. Packet Co.,
a Mo. App. 167; Kean v. Johnson, 9

N. J. Eq. 401.

Muscatine Turn Verein v. Funck,
18 Iowa 472; Russell v. M’Lellan, 14
Pick. (Mass.) 63; Hoboken Building

Assn. v. Martin, 13 N. J. Eq. 427;
Philips v. Wickham, 1 Paige (N. Y,)
596; Evarts v. Killingworth Mfg. Co.,
30 Conn. 447; Boston Glass Manufac-
tory v. Langdon, 24 Pick. (Mass.) 49.
In one of the cases cited, Ellsworth, J.,

said: “The further claim that the defend-
ants ceased to be a corporation after
their vote of the 15th of March, because
their charter then became extinct, by
the resignation of their officers, and the
omission to elect others, is wholly in-
admissible. Whether mere disuse of
any or all corporate power works a,de-
termination of corporate being and
corporate liability, we need not say,

though we believe it would be difficult
jto maintain the.affirmative of the prop-

sition, According to numerous de-
cisions, the franchise shall ibe formally
302 DISSOLUTION AND WINDING UP. §§ 363, 364

§ 363. Misconduct of officers.—The misconduct of officers
of a corporation will not constitute ground for dissolution,
to the prejudice of innocent shareholders.’ The court may
enjoin or forbid the misconduct, or suspend or remove the

faithless officer.®

§ 364. Neglect to exercise corporate powers.—To recapitu-
late, then, the sale of its property ;* neglect to exercise its
corporate powers;* omission to elect officers ;° and cessa-
tion of active business, will not, per se, accomplish the dis-
solution of a corporation.® Accordingly, a suspension of
business for one year does not, zfso facto, work a dissolu-
tion; the corporation continues to exist until a dissolution
is judicially declared.*”. Nor does a decree of insolvency,
an injunction against disposing of property, and the ap-
pointment of a receiver extinguish a corporation.’ ‘The
corporation exists, Aer se, so far as is requisite to the main-
tenance of perpetual succession, and holding and pre-

serving its franchises.

The non-existence of the man-

agers does not imply the non-existence of the corporation.

 

surrendered to the legislature who
gave it. In case of forfeiture, the
legislature can retake it, by a judi-
cial proceeding on a guo warranto.”
Evarts v. Killingworth Manuf. Co., 20
Conn. 458.

1See §172. Waterbury v. Merchants’
Union Express Co., 50 Barb. (N. Y.)
166; Belmont v. Erie Railway Co., 52
Barb. (N. Y.) 666.

2 Belmont v. Erie Railway Co., 52
Barb. (N. Y.) 666; Hardon v. Newton,
14 Blatchf. 378; Fisk v. Chicago, R. I.
& Pacific R.R. Co., 36 How. Pr. (N.
Y.) 20; Baker v. Backus, 32 Ill. 79.

2 Hill v. Fogg, 41 Mo. 563.

§ 356.

4 Baptist Meeting House v. Webb, 66
Me. 398; Attorney Genl. v. Bank of
Niagara, Hopk. Ch. (N. Y.) 354; Rol-
lins v. Clay, 33 Me. 132; Mickles v.

See

Rochester City Bank, 11 Paige (N. Y.)
118; Nimmons v. Tappan, 2 Sweeny
(N. Y.) 652; Harris v. Nesbit, 24 Ala.
398; Kansas City Hotel Co. v. Sauer,
65 Mo. 288; State v. Barron, 58 N. H.
370; Troy & Rutland R.R. Co. v.
Kerr, 17 Barb. (N, Y.) 581.

5 Allen v. New Jersey Southern R.R.
Co., 49 How. Pr. (N. Y.) 14. See
§ 372.

° Kansas City Hotel Co. v. Sauer, 65
Mo. 279; State National Bank v. Ro-
bidoux, 57 Mo. 446; The Chouteau
Insurance Co. v. Floyd, 74 Mo. 290.

*Mickles v. Rochester City Bank, 11
Paige (N. Y.) 118.

* Second Nat. Bank v. New York Silk
Manufacturing Co., 11 Fed. Rep. 532;
s. Pp. Coburn v. Boston Papier Mache
Mfg. Co., 10 Gray (Mass.) 243; Moseby
v. Burrow, 52 Texas 396.
§§ 365, 366 DISSOLUTION AND WINDING UP. 303

The latter is dormant during that time; its functions are
suspended for want of the means of action ; but the capac-
ity to restore its functionaries by means of elections re-
Mais . «+. I see no reason why the company may not
retain all their rights, powers, and privileges, though there
be a suspension of the power of action; nor why this power
of action, though dormant for a time, may not be revived
by a new election of the managers and officers competent
to carry on its affairs, conformably to the directions of the
charter,” !

$ 365. Illegal action.—Where a bank loaned to its direct-
ors, or on their credit, an amount forbidden by statute, this
was considered in New York to constitute a ground for an
injunction, receiver, and decree of dissolution.?

$ 366. Suspension of business.—An election of trustees,
made apparently for no purpose but to keep the company
in existence, will not necessarily prevent a dissolution in
New York.’ Where insolvency and suspension of busi-
ness are admitted, the law will accept of no excuse for non-
forfeiture.* As will appear, neglect to comply with the
fundamental provisions of the charter warrants proceed-
ings for vacating it, and annulling the existence of the cor-
poration.> The meaning of the term, suspension of its
ordinary and lawful business, as applied to a corporation,
came up in the New York Court of Chancery.’ The Vice-
Chancellor said: ‘“‘ There can be no doubt that the corpo-
ration has, for more than a year, suspended its ordinary and
lawful business. The argument that there is no such sus-

 

1 Rose v. The Turnpike Co., 3 Watts 42 N. Y. 217. See People v. Excelsior

(Pa.) 48. i Gaslight Co., 8 N. Y. Civ. Pro. 3900 ?@®@* 1
2 Bank Commrs. v. Bank of Buffalo, 5People v. Kingston & Middletown
6 Paige (N. Y.) 503. Turnpike Road Co., 23 Wend. (N. Y.)

3 See Briggs v. Penniman, 8 Cowen 204; People v. Rensselaer Ins. Co., 38
‘(N. Y.) 387. Compare Jz ve Jackson Barb. (N. Y.) 337.
Marine Ins. Co., 4 Sandf. Ch.(N.Y.) 561. 6 Jw re Jackson Marine Ins. Co., 4
4People v. Northern Railroad Co., Sandf. Ch. (N. Y.) 562.
304 DISSOLUTION AND WINDING UP. | § 367

pension as long as it takes or has standing a single risk or
policy, is entirely inadmissible. A substantial relinquish-
ment of its ordinary business brings it within the statute.
The annual election of directors does not avoid the diffi-
culty.”

§ 367. Continuing losing enterprise,—As already intimated,
there seems to be a condition of uncertainty concerning
the right of the courts to close up a losing concern at the
instigation of a minority. In Re The Factage Parisien
(Limited),* the Master of the Rolls said: ‘The principle
upon which it appears to me that the court ought to deal
with these cases of limited companies is very simple and
plain. It is clear that they stand upon a very different
footing from unlimited companies; but if the company is
carrying on business at a manifest loss, with no prospect of
making anything of it, it can scarcely be said that this court
can consider it just and equitable that the company should
be allowed to continue against the will of persons who have
embarked property in it to a considerable extent, when the
court sees that if they go on embarking the whole of the
capital, no benefit whatever can be derived from it. It ap-
pears to me to be clear that in any case of a limited com-
pany, where the original speculation is a failure, and cannot
be carried on with a profitable result, it is just and equita-
ble for the court to interfere and say.to the directors, ‘ You
shall not spend any more money of the shareholders, who
do not wish to risk any more money in the concern.’ It
is not the case of an insolvent company, for as long as any
capital remains to be called up, those who are managing it
will take care to have the debts paid by making calls; but
it is obvious that the persons who are managing the com-
pany may find it very convenient for themselves, who are

 

134 L. J. (Ch.) 141, See Re Tu- (Tenn.) 484, Compare-.Masters v. Ec-
macacori Mining Co., L. R. 17 Eq. lectic Life Ins. Co.,.6 Daly (N. Y,)
534; Marr v. Union Bank, 4.Coldw. 455.
§ 367 DISSOLUTION AND WINDING UP. 305
receiving salaries and income from it, to go on managing
it, although satisfied that it will never succeed, until the
last penny has been called from the shareholders. My
opinion, therefore, is, that in such cases it is proper for the
court to interfere, at the instance of the shareholders, and
wind up the company.” It will be noticed that this deci-
sion is rendered with reference to a special kind of corpora-
tion. Ordinarily a solvent corporation will not be wound
up against the wishes of a majority, by reason of the busi-
ness being carried on at a loss, and it appearing likely to con-
tinue a losing concern, unless there is proof of absolute im-
possibility of successfully consummating the contemplated

business.?

 

_ 1Jn re Suburban Hotel Co., L. R. 2
Ch. 737; Pratt v. Jewett, 9 Gray (Mass.)
34. In Zz re Suburban Hotel Co., L.
R. 2 Ch. 737, 750, Lord Cairns Said:
“Tf there be insolvency, or anything
which is equivalent to a test of insol-
vency, if there be the circumstances
that the company has not, for a certain
time, commenced business, or has sus-
pended business, that is a test given to
the court by which to prove that the
business cannot be carried on, and in
those cases the company may be wound
up. It is not necessary now to decide
it; but if it were shewn to the court
that the whole swbstratum of the part-
nership, the whole of the business
which the company was incorporated
to carry on, has become impossible, I
apprehend that the court might, either
under the act of Parliament, or on gen-
eral principles, order the company to
be wound up. But what I am prepared
to hold is this, that this court, and the
winding-up process of the court, cannot
be used, and ought not to be used, as
the means of evoking a judicial decision
as to the probable success or non-suc-
-eess of a company as a commercial
speculation. This company may be-

20

come successful, or may continue to be
unprofitable, as I believe it has hitherto
been; and it may, therefore, hereafter
reappear in this court under different
circumstances, but it is not for this
court now to pronounce, and, above all,
not for this court to pronounce on
opinion evidence, that this is likely to
be an unprofitable speculation ; and that
therefore, at the wish of a minority of
shareholders, against the will of a large
majority, the company should be wound
up.” In Croft v. Lumpkin Chestatee
Mining Co., 61 Ga. 467, Justice Bleck-
ley said: “The charter has many years
to run; no forfeiture has been ad-
judged; no surrender has been made.
The court is not called upon to presume
a surrender from nonuser and lapse of
time, for the bill treats the corporation
as a living, subsisting entity. The
complaint is that it is indolent, inert,
lazy—that it won’t work. It has valu-
able property that might be made prof-
itable to the stockholders, but the
stockholders are scattered, and cannot
be brought together so as to secure co-
operation and concert. The officers
are non-residents of the State; so, too,
are the stockholders, the complainants
306 § 368

§ 368. Right to discontinue business.—It appears to be set-
tled, as a general rule of law, that the officers of a corpora-
tion cannot, against the wishes of a single stockholder, con-
vey away the entire property from which the corporation
derives its income, and which is essential to the purposes of
its organization.! And where the public convenience would
be seriously interfered with by such a sale of the corporate
property, it would be prohibited? Yet this principle
must be accepted with certain modifications in its ap-
plication, The contract of a stockholder cannot imply
that the business of the corporation must be persistently kept
up to the ruin of all concerned. The understanding and
intent of the other parties must also be considered. Thus
a mine worked by a corporation may become wholly ex-
hausted. A wilful or obstinate stockholder could hardly
prevail against the majority who should determine upon a
sale of the useless machinery for distribution to creditors
and shareholders rather than to throw away all their re-
maining capital in operating it with no possibility of ben-
eficial results. Referring to business corporations, Bigelow,
J., said :* “ Neither the public nor the legislature have any

DISSOLUTION AND WINDING UP.

 

excepted. A corporation thus situated
is undoubtedly a sluggish body, and
how to move it may not be easy to find
out. The object of the bill is not to
move it, but to strip it. But while it is
alive, can this be done? If it were
dead, it would be an easy prey; but as
long as it lives, its property and fran-
chises are its own, and how is a court
of equity to terminate its right to them
by a decree? In the absence of statu-
tory provisions applicable to this case,
has chancery this power? See Ver-
planck v. Mercantile Ins. Co., 1 Edw.
Ch. (N. Y.) 84. It is a mistake to rest
such a bill as the present on the
law of partition. Real estate is parti-
tioned among the owners, so as to give
each his part in severalty ; but here the
corporation is sole owner; the stock-

holders do not own the property
or any part of it; what they own
is the stock, It may be that anal-
ogies drawn from partition, or from
some other head of the law, may be
found to guide a court of equity in di-
viding out the assets of a living corpo-
ration, but if so, all the stockholders:
should be parties to the bill.”

1 Buford v. Keokuk N. L. Packet
Co., 3 Mo. App. 166; Kean v. John-
son, 9 N.J. Eq. 401; Black v. Delaware
& Raritan Canal Co., 24 N. J. Eq.
455; Abbot v. American H.R. Co., 33
Barb. (N. Y.) 578.

* Compare Central R.R. Co. v. Col-
lins, 40 Ga. 582.

* Treadwell v. Salisbury Mfg. Co., 7
Gray (Mass.) 404.
§§ 369, 370 DISSOLUTION AND WINDING UP. 307

direct interest in their business or its management. These
are committed solely to the stockholders, who have a pecu-
niary stake in the proper conduct of their affairs. By ac-
cepting a charter they do not undertake to carry on the
business for which they are incorporated indefinitely, and
without any regard to the condition of their corporate prop-
erty. Public policy does not require them to go on at a loss,”!

§ 369. Dissolution by death of members.—It has appeared?
that one of the ways in which a private corporation of a
certain class may lose its legal existence is by the death of
all its members. When a corporation has been so. dis-
solved, this fact may be shown collaterally. The reader
must keep in mind, however, the fact that the legal title to
the assets remains in the corporation, notwithstanding the
individual members change. ‘‘The stock, if every indi+
vidual member should decease at the same moment, would
be distributed according to the statute of distributions or
according to the wills of the individuals deceased. The
legal representatives of the deceased members would have
authority, by law, to manage the corporation, and no dis-
solution would in such case take place.”* It follows that
corporations having capital stock will not be annihilated
by the death of all the stockholders,

§ 370. Exclusive ownership in one person.—The principle
has been advanced that the purchase® by one person of
all the stock of a private corporation aggregate virtually
dissolves the corporation. For the time being it certainly

 

1See Boston & Providence R.R. Co. N. Y. 93; Philips v. Wickham, 1 Paige
v. New York & New England R.R. (N. Y.) 590, 596; Penobscot Boom
Co.,13 R.I. 263; Wilsonv. Proprietors Corpn. v. Lamson, 16 Me, 224. See 8
of Central Bridge, 9 R. I. 590, 598. South. L. Rev. N. S. 507.

2 See § 337. 4Russell v. M’Lellan, 14 Pick.

° Blackwell v. The State, 36 Ark. 188. (Mass.) 69.
Compare Chesapeake & O, Canal Co, 5 Bellona Company’s Case, 3 Bland
v. Baltimore & O. R.R. Co., 4 Gill (Md.) 446; s. P, Swift v. Smith, 65 Md,
& J. (Md.) 122; Bradt v. Benedict, 17 434.
308

DISSOLUTION AND WINDING uP. §$§ 371, 372

does practically suspend corporate action, although, accord-
ing to the now generally received understanding of the
law, such sole owner may dispose of some of his stock to
others, and continue the corporate existence by the elec-
tion of necessary officers.’

§ 371. By consolidation.—Eurther on it will appear? that
dissolution may, in certain cases, bé effected by the con-
solidation of the corporation with other bodies, thereby
forming a new organization.®

§ 372. What does not effect dissolutionA corporation is
not dissolved by the appointment of a receiver after the re-
turn of an execution unsatisfied ;* nor by the appointment
of a receiver in voluntary liquidation,® or under the revised
statutes of New York ;° nor, as we have seen,” by dispos-
ing of its corporate property ;° nor by a sale of its property
and franchises under a decree of foreclosure ;® nor on execu-
tion ;*° nor by an assignment ;" nor by a cessation of active

 

‘Compare Russell v. M’Lellan, 14
Pick. (Mass.) 70; Newton Mfg. Co. v.
White, 42 Ga. 148; Wilde v. Jenkins,
4 Paige (N. Y.) 481. See also Swift v.
Smith, 65 Md. 428; Button v. Hoff-
man, 61 Wis. 20; England v. Dear-
born, 141 Mass, 590; Sharpe v. Dawes,
46 L. J. Q. B. 104; Hopkins v. Rose-
clare Lead Co., 72 Ill. 373; Common-
wealth v. Cullen, 13 Pa. St. 133. In
Newton Mfg. Co. v. White, 42 Ga. 159,
Lochrane, C. J., said that the fact that
“one of the stockholders finally buys
up and owns all the stock and property
of the balance, and the whole lodges
in him, does not deprive such person
from the use and rights of the charter,
to carry on the business, under the
name adopted; and the fact of being
the sole owner, if he goes on, and uses
such zame, does not abate suits at law
or equity filed against such corpora-
tion, although individual property,”

2 See § 430.

§ See Pullman’s Palace Car Co. v. Mis-
souri Pacific Ry. Co., 115 U. S. 594;
Railroad Company v. Georgia, 98 U.S.
362; New Jersey Midland Ry. Co. v.
Strait, 35 N. J. Law 325; State v.
Maine Central R.R. Co., 66 Me. 506;
Indianola R.R. Co. v. Fryer, 56 Texas
609.

“Mann v, Pentz, 3 N.Y. 415. Com-
pare Osgood v. Maguire, 61 N. Y. 528.

5 National Bank v. Insurance Co.,
104 U.S. 54. See Bank of Bethel v.
Pahquioque Bank, 14 Wall. 383.

* Kincaid v. Dwinelle, 37 N. Y. Su-
perior 331.

7 See § 356.

*N. J. Zinc Co. v.N. J. FrankliniteCo.,
13 N. J. Eq. 322; Russell v. M’Lellan,
14 Pick. (Mass.) 63 ; Sullivan v. Triunfo
G. & S. M. Co., 39 Cal. 459.

* Smith v. Gower, 2 Duv. (Ky.) 17.

See State v. Rives, 5 Ired. (N. C.)
Law 309,

" De Camp v. Alward, 52 Ind. 473.
DISSOLUTION AND WINDING UP.

§ 372 309,

business ;’ nor by a neglect to hold annual meetings for ten:
years ;* nor by ceasing to exercise its powers.’ Insolvency,
followed up by an assignment of all its property to a trus-
tee with power to collect debts and distribute assets, and by
failure to meet and elect officers for several years, does not
work a dissolution.* Then the fact that a manufacturing
corporation has temporarily leased its property to some per-
son to continue and carry on its business, does not give a
portion of its stockholders a standing in a court of equity
under the New York statute to ask for a dissolution of the
corporation.® A corporation does not lose its corporate
capacity merely by a perversion or abuse of its powers,°
though, as we have seen, this may furnish a reason why the
legislature or the courts should annul its charter. It is not
dissolved by an omission to elect officers ;* nor by a seques-
tration of its property ;* nor by being enjoined from exer-

cising its corporate powers ;°
its whole road ;! nor because

nor by a lease and transfer of
its stockholders and directors

 

’ Kansas City Hotel Co. v. Sauer, 65
Mo. 288 ; State Nat. Bank v. Robidoux,
57 Mo. 446; Rorke v. Thomas, 56 N.
Y. 563; State v. Barron, 58 N. H. 370;
Hollingshead v. Woodward, 35 Hun
(N. Y.) 410; Nimmons v. Tappan, 2
Sweeny (N. Y.) 652; Moseby v. Bur-
row, 52 Tex. 396; Allen v. N. J. South-
ern R.R. Co., 49 How. Pr. (N. Y.) 14.

® State v. Barron, 58 N. H. 370. See
State v. Trustees of Vincennes Univer-
sity, 5 Ind. 81.

8 Rollins jv. Clay, 33 Me. 132.

4Boston Glass Manuf’y v. Langdon,
24 Pick. (Mass.) 49. But in the appoint-
ment of a receiver of a manufacturing
company in New York the corporation
is so far dissolved that thereafter the
duty no longer rests upon the trustees
to make an annual report. Huguenot
Nat. Bank v. Studwell, 74 N. Y. 621,
reversing 6 Daly (N. Y.) 13.

® Denike v. New York & Rosendale
Lime & Cement Co., 80 N. Y. 599.

6 Clancey v. Onondaga Fine Salt
Manuf. Co., 62 Barb, (N. Y.) 395.

T Allen v. N. J. South. R.R. Co., 49
How. Pr. (N. Y.) 14; Commonwealth’
v. Cullen, 13 Pa, St. 133; Evarts v. Kil-
lingworth Mfg. Co., 20 Conn. 447; Le-
high Bridge Co. v. Lehigh Coal & Nav.
Co., 4 Rawle (Pa.) 8, 23; Boston Glass
Manuf’y v. Langdon, 24 Pick. (Mass.)
49; Rose v. Turnpike Co., 3 Watts
(Pa.) 46; Harris v. Mississippi Valley,
etc. R.R. Co., 51 Miss. 602; State v.
Trustees of Vincennes University, § Ind.
81; Cahill v. Kalamazoo Mut. Ins. Co.,
2 Doug. (Mich.) 140; Hoboken Build-
ing Assn. v. Martin, 13 N. J, Eq. 427.

* Huguenot Nat. Bk. v. Studwell, 6
Daly (N. Y.) 13, rev'd on another point,
74 N. Y. 621; Mann v. Pentz, 3 N. Y.
415.

® Kincaid v. Dwinelle, 59 N. Y. 548.
See Sanborn v. Lefferts, 58 N. Y. 179.

1 Troy & R. R.R. Co. v. Kerr, 17
Barb: (N. Y.) 581. :
310. DISSOLUTION AND WINDING uP. $$ 373, 374
may consider it to be defunct;! nor by insolvency.? In
Rosenblatt v. Johnston,? Chief Justice Waite said: “The
bank did not cease to exist on the appointment of the re-
ceiver. Its corporate capacity continues until its affairs are
finally wound up and its assets distributed.”* As is else-
where shown,® a banking corporation is. not dissolved by a
resolution of the board of directors to go into liquidation
and surrender its franchises; ° nor is a corporation dissolved
by a vote of its members in favor of dissolution with a view
to escape liabilities ;7 nor by giving notice of dissolution to
the executive department of the government.* And a cor-
poration has no power to effect a dissolution against the
dissent of a minority of the stockholders, by a transfer of
all its property and taking in payment therefor the stock
of a foreign corporation carrying on the same business.°

§ 373. Enjoining exercise of corporate functions.—A cor-
poration which has been enjoined from the exercise of its
corporate franchises and deprived of its property, and thus
has ceased to exist for all practical purposes, is not thereby
actually dissolved. As we have said, it cannot be dissolved
save by the judgment of a court of competent jurisdiction.
Until such judgment is rendered, creditors may proceed by
suit against it, unless restrained by injunction, and its stock-
holders do not cease to be such.”

' § 374. Wrong complained of remedied.—When the injury

 

' Rollins v. Clay, 33 Me. 132; Pro-
prietors of Baptist Meeting House v,
Webb, 66 Me. 398.

2 Germantown Passenger Ry. Co. v.
Fitler, 60 Pa, St. 132. See § 34.

3 104 U.S. 463.

4 Citing Bank of Bethel v. Pahquioque
Bank, 14 Wall. 383; Kennedy v. Gib-
son, 8 Wall. 498; Bank v. Kennedy, 17
Wall. 19.

5 See § 358,

6 Lake Ontario Nat. Bank v. Onon-
daga County Bank, 7 Hun (N, Y.) 549.

But compare McCurdy v. Myers, 44 Pa.
St. 535.

" Portland Dry Dock & Ins. Co. v,
Trustees of Portland, 12 B. Mon,
(Ky.) 77. Compare Polar Star Lodge
v. Polar Star Lodge, 16 La, Ann. 53.

“Revere v. Boston Copper Co., 15
Pick. (Mass.) 360.

° Taylor v, Earle, 8 Hun (N. Y.) 1.

* Kincaid v. Dwinelle, 59 N. Y. 548,
See Sanborn v. Lefferts, 58 N. Y. 179.
See § 372.
§ 374 DISSOLUTION AND WINDING UP. 311

or wrong alleged as a ground for the dissolution of a cor-
poration has been remedied, a suit for a dissolution will be
dismissed.’ In the case cited, the ground upon which dis-
solution was sought,,was that a telegraph company had
fraudulently leased its property to a second company for a
less rental than it might have obtained. It was considered
a sufficient answer to the proceeding that the objectionable
lease had been cancelled by a vote of both boards. Devens,
J., referring to the statute authorizing the dissolution,’ said :
“Such a power is one of great delicacy, and must be ex-
ercised with extreme caution, as the dissolution of a corpo-
ration must affect seriously not only the property of -the
petitioners, and of those by whom such frauds may have
been committed, or from whom they are to be appre-
hended, but also of those stockholders who are no parties
to the controversy as such, and are represented in it only
through the corporation itself. No proceeding so radical
as the destruction of the organization should be taken, un-
less, after careful examination, the court were fully satisfied,
whatever the disadvantages and losses attending such a step
might be, that in no other way could the rights of all in-
nocent stockholders be so well protected... .. Because
the majority had once violated its duties, to destroy, by a
dissolution of the corporation, the valuable rights which all
the stockholders have by virtue of its charter, would be to
apply a remedy which would be much more formidable than
any danger to be feared. The mere vague apprehension of
some future mischief is not the reasonable cause which by
the statute is made the foundation of the action of this
court,”

 

1 Matter of Franklin Teleg. Co., 119 *Gen, Stat. Mass., c. 68, § 35.
Mass. 447.
CHAPTER XVIII.

DISSOLUTION AND WINDING UP.

'

§ 375. Who may apply for dissolu-
tion.

376, Enjoining proceedings for disso-

lution.

377. Injunction pending  dissolu-
tion.

378. Collusive judgment of dissolu-
tion.

379, Dissolution abates actions.

380. No judgment after repeal of
charter.

381. Effect of dissolution on debts.

382. Contract obligations survive dis-
solution.

383. Effect of dissolution on leases to
corporation.

 

384. Real property on dissolution.

No transfer of stock after disso-
lution.

Creditors’ lien.

Power and duty of trustees.

Receivers on dissolution.

Rights. settled by decree.

No dissolution of municipal cor-
porations in the courts.

Dissolution of benevolent so-
ciety.

Charitable organization.

National bank.

Joint stock company.

Effect of military order.

Presumed surrender of franchise.

When dissolution is effected.

Abandonment.

§ 385.

386,
387.
388,
389.
399.

391.

392.
393-
394.
395.
396.
397:
398.

§ 375. Who may apply for dissolution.—Manifestly a dis-
interested party, or an interloper, has no standing in a pro-
ceeding instituted to secure a dissolution of a corporation.
The people, or stockholders or creditors of the association,
are the parties who must invoke the jurisdiction of the

courts to obtain this form of relief.

In New York State;

as has appeared,’ an insolvent life insurance company was
dissolved and wound up at the instance of a single stock-
holder.?_ In Van Pelt v. United States Metallic Spring, ete.

 

* See § 70.

? Masters v. Eclectic Life Ins. Co., 6
Daly (N. Y.) 455. Compare Verplanck
v. The Mercantile Ins. Co., 2 Paige
(N. Y.) 438; Osgood v. Maguire, 61 N.
Y. 524; Boisgerard v. The N. Y, Bank-

ing Co., 2 Sandf. Ch. (N. Y.) 24; Ward
v. Sea Ins. Co., 7 Paige (N. Y.) 297;
Hardon v, Newton, 14 Blatchf. 378,
The government or people are the
proper complainants in forfeiture pro-
ceedings against a corporation. See
§ 375 DISSOLUTION AND WINDING UP. 313

Company, in the same State, the right of a judgment cred-
itor to maintain a dissolution action against a corporation
was recognized. A creditor at large cannot enforce disso-
lution.? But the subject of dissolution proceedings and the
standing of complainants therein, depends so much upon
local statutes that any extended consideration of the cases
in particular States would scarcely seem serviceable. As
we have seen, in the absence of a statute, a stockholder
has an uncertain standing in prosecuting dissolution pro-
ceedings® instituted against the will of any other stock-
holder.* It is said in Alabama, and such would seem to be the
general rule, that if a corporation is formed to continue only
for a definite period of time, and the agents of the company
neglect to wind it up at the expiration of the time pre-
scribed, any shareholder may file a bill in equity for that
purpose.> It is considered no ground for dissolving a cor-
ppration on the petition of a majority in number of the
stockholders that the owner of the majority of the stock

 

§ 66. State v. McConnell, 3 Lea (Tenn.)
339; Commonwealth v. Allegheny
Bridge Co., 20 Pa. St. 185; Whitney
v. Wyman, ror U. S. 392; National
Bank v. Matthews, 98 U.S. 628. See
Chap. XIX. Ina Massachusetts case,
Briggs v. Cape Cod Ship Canal Co.,
137 Mass. 72, this language is em-
ployed: “It is too well settled to admit
of discussion, that a corporation can be
judicially determined to have ceased to
exist only in a suit to which the Com-
monwealth is a party. The act of in-
corporation is a contract between the
Commonwealth and the corporation;
whether the corporation has complied
with the conditions is a question of fact
to be judicially determined.”

113 Abb. Pr. N. S. (N. Y.) 325.

2 Cole v. Knickerbocker Life Ins. Co.,
23 Hun (N. Y.) 255. Compare Belknap
v. North America Life Ins. Co., 11 Hun
(N. Y.) 282.

3 See § 339; Strong v. McCagg, 55
Wis. 627.

4Bliven v. Peru Steel, etc. Co., 60
How. Pr. (N. Y.) 280; Denike v. New
York & R. Lime, etc. Co., 80 N. Y.
599. See Howe v. Deuel, 43 Barb. (N.
Y.) 504; Baylees v. Orne, 1 Freem. Ch.
(Miss.) 161; Ae Louisiana Savings
Bank, 35 La. Ann. 196,

5 Merchants’ & Planters’ Line v.Wag-
aner, 71 Ala. 581. In Mickles v. The
Rochester City Bank, 11 Paige (N. Y.)
126, the court say: ‘I think any cred-
itor or stockholder, who has an interest
in closing up its affairs, and having its
effects applied to the payment of its
debts, or distributed among its stock-
holders, may file a bill in this court
against the corporation to have its dis-
solution judicially declared, and its
concerns wound up under the direction
of the court.”
DISSOLUTION AND WINDING uP. $$ 376, 377

314
“has for a long time managed the affairs of said corpora-
tion according to his own will and choice, regardless of the
wishes and interests of the other stockholders.” 4

§ 376. Enjoining proceedings for dissolution—A novel ju-
risdiction is sometimes exerted over corporations that are
seeking dissolution. A corporation defendant in a suit in
equity, liable to respond pecuniarily to the plaintiff in the
suit, the corporation having already made one attempt to
wind itself up, may, in a proper case, be enjoined from
taking any proceedings for its own dissolution, or for the
appointment of a receiver of its effects, or for the distribu-
tion thereof among its stockholders or any other persons,
and from making any distribution or transfer of any of its
effects.’ :

§ 377. Injunction pending dissolution—When a corpora-
' tion is being wound up with a view to the equal distribu-
tion of its assets among all the creditors, equity will not
permit one of the creditors to obtain an advantage over
any of the others, and will restrain him from levying an
execution, his judgment having been recovered the same
day that the winding-up proceedings were consumma-
ted.2 And in New York, where the corporation is in the
hands of a receiver appointed by a court of equity to wind
up its affairs, the decree is ‘‘in the nature of a judgment
for all the creditors, and they are subject to the summary
jurisdiction of the court in matters pertaining to the ad-

 

1 Pratt v. Jewett, 9 Gray (Mass.)
35-
2 Fisk v. Union Pacific R.R. Co., ro
Blatchf. 519. Blatchford, J., said:
“Upon the principle that the property
of a corporation is held by its officers
in trust to be applied to the discharge
of the legal debts of such corporation,
courts of equity interfere to restrain
such officers from applying such prop-
erty to any illegal purpose, and to com-
pel restitution when any illegal applica-

tion has been made (2 Story’s Eq. Ju-
ris. §§ 1252, 1252@). The pursuit of the
stockholders may make it necessary to
retain jurisdiction over the corporation.
It cannot be permitted, that, after ju-
risdiction in this suit over this corpora-
tion has been acquired by this court,
the corporation should be suffered to
take steps to evade such jurisdiction by
procuring its own dissolution.”

8 In re Sabloni¢re Hotel Co., L. R,
3 Eq. 74.
$§ 378, 379 DISSOLUTION AND WINDING UP, 315
ministration of the estate of the insolvent corporation,” and
creditors may be enjoined on motion, in the receivership
proceedings, from prosecuting actions against the com-
pany.’ But parties who have recovered judgments prior to
the dissolution proceedings will not be enjoined, and where
the trustees of a defunct body have neglected for years to
apply the property to the payment of debts, an injunction

against creditors will not issue.’

‘§$ 378. Collusive judgment of dissolution.—A shareholder
may apply to the court to open and vacate a judgment of
dissolution of a corporation, where facts showing reason-
able ground to believe that there was fraud or collusion in
entering the judgment exist.‘

§ 379. Dissolution abates actions—The better and pre-
vailing rule is, that where a corporation becomes dis-
solved by a judgment of forfeiture Jendente Lite, the action

cannot be further prosecuted against it.

Thus Mr. Jus-

 

Atty. Genl. v. Guardian Mut. Life
Ins. Co., 77 N. Y. 272, 277.

° In re Waterbury, 8 Paige (N. Y.)
380. a

3 See Good v. Sherman, 37 Texas
660.

* People v. Hektograph Co., 10 Abb.
N.C. (N. Y.) 358. Compare Bronson
v. La Crosse & M. R.R. Co., 2 Wall.
283; Mussina v. Goldthwaite, 34 Texas
125., Ingalls, J., said in People v.
Hektograph Co., 10 Abb. N. C. (N.
Y.) 359: “The court is vested with
the control of its process, records, and
proceedings, so far as to prevent their
being improperly employed, through
fraud or collusion, to injure the citizen
or to deprive him of his just rights
(People v. Mayor, etc. of New York, 19
How. Pr, (N. Y.) 289; Chappel v.
Chappel, 12 N. Y. 215; Martin v. Mar-
tin, 3 Barn. & Adol. 934; People v. Ul-
ster Common Pleas, 18 Wend. (N. Y.)
628; Cleveland v. Porter, 10 Abb, Pr,

(N. Y.) 407; State of Michigan v.
Phcenix Bank, 33 N. Y. 9, 27; Briden-
becker v. Mason, 16 How. Pr. (N. Y.)
203; Stilwell v. Carpenter, 2 Abb. N.
C.(N.Y.) 238; Young v. Drake, 8 Hun
(N. Y.) 61; Denton v. Denton, 41
How. Pr. (N. Y.) 221; Lowber v.
Mayor, etc. of N. Y., 5 Abb. Pr. (N.
Y.) 484; S.C. 26 Barb. (N. Y.) 263).

. I have become satisfied that in
the proceedings which resulted in the
dissolution of the corporation, consid-
ered in connection with the subsequent
manipulation of the property and ef-
fects thereof, sufficient appears, not
only to excite suspicion in regard to
the honesty of the transaction, but to
induce the belief that it is so far tainted
by fraud and collusion as to require
that the judgment and proceedings
should be so far opened as to allow
the stockholders who make this appli-
cation to interpose an answer and to
defend the action.”
316 DISSOLUTION AND WINDING UP. § 379
tice Field observed, in National Bank v. Colby :* “With
the forfeiture of its rights, privileges, and franchises, the
corporation was necessarily dissolved, as the decree ad-
judged. Its existence asa legal entity was thereupon ended ;
it was then a defunct institution, and judgment could no
more be rendered against it in a suit previously commenced
than judgment could be rendered against a dead man dying
pendente lite.”’*® A dissolution would be of little practical
value if an effectual judgment could be thereafter had
against a corporation. So a writ of error cannot be pros-
ecuted if a judgment of forfeiture has been rendered after
the judgment against the corporation which it is sought to
review.4 So it is said that “there is no pretense to say
that a sc¢re faczas can be maintained, and a judgment had
thereon, against a dead corporation any more than against
a dead man.”® A writ directed to a defunct corporation is
a nullity.6 And service of process upon an officer of a cor-
poration, after dissolution, is ineffectual." In Sturges v.
Vanderbilt,’ the action was brought to compel the defend-
ants to apply moneys received by them as stockholders, out
of the assets of a corporation, to the payment of a judg-

ment recovered against the corporation.

It appearing that

 

121 Wall. 609, 615.

? Compare Dobson yv. Simonton, 86
N. C. 492; Paschall v, Whitsett, 11
Ala. 472; Merrill v. Suffolk Bank, 31
Me. 57; City Ins. Co. v, Commercial
Bank, 68 IIl. 350; Greely v. Smith,
3 Story 657; Thornton v. Marginal
Freight Railway Co., 123 Mass, 32.
Contra, Lindell v. Benton, 6 Mo. 361;
Kansas City Hotel Co. v. Sauer, 65
Mo. 279; Muscatine Turn Verein v.
Funck, 18 Iowa 469.

3In Platt v. Archer, 9 Blatchf. 568,
the corporation was in existence when
an order to show cause in bankruptcy
was served, but a receiver was ap-
pointed, and a decree of dissolution
entered before the return day of the

order. It was held that these pro-
ceedings did not oust the bankruptcy
court of jurisdiction.

4Miami Exporting Co. v. Gano, 13
Ohio 269. The expiration of the char-
ter of the Bank of the United States,
on the 4th of March, 1811, abated all
suits then pending in the name of the
President, Directors, and Company of
that bank. Bank of United States v.
McLaughlin’s Admr., 2 Cranch C.C. 20,

5 Mumma v. Potomac Co., 8 Peters
281, 285.

® Renick v. Bank of West Union, 13
Ohio 298; S.C. 42 Am. Dec. 203,

" Hetzel v. Tannehill Silver Min. Co.,
Abb. N.C. (N. Y.) 4o.

°73 N.Y. 384.
§§ 38@ 381 DISSOLUTION AND WINDING UP. 417
the charter’ had expired pending the suit and before judg-
ment, and that no order of continuance had been made, the
judgment was declared absolutely void.1_ The dissolution
of a corporation does not, however, affect pending proceed-
ings zz vem against it, and does not oust a court of bank-
ruptcy of jurisdiction previously obtained over the prop-
erty of the corporation.”

By a decree of forfeiture a corporation loses the faculty

of suing in its corporate name.®

$ 380. No judgment after repeal of charter.—It follows
that by an absolute repeal of a charter by the legislature,
acting within the limits of its constitutional authority, a
corporation ceases to exist, and no judgment can afterwards
be rendered against it in an action at law.* This, of course,
does not, as we have seen, prevent creditors or stockhold-
ers from asserting their rights against its property.> Where,
pending an action against a bank, its charter expires, the
court may dismiss the action.® As a matter of course, a
judgment entered against a corporation after it has ceased
to exist, possesses no validity.”

§ 381. Effect of dissolution on debts.—As has already been
made apparent, the modern prevailing policy is to hold that
debts due to or from a corporation do not become extinct
by its dissolution.2 It is competent for the legislature to

 

1s, Pp. McCulloch v. Norwood, 58 N.
Y. 562.

2 See Platt v. Archer, 9 Blatchf. 559.

*Bank of Louisiana v. Wilson, 19
La. Ann. 1. See Greely v. Smith, 3
Story 657.

* Thornton v. Marginal Freight Rail-
way Co., 123 Mass. 34.

5 See §§ 347, 348. Greenwood v.
Freight Co., 105 U. S. 19, Compare
Foster v. Essex Bank, 16 Mass. 245;
Read v. Frankfort Bank, 23 Me. 318;
Merrill v. Suffolk Bank, 31 Me. 57;
Mumma v. Potomac Co., 8 Peters 281 ;
Curran v. State of Arkansas, 15 How.

304; Bacon v. Robertson, 18 How.
480; Lum v. Robertson, 6 Wall. 277;
Ashuelot Railroad Co. v. Elliot, 58
N. H. 455.

6 Terry v. Merchants’ & Planters’
Bank, 66 Ga. 177.

™Dobson vy. Simonton, 86 N. C. 492.

* Greenwood v. Freight Co., 105 U.S.
19; Blake v. Portsmouth & C. R.R.Co.,
39 N. H. 435; Howe v. Robinson, 20
Fla. 352; McCoy v. Farmer, 65 Mo.
244; Thornton v. Marginal Freight Ry.
Co., 123 Mass. 32. See Lum v. Robert-
son, 6 Wall. 277; Bacon v. Robertson}
18 How. 480, ~
318 DISSOLUTION AND WINDING UP. $$ 3%, 383
abrogate the common-law rule that obtained, to some ex-
tent at least, holding that debts due to or from a corpora-
tion were extinguished by dissolution,’ and to preserve the
same to stockholders and creditors.?, We may note that if
the common law furnishes no adequate remedy to creditors
or stockholders of a dissolved corporation, relief may be
had in equity.®

§ 382. Contract obligations survive dissolution.—It results
that, on the dissolution of a corporate body, its general con-
tract obligations survive, and the creditors may enforce
their claims against any property belonging to the corpo-
ration which has not passed into the hands of dona fide
purchasers.* The property is still held in trust for the stock-
holders and creditors, and is distributed much in the same

manner as the estate of a decedent.®

§ 383. Effect of dissolution

on leases to corporation.—A

 

1 Hightower v. Thornton, 8 Ga. 486;
Comm’! Bank v. Lockwood’s Admr.,
2 Harr. (Del.) 8; Fox v. Horah, 1 Ired.
Eq. (N. C.) 358; Malloy v. Mallett, 6
Jones Eq. (N. C.) 345; Bacon v, Rob-
ertson, 18 How. 480; President, etc. of
Port Gibson v. Moore, 21 Miss. 157;
Bank of Mississippi v. Duncan, 56 Miss.
173.

 Henaa vy. Lane, 19 Ga. 338;
McGoon v. Scales, 9 Wall. 23. In
Bacon v. Robertson, 18 How. 487,
Mr. Justice Campbell said : «« The ques-
tion is, has the dona fide and just cred-
itor of a corporation, dissolved under a
judicial sentence for a breach in its
charter, any claim upon the corporate
property for the satisfaction of his debt,
apart from the reservation in the act of
the legislature which directed the pros-
ecution? Can the lands be resumed
in disregard of their rights by vendors,
who have received a full payment of
their price, and executed an absolute
conveyance? Can the careless, im-

provident, or faithless debtor plead the
extinction of his debt, or of the cred-
itor’s claim, and thus receive protection
in his delinquency? The creditor is
blameless,—he has not participated in’
the corporate mismanagement, nor
procured the judicial sentence; he has
trusted upon visible property acquired
by the corporation, in virtue of its leg-
islative sanction. How can the vendors
of the lands or the delinquent debtors
resist the might of his equity?”

* Folger v. Columbian Ins, Co., 99
Mass. 276; Bacon v. Robertson, 18
How. 480, See Howe v. Robinson, 20
Fla. 352.

“Mumma v. The Potomac Co., 8 Pe-
ters 286; Fisk v. Union Pacific R.R.
Co., 10 Blatchf. 519,

5 See §§ 347, 348, 381. Foster v. Es-
sex Bank, 16 Mass. 245; Read v. Frank-
fort Bank, 23 Me. 318; Bacon v. Rob-
ertson, 18 How, 480; Lum v. Robert-
son, 6 Wall. 277; McCoy v, Farmer,
65 Mo. 244.
$$ 384-387 DISSOLUTION AND WINDING UP,

319

lease for a term of years to a corporation is not terminated
by its dissolution and the appointment of a receiver; the
covenant to pay rent does not cease to be obligatory, and
the lessor is entitled to the subsequently accruing rent out
of the fund in the hands of a receiver.!

§ 384. Real property on dissolution—We have shown?
that, under the modern view and policy of the law, the title
to real property of a corporation does not revert to the
original grantors or their heirs, but vests in the receiver for
distribution? The principle was probably introduced from
the courts of equity.*

§ 385. No transfer of stock after dissolution.—Stock in an
incorporated company cannot be transferred so as to pass
a legal title after the dissolution of the corporation.» Upon
the happening of this latter event the interests of the stock-
holders become equitable rights to a proportionate share of
the assets after the payment of debts.

§ 386. Creditors’ lien.—Creditors of a dissolved corporation
retain an equitable lien on its assets in the hands of a third
person for the payment of their debts.®

§ 387. Power and duty of trustees.—In some of the States
statutory provisions make the directors or managers of the
corporation trustees for creditors as to corporate property
in case of dissolution.’ It is the duty of the trustees, upon
dissolution, to convert the assets into money. They have

 

1 People v. National Trust Co., 82 N.
Y. 283. See § 207.

* James v. Woodruff, 2 Denio (N. Y.)
574; affig s. c. 10 Paige (N. Y.)

* See §§ 347, 348, 381.

3Qwen v. Smith, 31 Barb. (N. Y.)
641; S. P. Towar v. Hale, 46 Barb.
(N. Y.) 361; Bacon v. Robertson, 18
How. 480; Heath v. Barmore, 50 N.Y.
302; People v. College of California,
38 Cal. 166; Life Assn. of America v.
Fassett, 102 Ill. 323.

4Life Assn. of America v. Fassett,
102 Ill. 323.

541.

® Tinkham vy. Borst, 31 Barb. (N. Y.)
407.

7 Paola Town Co. v. Krutz, 22 Kans.
728; Frothingham v. Barney, 6 Hun
(N. Y.) 372; Central City Savings Bank
v. Walker, 66 N. Y. 428; Towar v.
Hale, 46 Barb. (N. Y.) 365. See Bliss v,
Matteson, 45 N. Y. 22. See §§ 192,
347-
320 DISSOLUTION AND WINDING UP. §§ 388-390
no right to exchange corporate property for the stock of
another corporation without the consent of all the stock-
holders.’ And creditors’ rights will be protected where

elements of unfairness affected such a transaction.

§ 388. Receivers on dissolution —As has appeared, in vol-
untary proceedings in New York a receiver cannot be ap-
pointed before the final order for dissolution.’ The rights
of statutory receivers in dissolution have been elsewhere
noticed.* In New York State the attorney-general is en-
titled to notice of all proceedings instituted for a dissolu-
tion of a corporation or a distribution of its assets, and this
requires that he be served with notice of application for a
receiver.®

§ 389. Rights settled by decree.—The rights of creditors of
an insolvent corporation are usually fixed by the decree of
dissolution. As a general rule, no rights can be subse-
quently acquired which will enlarge a creditor’s participa-
tion in the assets.°

$ 390. No dissolution of municipal corporations in the courts.
—Municipal corporations cannot be dissolved by the courts
for nonuser or misuser of their powers and franchises,” and
do not forfeit their corporate existence by a failure to elect
officers. A public corporation will not be dissolved be-
cause of the acts or misconduct of its officers.® ‘In short,”
says Judge Dillon, ‘‘unless otherwise specially provided by
the legislature, the nature and constitution of our municipal

 

! Frothingham v,. Barney, 6 Hun (N. v. N, Y. & Atlantic R.R. Co., 32 Hun
Y.) 366. (N. Y.) 164.

2 See § 186.

3 Re E. M. Boynton S. & F. Co., 34
Hun (N. Y.) 369. Compare Herring v.
New York, L. E. & W. R.R. Co., 105
N. Y. 340.

4 See § 187. Relfe v. Rundle, 103 U.
S. 222; Rundel v. Life Assn. of Ameri-
ca, 10 Fed. Rep. 720.

5 N, Y, Laws 1883, ch. 378; Whitney

* Dean & Son’s Appeal, 98 Pa. St.
Iol,

‘Welch v. Ste. Genevieve, 1 Dill.
130,

* See 1 Dillon on Mun. Corp., p. 193,
§§ 220, 227,

* People v. Reclamation District, 53
Cal. 346.
DISSOLUTION AND WINDING UP.

§: 391 321

corporations, as well as the purposes they are designed to
subserve, are such that they can, in the author’s judgment,
only be dissolved by the legislature.” *

When a municipal corporation, having fixed territorial
boundaries, is dissolved according to law, and a new corpora-
tion is created by legislative enactment, embracing less ter-
ritory, but substantially the same population, and the bulk
of the taxable property, the debts of the old corporation’
will fall upon its successor.” In Mount Pleasant v. Beck-
with,? a municipal corporation had been dissolved and its
territory divided between, and annexed to; three adjacent
‘corporations. Upon this state of facts the court held that,.
unless the legislature otherwise provided, the corporations
to which the territory and the inhabitants of the divided
corporation had been transferred, were severally liable for
their proportionate share of its debts, and were vested with
its power to raise revenue wherewith to pay them by levy-
ing taxes upon the property transferred and the persons re-
siding therein.* A change in a charter will not relieve a
municipal corporation from previous liabilities.» The sub-
ject is, however, too broad to permit us to follow it further.®

§ 391. Dissolution of benevolent society.—In case of violent
dissensions and irreconcilable differences between the mem-
bers of a voluntary benevolent association, judgment will
be rendered at the suit of one or more members against all
the others, dissolving the society." Such societies should

 

+1 Dillon’s Mun. Corp.(3d ed.) § 168.

2 Mobile v. Watson, 116 U. S. 289.
See O’Connor v. City of Memphis, 6
Lea (Tenn.) 730.

3 oo U. S. 514.

4 See also Mayor, etc. of Colchester
v. Seaber, 3 Burrow 1866; Cuddon-v.
Eastwick, 1 Salk. 192; People v. Mor-
ris,.13 Wend. (N. Y.) 325; New Or-
leans, M. & C. Railroad. Co. v. City of
New Orleans, 26 La. Ann. 478; Meri-
wether v. Garrett, 102 U. S. 472.

21

5 Broughton v. Pensacola, 93 U. S.
266. See the cases reviewed in Dever-,
eaux v. City of Brownsville, 29 Fed,
Rep. 742.

§ See §.454.

"Lafond v. Deems, 52 How. Pr. (N.
Y.) 41. See Ss. c. on appeal, 81 N. Y..
507; Fischer v. Raab, 57 How. Pr. (N.
Y.) 94. In Wells v. Gates, 18 Barb.
(N. Y.) 557, Clerke, J., delivering the
opinion of the court, says: “ Companies.
or societies which are not sanctioned
322 DISSOLUTION AND WINDING UP. $f 392, 393

not be dissolved for slight causes, and, if at all, only when
it is entirely apparent that the organization has ceased to
answer the ends of its existence, and no other mode of re-
lief is attainable. Courts will not, as a general rule, inter-
fere with the contentions and quarrels of voluntary associ-
ations, so long as the government is fairly and honestly
administered, and those who have grievances should be re-
quired, in the first instance, to resort to the remedies for
redress provided by their rules and regulations."

§ 392. Charitable organization.—In a case which arose in
California, it was held that the president and trustees of
a charitable educational institution in which there were no
stockholders, possessed the power to dissolve it. Upon
dissolution, the personal estate, and the real estate acquired
by purchase for value, vested in the State. Real estate ac-
quired by gift remaining undisposed of reverted to the
donors.?

§ 393. National bank,—A national bank can only be wound
up in the manner provided in the National Banking Act.®
Hence, such an institution is not liable to be proceeded
against in bankruptcy,‘ and its charter cannot be collater-
ally attacked.” A suit against a national bank to enforce
the collection of a demand, is abated by a decree of the
District Court of the United States dissolving the corpo-
ration and forfeiting its rights and franchises, rendered
upon an information against the bank filed by the comp-
troller of the currency.® Still, in cases not embraced in

 

expressly by the legislature, pursuant

* People v. College of California, 38
to some general or special law, are

Cal. 166.

nothing more than ordinary partner-
ships; and the laws respecting them are
the same.” But see Lafond v. Deems,
81 N.Y. 514. J” ve St, James Club,
13 Eng. L. & Eq. 589; McMahon v.
Rauhr, 47 N. Y. 67.

4 Lafond v. Deems, 81 N. Y. 514.
See Fischer v. Raab, 57 How. Pr. (N.
Y.) 87.

* dn re Manufacturers’ Nat. Bank, 5
Biss. 499; Union Gold Min. Co. v.
Rocky Mt. Nat. Bank, 1 Col. 531,

‘Ja re Manufacturers’ Nat. Bank, 5
Biss. 499.

*Union Gold Mining Co. v. Rocky
Mountain Nat. Bank, 1 Col. 531.

‘National Bank v. Colby, 21 Wall.
609.
$ 393 DISSOLUTION AND WINDING UP. 203

the National Banking Act, a court of equity may assume
jurisdiction, In Irons v. Manufacturers’ National Bank,!
Blodgett, J., observed: ‘The allegations in this bill are
very full that this bank was insolvent at the time it closed
its doors, and has been ever since ; that it failed to pay its
debts; that’a large amount of its debts are still unpaid;
and the question is, what remedy have the creditors of this
bank if a court of equity cannot take on itself the adminis-
tration of its affairs, where the banking law does not pro-
vide that it shall be done. by the comptroller of the cur-
rency? It is true that in the case of Kennedy v. Gibson,’
the Supreme Court state that the provision of the banking
law making the stockholders liable for the debts of the
corporation to the amount of the stock held by them re-
spectively, could not be enforced, except under the action
of the comptroller, through a receiver appointed by him.
Whether that opinion will be found to entirely express the
full meaning and intention of the Supreme Court, when-
ever they come to examine it in the light of future cases
and facts which may be brought before it, is at least a mat-
ter of doubt. I do not feel sure that the Supreme Court
will adhere to quite as broad a statement as is made in that
case; but still they may. But even that does not oust the
jurisdiction of a court of equity to take hold of whatever
assets the bank may have aside from the personal liability
of the stockholders, and administer those as it would the
affairs of any insolvent corporation.” A national bank, as
already seen, is not dissolved by the appointment of a re-
ceiver;® and does not lose its corporate existence by the
mere default in paying its circulating notes. And where
such a bank is in voluntary liquidation, it is not dissolved,
but may sue and be sued for the purpose of winding up its

 

16 Biss. 304. 14 Wall. 383; Green v. Walkill Nat.

28 Wall. 498. Bank, 7 Hun (N. Y.) 63.

2 Bank of Bethel v. Pahquioque Bank, = * Bank of Bethel y. Pahquioque Bank,
14 Wall. 383.
324 DISSOLUTION AND WINDING uP. $$ 394, 395

business,'| The general subject of a receiver’s title has been
already discussed,? but we may state here that he holds the
assets by the same title as the bank held them,’ and he rep-
resents the corporation, its stockholders, and its creditors.‘

$ 394. Joint stock company.—As is elsewhere shown, the
infidelity or misconduct of trustees of a joint stock com-
pany affords no ground for its dissolution, or for placing
its management in the hands of an officer of the court.®
The case is different where insolvency is shown, or insuper-
able difficulties preventing the consummation of the under-
taking are suggested. Upon dissolution of such an asso-
ciation, it becomes the duty of the trustees to convert the
assets into money, and to distribute the proceeds among
the stockholders. Where the shareholders are numerous,
one of them may bring a bill on behalf of himself and all
the others to compel the distribution of the funds and
property.”

§ 395. Effect of military order—_The tenacious character
of corporate existence may be variously illustrated. The
order issued by Major-General Banks appointing commis-
sioners to liquidate the affairs of the Bank of Louisiana
was held not to destroy zpso facto the charter of the bank.®
Hyman, C. J., said in this case: ‘““There is no evidence
that the bank violated its corporate powers or neglected to
comply with the provisions of its charter. Had the bank
so. done, such conduct does not, fer se, destroy it or pro-
duce a forfeiture of its charter. Its charter must be de-
clared forfeited by those whom the law authorizes so to de-
clare under such proceedings as are prescribed by law.”

 

1 National Bank v. Insurance Co.,104 —* Frothingham v. Barney, 6 Hun (N.

U:S. 54. Y.) 366, Compare Butterfield v.
3 See Chap. X. Beardsley, 28 Mich. 412.
* Casey v. La Société de Credit Mo- _' Mann v. Butler, 2 Barb. Ch. (N. Y,)
bilier, 2 Woods 77. 362.
4 Case v. Terrell, 11 Wall. 199. * Bank of Louisiana v. Green, 20 La.

5 Waterbury v, Merchants’ Union Ann. 214.
Express Co., 50 Barb. (N. Y.) 157.
§$§ 396-398 DISSOLUTION AND WINDING UP. 325

§ 396. Presumed surrender of franchise—There is author-
ity to the effect that a legal surrender of its franchise by a
corporation may be presumed where there has existed an
entire nonuser of corporate franchises, and a neglect to
choose corporate officers for a given length of time. In
Vermont it was held! that a corporation would not lose its
corporate existence by having ceased to do business from
1841 to 1852, and by disposing of its property and neglect-
ing to choose corporate officers for that period of time. In
the much-quoted case of Slee v. Bloom,” it was said that
eighteen months would not have this effect, and so in Mas-
sachusetts*® and in Connecticut * a nonuser of ten years was
héld not to work a loss of corporate franchises,

$ 397. When dissolution is effected—A statute providing
that a corporation shall be dissolved by a mortgage sale of
its franchises and property, does not terminate the exist-
ence of the corporation till after a legal and valid sale. An
illegal and fraudulent sale does not work a dissolution.’

$ 398. Abandonment.—A corporation may abandon its
franchises, works, and property of every description.’ If
the works are disused, if no directors are elected, and no
sign of corporate existence given for a long series of years,
no one would doubf that an abandonment had taken place.

 

1 Brandon Iron Co. v. Gleason, 24 ‘Enfield Toll Bridge Co. v. Conn.

Vt. 228. River Co., 7 Conn. 47. _
? 5 Johns. Ch. (N. Y.) 366; S. C.19 White Mts. R.R. Co. v. White
Johns, 456. Mts. (N. H.) R.R. Co., 50 N. H. 50.

? Russell v. McLellan, 14 Pick. * Pennsylvania & Ohio Canal Co. v.
(Mass.) 63. Comms. of Portage Co., 27 O. S, 22.
CHAPTER XIX.
FORFEITURE.

.§ 399. Dissolution by forfeiture only | § 408. Grounds of forfeiture.
f effected by proper legal pro-| 409. Non-performance of conditions.
ceedings. 410. Failure to act within reasonable
400, Complainants in forfeiture ac- time.
tions. 4tr. Absence from State.
4or. Statutes in New York. 412. Forfeiture of railroad charter.
402. Forfeiture proceedings must be} 4; 3. Insufficient ground of forfeiture.

against corporation. 5 hte
14. Accident or mistake no ground
403. No forfeiture in collateral pro- 414 of forfeiture. 8

ceeding. . j ; :
Mees ‘ 415. Evidence in action for forfeiture.
aia Tee ee declaration: 16h teh 416. Mandamus against attorney-
405. Alteration and repeal of char- oo Piseniall

ter. 417. Judgment of partial ouster.

406. Forfeiture by terms of franchise. 418. Judgment upon information.

: i i ill filed by in- | 419: Effect of judgment.
we ma era a aan 420. Waiver of forfeiture.

 

$ 399. Dissolution by forfeiture only effected by proper legal
proceedings. — Corporations are, in certain instances, dis-
solved and wound up in proceedings primarily instituted to
declare a forfeiture of the corporate franchises. This sub-
ject of dissolution by forfeiture ; the reasons which prompt
it, and the means by which it is accomplished, and the
rights of creditors and stockholders preserved, will next
command. our attention. The right of a corporation to
exist is granted, subject to the condition that the privileges
and franchises conferred upon it shall not be abused, or so
employed as to defeat the ends for which it was established,
and, when misemployed, the privileges may be reclaimed by
the State. Such a condition, though not expressed, is
necessarily implied in every grant of corporate existence.'

 

'Chicago Life Ins. Co. v. Needles, 113 U. S. 580; Terrett v. Taylor, 9
Cranch 51,
$ 399 FORFEITURE.

327
The general rule is, that a dissolution of a corporation by
forfeiture can only be effected by proper judicial proceed-
ings against the corporation taken for that purpose,’ and
that, to be effectual, an opportunity for a hearing must be
accorded to it, and a formal judgment of forfeiture ren-
dered in the proceedings.* It should also be borne in
mind that the courts proceed with extreme caution and
much deliberation in proceedings having for their object
the forfeiture of corporate privileges,* for judgments decree-
ing an ouster of corporate franchises carry with them im-
portant and vital results, Chancellor Kent says: “The
old and well-established principle of law remains good, as
a general rule, that a corporation is not to be deemed dis-
solved, by reason of any misuser or nonuser of its fran-
chises, until the default has been judicially ascertained
and declared.”* Ordinarily, no advantage can be taken of
any nonuser or misuser on the part of a corporation by a
defendant in any collateral action.®> This doctrine seems
to be indispensable to the protection of innocent persons,
who have dealt with the corporation. It is necessary to
the existence of a corporation, which, otherwise, would be
consumed in repeated contests about its right of existence.®
A corporation can be dissolved only in the manner pro-
vided by law, and hence, as will appear, an attempt by its

 

1 National Pahquioque Bank v. First
Nat. Bank, 36 Conn. 334; Folger v.
Columbian Ins. Co., 99 Mass. 267;
Heard v. Talbot, 7 Gray (Mass.) 120;
Allen v. New Jersey Southern R.R.
Co., 49 How. Pr. (N. Y.) 14; Kincaid
v. Dwinelle, 59 N. Y. 552; State. v.
Real Estate Bank, 5 Ark. 604. As to
forfeiture affecting foreign corporations,
see § 325.

2 National Pahquioque Bank v. First
Nat. Bank, 36 Conn. 334.

3State v. Farmer’s College, 32 Ohio
St. 487; Harris v. Mississippi Valley
& S.1. R.R. Co., 51 Miss, 602; State

v. Peoples’ Mutual Benefit Assn., 42 O.
S. 584; State v. Commercial Bank, 10
Ohio 535.

42 Kent’s Comm., p. 312; Peter v.
Kendal, 6 Barn. & Cress. 703; Slee v.
Bloom, 5 Johns. Ch. (N. Y.) 379; Ter-
rett v. Taylor, 9Cranch 51. See Dart-
mouth College v. Woodward, 4 Wheat.
698; The King v. Amery, 2 T. R. 515.

5 Vernon Society v. Hills, 6 Cowen
23; AllSaints Church v. Lovett, 1 Hall
(N. Y.) 191; Cooper v. Curtis, 30 Me.
488. See § 403.

‘Importing & Exporting Co. of Ga.
v. Locke, 50 Ala. 335.
328 FORFEITURE, § 400
directors to make one of the members its irrevocable agent,
or to grant to one of its agents an irrevocable power of at-
torney, would be virtually effecting a dissolution, and is
therefore void.1 The reader should keep in mind the fact
that the offending corporation, prior to judicial forfeiture,
is not deprived of any of its corporate powers or fran-
chises.2, Hence it may bring suits,? or perform acts, the
same as though the ground of forfeiture did not exist.

§ 400, Complainants in forfeiture actions~—In an earlier
part of this discussion’ we have shown the existence of the
principle that the government, having created the corpora-
tion for certain specified purposes, is entitled to a voice in
its destruction. The abuse of the franchise is a public
wrong which the people must resent. Hence the origin
of the rule that the government or people are the proper

parties to institute forfeiture

proceedings.” To authorize

 

1 Davis v. Flagstaff Silver Mining Co.,
2 Utah 74. In Regents of University of
Md. v. Williams, 9 Gill & J. (Md.) 425,
the court say: ‘“ There are two modes
of proceeding judicially to ascertain and
enforce the forfeiture of a charter, The
one is by sczrve facéas, which is the
proper process when there is a Zgadly
existing body capable of acting, but
who have abused their power. The
other by information in nature of a
guo warranto ; which properly applies,
where there is a corporate body de
facto only, but who take upon them-
selves to act, though from some defect
in their constitution or organization,
they cannot legally exercise their pow-
ers.” See Eastern Archipelago Co, v,
The Queen, 2 El. & B.857. In Thomp-
son v, The People, 23 Wend, (N. Y.)
538, it was held that an information,
though on the relation of private per-
sons, would lie to vacate franchises law-
fully acquired, but subsequently for-
feited in the hands of individuals claim-
ing not as corporators, but as natural

persons; the remedy was not limited
to sczvre factas.

? Penobscot Boom Corporation v.
Lamson, 16 Me. 224.

3Hughes v. Bank of Somerset, 5
Litt. (Ky.) 45; Mechanics’ Bldg. Assn.
v. Stevens, 5 Duer (N. Y.) 676; Buf-
talo & Allegany R.R. Co. v. Cary, 26
N.Y. 75; Connecticut & P. R. R.R.
Co. v. Bailey, 24 Vt. 465.

4 See §§ 57, 66.

5 Whitney v. Wyman, ror U.S. 392;
National Bank v. Matthews, 98 U. S.
628; State v. Paterson & Hamburg
Turnpike Co., 21 N. J. Law 9; Com-
monwealth v. Allegheny Bridge Co., 20
Pa. St. 185; State v. Moore, 19 Ala.
514; Rice v. National Bank of Com-
monwealth, 126 Mass. 300; Farnham
v. Delaware & Hudson Canal Co., 61
Pa. St. 265; Merrick v. Van Santvoord,
34. N. Y. 208; National Docks R.R. Co.
v. Central R.R. Co., 32 N. J. Eq. 755;
People v. Northern R.R. Co., 42 N.Y.
217; People v. Jackson & Mich. P. R.
Co., 9 Mich, 285,
$ 401 FORFEITURE, 329
the institution of a suit in the name of the State to forfeit
the charter of a corporation, it is not necessary that the
legislature should have directed the suit to be brought. If
the legislature declares that a particular act of malfeasance
or nonfeasance by a corporation or its officers shall work a
forfeiture, it is the duty of the prosecuting officers of the
State, in case of such nonfeasance or malfeasance, to insti-
tute a suit, and no further authority is necessary. Gener-
ally, the proper proceeding is by guo warranto or sctre
faczas.” A court of law rather than a court of equity is
the forum to determine a forfeiture.2 As has appeared,‘
the people will not litigate to redress private wrongs in-
flicted by some citizens upon others,® though it is compe-
tent for the legislature to confer on private parties the
right to institute proceedings to forfeit a charter.®

§ 401. Statutes in New York.—In New York State the
attorney-general, whenever he is so directed by the legisla-
ture, must bring an action to vacate an act of incorpora-
tion, or renewal or continuance thereof, upon the ground
that ‘the act was procured upon a fraudulent suggestion,
or the concealment of a material fact, made by or with the
knowledge and consent of any of the persons incorpora-
ted.”7_ The attorney-general may also, upon leave being
granted by the court, after notice in its discretion,’ bring
an action against a New York corporation, to procure a

 

1 State v. Southern Pacific R.R. 5 People v. Albany & S. R.R. Co., 57

0.;

24 Texas 80.

2 See §§ 57, 66; Green v. St. Albans
Trust Co., 57 Vt. 340.

3 President, etc. v. Trenton City Bridge
Co., 13 N. J. Eq. 46. The granting ‘of
leave to file an information has been
treated as a matter of discretion. See
Cole v. Dyer, 29 Ga. 437; Fall River Iron
Works Co. v. Old Colony & Fall River
R.R. Co., 5 Allen (Mass.) 225.

4 See § 67.

N. Y. 167. See People v. Brooklyn, F.
& C. I. Ry. Co, 89 N. Y. 93; People
v. Booth, 32 N. Y. 397. Ashareholder,
as already shown (see § 41), may main-
tain a bill to annul an improper forfeit-
ure of his shares, Sweny v. Smith, L.
R. 7 Eq, 324.

6 State v. Consolidation Coal Co. 46
Md. 1. .

7™N,. Y. Code Civ. Pro. § 1797.

*See N. Y. Code Civ. Pro. § 1799.
330 FORFEITURE. § 402

judgment vacating its charter, upon the ground that it has,
either: “1, Offended against any provision of an act, by
or under which it was created, altered, or renewed, or an
act amending the same, and applicable to the corporation ;
or, 2. Violated any provision of law, whereby it has for-
feited its charter, or become liable to be dissolved, by the
abuse of its powers; or, 3. Forfeited its privileges or fran-
chises, by a failure to exercise its powers; or, 4. Done or
omitted any act, which amounts to a surrender of its cor-
porate rights, privileges, and franchises; or, 5. Exercised
a privilege or franchise, not conferred upon it by law.”*
Such an action is triable by jury ;® an injunction may issue
therein restraining the officers from exercising any of the
corporate franchises, or from transacting any business not
allowed by law ;® and restraining creditors from proceeding
with actions against it ;* and the judgment perpetually en-
joins the exercise of the corporate franchises, dissolves the
corporation, and appoints a receiver to distribute the prop-
erty among creditors and stockholders.’ A copy of the
judgment must be filed in the office of the secretary of
state, and public notice thereof must be given.’ The pro-
cedure is regulated by various minor provisions which it is
not considered expedient to reproduce here.

§ 402. Forfeiture proceedings must be against corporation.
—As a corporation can, generally speaking, only be dis-
solved by a judgment, it would seem to follow that if the
company has, by the abuse or nonuse of its franchises, ren-
dered itself liable to a forfeitu# of its charter, such for-
feiture can properly be declared and enforced only in a

 

1N. Y. Code Civ. Pro. $1798. Com- Cow. (N. Y.) 387; Attorney-General
pare People v. Albany & Vt. R.R. v, Bank of Niagara, Hopk. (N. Y.)
Co., 77 N. Y. 232, revg 15 Hun(N.Y.) 354.
126; People v. Williamsburgh T. R. & *N. Y. Code Civ. Pro. § 1800.
B. Co., 47 N. Y. 586; People v. King- 5 Ibid. §§ 1802, 1806, 1809.
ston & M. Tpke. Road Co., 23 Wend. 4 Ibid. § 1806.
(N. Y.) 194; Wilde v. Jenkins, 4 Paige = * Ibid, § 1801.
(N: Y¥.) 481; Briggs v. Penniman, 8 ® Ibid. § 1803.
$ 403 FORFEITURE. Sat

‘proceeding to which the corporation is a party.’ The pro-
ceeding is not properly brought against the individual offi-
cers and members.* In New York, interested parties may
be admitted to the action as defendants in order to contest
the forfeiture.® But it is said in Massachusetts that the
fact that a creditor has levied upon the franchise of a cor-
poration and acquired the right to the tolls for ninety-nine
years, will not introduce a new party upon the question of
the forfeiture of the charter. The commonwealth knows
no adverse party but the corporation.‘

§ 403. No forfeiture in collateral proceeding.—The ele-
mentary principle already stated should never be lost sight
of, that a forfeiture cannot be taken advantage of or en-
forced against a corporation collaterally or incidentally, or
in any other mode than by a direct proceeding against the
corporation instituted by the proper authorities.° The
ouster must be enforced by the authority that created
the corporation.® It necessarily follows that the question
whether a corporation has, by nonuser, forfeited an ex-
emption from taxation conferred upon it by charter, can-
not be tried in an action of ejectment brought by a pur-
chaser of its lands on a sale for non-payment of taxes. The
forfeiture, as we have said, must be established by a direct
proceeding, instituted for that purpose, before a sale for

non-payment of taxes can be

made.”

 

1See § 105.

? State v. Taylor, 25 O. S. 282.

3 See § 107. People v. Albany & Ver-
mont R.R. Co., 77 N. Y. 232.

4Commonwealth v. Tenth Mass,
Turnpike Co., 5 Cush. (Mass.) 511.

5 Central Crosstown R.R. Co. v.
Twenty-third St. R.R. Co., 54 How. Pr.
(N. Y.) 169; State v. Fourth N. H.
Turnpike, 15 N. H. 162; Matter of N.
Y. Elevated R.R. Co., 70 N. Y. 338;
Bank of State of Missouri v. Merchants’
Bank, 10 Mo. 123; Duke v. Cahawba
Nav. Co., 16 Ala. 372; West v. Carolina

Life Ins. Co., 31 Ark. 476; Johnston v.
Elizabeth Building & Loan Assn., 104
Pa. St. 394; Pearce v. Olney, 20 Conn.
544; Kincaid v. Dwinelle, 37 N.Y. Su-
perior 331; Dyer v. Walker, 40 Pa. St.
157.

® National Bank v. Matthews, 98 U.
S. 621; Southern Pacific Railroad Co.
v. Orton, 6 Sawy. 157; Laflin & Rand
Powder Co. v. Sinsheimer, 46 Md. 315 ;
Briggs v. Cape Cod Ship Canal Co., 137
Mass, 71; Wallamet Falls Canal & Lock
Co. v. Kittridge, 5 Sawy. 44. See § 400.

* Mackall v. Chesapeake & O. Canal
332 FORFEITURE. § 404

§ 404. Legislative declaration of forfeiture —Interesting
questions concerning legislative declarations of forfeiture of
corporate franchises have arisen in this country. In a case
before the Michigan Supreme Court it appeared that the
charter of a corporation contained a provision that it should
not be repealed “unless it shall be made to appear to the
legislature that there has been a violation by the company
of some of the provisions of this act.” The learned Justice
Cooley, in a very carefully considered opinion, reached the
conclusion that the question of violation was a judicial ques-
tion, and that the charter could not be repealed until the vio-
lation had been made to appear to the legislature by some
proper judicial proceeding.’ In Commonwealth v. Pittsburg
& Connellsville Railroad Company,’ the learned Justice
Sharswood expressly assumes that the legislature is not the
final judge as to whether or not an event, upon the happen-
ing of which the authority to repeal the charter is based,
has occurred. After alluding to certain legislative docu-
ments, he continues: ‘These instances in our legislative .
annals are referred to as showing that the General Assem-
bly has not been inattentive to this subject, and has been
far from claiming an absolute right to decide conclusively
upon the facts of misuser or abuse.” In another case,
which arose in Pennsylvania, concerning a repeal, where
the terms of a reservation had not been observed, the
learned Judge Black argued that a legislative body,
in a matter like this, is known to proceed without
formal notice, without specific accusation, and without
opportunity to answer. There is no confronting of the
parties with the witnesses, nor anything that can be called a
hearing or trial. It would, therefore, seem unjust to hold

 

Co., 94 U. S. 308; SP. New Central Am. Rep, 233. See Bruffett v. Great

‘Coal Co, v. George’s Creek Coal & Iron Western R.R. Co., 25 Ill. 353.

Co., 37 Md. 537. 258 Pa. St. 26, 47. Compare Erie
‘Flint & Fentonville Plank Road & N. E. R.R. Co. v. Casey, 26 Pa. St.

Co. v. Woodhull, 25 Mich. 99; S.C. 12 316,
FORFEITURE.

§.404 333

that a legislative act is, like a judicial sentence, conclusive
of every fact which ought to have been found before it was
passed, He then added: 1. The illegal act must be Zosz-
zzve. A mere omission, like the failure of a bank to make
its annual returns, is not enough. 2. A disregard of the
charter such as is injurious only to Zrzvate interests, and
which, therefore, admits of pvzvate compensation, is not
within the fair meaning of the words. It must be some
conduct which infringes upon a right reserved by a State
for the benefit of the public. 3. It must be wilful; that is,
not involuntary, accidental, or the consequence of mere
mistake of fact. 4. It must not be the mere transgression
of the act of incorporation by a subordinate officer or agent
without authority, express or implied, from the board of
directors.1 The right of the legislature to declare a forfeit-
ure independent of judicial action was, in a certain sense,
affirmed in this very important case, but it is to be observed
that the court became satisfied, from what appeared before
it, that a case of abuse or misuse of corporate functions ex-
isted, The decisions rendered by Cooley and Sharswood,
which we have just cited, seem to embody plausible propo-
sitions, but there is authority having an opposite tendency.”

 

1 Erie & N. E. R.R. Co. v. Casey, 26
Pa, St. 316, 319.

2 The Miners’ Bank v. The United
States, Morris (Ia.) 482; S, C. in an-
other form, 1 Greene (Ia.) 553. Com-
pare Crease v. Babcock, 23 Pick.(Mass.)
344, where Morton, J., said: “ Wedo
not believe that the inquiry into the
affairs or defaults of a corporation, with
a view to continue or discontinue it, is
a judicial act, No issue is formed. No
decree or judgment is passed, No for-
feiture is adjudged. No fine or punish-
ment is imposed. But an inquiry is had
in, such form as is,deemed most wise
and expedient, with a view.to ascertain
facts upon which to exert legislative

power; or to learn whether a contin-
gency has happened upon which legis-
lative action is required.” In DeCamp
v. Eveland, 19 Barb. (N. Y.) 89, the
court said: “The legislature are no-
where restrained, directed, or limited:
in regard to the nature, grade, or char-
acter of evidence which they must have
as the basis of their action, or to guide
them in their decisions. In some speci-
fied cases their power is limited, and in.
others conditional, depending upon the.
existence of certain facts. But they
must necessarily decide whether such.
facts exist. Their general power to pre-
scribe and regulate evidence for every,
other, tribunal in the State has never
354 FORFEITURE. § 405

Manifestly, where the reservation of the power of repeal is
at ‘the pleasure of the legislature,” that body need give no
reason for its action in the matter. The validity of the
repeal does not depend on the necessity for it, or on the
soundness of the reasons which prompted it.’ The courts
will not presume that such power was improperly exercised.”

§ 405. Alteration and repeal of charter.—As already stated,
the legislative right to repeal the charter of a private corpo-
ration must be reserved or it cannot be enforced. In Shields
v. Ohio,® Justice Swayne said : “ The power of alteration and
amendment is not without limit. The alterations must be
reasonable; they must be made in good faith and be con-
sistent with the scope and object of the act of incorpora-
tion. Sheer oppression and wrong cannot be inflicted un-
der the guise of amendment or alteration. Beyond the
sphere of the reserved powers, the vested rights of property
of corporations, in such cases, are surrounded by the same
sanctions and are as inviolable as in other cases.” Though
general expressions may be found to the effect that limita-
tions exist upon the reserved power of alteration and repeal,
yet, in actual practice, this power is regarded as most deadly
and sweeping.* Ina Massachusetts case,Gray, J., said : “The
extent of the power reserved by such an enactment has been
the subject of some diversity of judicial opinion, and a defini-
tion of its extreme limit is not necessary to this case. It is
sufficient now to say that it is established by adjudications
which we cannot disregard, and the principles of which we

 

been questioned, and it would present —_' Greenwood v. Freight Co., 105 U.
a singular anomaly if they were want- S.17. Compare People v. O’Brien, 45
ing in power to do the same for them- Hun (N. Y,) 524, and dissenting opin-
selves, or toalterandchangethesameat ion of Learned, P. J.

pleasure; and it would be equally strange * State v. Curran, 12 Ark, 321.

if any judicial tribunal in the State “95 U.S. 319, 324.

were permitted to review their decision 4 See Greenwood v. Freight Co., 105
upon the question of fact, on the exist- U.S. 17; People v. O’Brien, 45 Hun
ence of which their power to legislate (N. Y.) 519, now on appeal,

in a particular case is made to depend.”
§ 405 FORFEITURE. 335
fully approve, that it at least reserves to the legislature the
authority to make any alteration or amendment in a charter
granted subject to it, that will not defeat or substantially
impair the object of the grant, or any rights which have
vested under it, and that the legislature may deem neces-
sary to secure either that object or other public or private
rights.”* A grant in the constitution of a State of a privi-
lege to a corporation is not subject to repeal or change by
the legislature of the State.» A repeal of a charter does
not of itself violate or impair the obligations of any con-
tract which the corporation has entered into. But the leg-
islature cannot establish such rules in regard to the man-
agement and disposition of the assets of the corporation,
that the avails shall be diverted from, or divided unfairly
and unequally among, the creditors, and thus impair the
obligations of contracts, or that the portion of the avails
which belong to the stockholders shall be sequestered and
diverted from the owners and thus injure vested rights.’
If a corporation has been established under.a general law,
the repeal of the law does not affect the right of associa-
tions formed under it prior to the repeal ;* but a special
charter may be repealed by a general law.®

 

1 Commissioners of Inland Fisheries
v. Holyoke Water Power Co., 104 Mass.

law extending the provisions of the old
one and perfecting its details, but not

ASI. changing its general policy. It is a
2 New Orleans v. Houston, 119 U.S. familiar rule of construction that when
265. statutes are repealed by acts which

3 Lothrop v. Stedman, 13 Blatchf.
143. See People v. O’Brien, 45 Hun
(N. Y.) 524.

4 Bewick v. Alpena
Mich. 700,

5 State v. Commrs. of Railroad Taxa-
tion, 37 N. J. Law 228. The repeal of a
general corporation law cannot be con-
strued in the absence of express provi-
sions as intended to repeal the charters
of corporations formed under it, es-
pecially where the manifest purpose of
the repealing act is to substitute a new

Harbor Co., 39

substantially retain the provisions of
the old law, the latter are held not to
have been destroyed or interrupted in
their binding force. United Hebrew
Association v. Benshimol, 130 Mass.
327. “In practical operation and effect,

. . they are rather to be considered
as a continuance and modification of
old laws, than as an abrogation of those
old, and the re-enactment of new ones,”
Shaw, C. J., in Wright v. Oakley, 5
Met. (Mass.) 406; Steamship Co. v.
Joliffe, 2 Wall. 459.
336 FORFEITURE. §§ 406-408

§ 406. Forfeiture by terms of franchise—The legislature
in chartering a corporation has the power to provide that
in case of default in complying with its terms, the corpo-
rate franchises thereby granted shall zpso facto, without in-
tervention of the courts, be deemed forfeited and termi-
nated, and any party aggrieved may subsequently question
its corporate existence without any. suit to enforce a for-
feiture.*

§ 407. Receivership on bill filed by individual.—Although,
as we have seen, the courts will not entertain a bill filed
by an individual to enforce a forfeiture of a corporate fran-
chise, since the right to so proceed belongs to the State
alone; yet, if such a bill prays also for a receiver, and for
general relief, it may be retained for the purpose of grant-
ing a receivership.?

§ 408. Grounds of forfeiture.—‘‘ Franchises,” says Danforth,
J., ‘may be forfeited by breach of the trust on which they
were granted and perversion of the objects of the grant.”®
It is not every failure of a corporation to perform a duty
imposed by its charter which will work a forfeiture. There |
must be something more than mere accidental negligence,
or excess of power, or mere mistake in the mode of exer-
cising an acknowledged power.‘ The question of declaring
a forfeiture “involves the discharge of an exceedingly del-
icate and responsible duty,” the determination of which gen-
erally rests with the sound discretion of the court.’ But
when the corporation is found to be clearly guilty of the
acts which constitute a ground of forfeiture, the court has

 

‘Brooklyn Steam Transit Co. v. ‘Harris v, Mississippi Valley, etc.
City of Brooklyn, 78 N. Y. 524. See R.R.Co., 51 Miss. 602; State v. Paw-
Matter of Brooklyn, Winfield & New- tuxet Turnp. Co., 8 R. I. 182; State v,
town Ry. Co.,72 N. Y. 245; S.C. again, Commercial Bank, 33 Miss. 474; State

75 N.Y. 335. v. Société Republicaine, 9 Mo. App.
2 Gaylord v. Fort Wayne, M. & C. 120.
R.R. Co., 6 Biss. 286. *State v, Peoples’ Mutual Benefit

*People v. Dispensary & Hospital Assn., 42 0.S. 584.
Society, 7 Lans. (N. Y.) 306.
FORFEITURE. 237

K

§ 408

no discretion to refuse a judgment.’ In Harris v. Missis-
sippi Valley & Ship Island Railroad Company,’ it is said that
the public must have an interest in the thing done, or omit-
ted to be done, constituting the ground of forfeiture. The
people will not litigate for the purpose of redressing private
wrongs.’ It is not necessary, however, to work a forfeiture,
that the neglect or refusal to perform the duties enjoined
should proceed from a corrupt motive; it is sufficient that
the duties be neglected or designedly omitted.4 We may
observe that a swbstantzal compliance with the provisions
of the general law is an essential prerequisite to the crea-
tion of a private corporation, and a failure to comply
therewith in any material particular is ground for the im-
peachment of the corporate existence.” A mere failure of
the notary public, before whom the articles of incorpora-
tion were acknowledged, to certify that he personally knew
the parties, is not, however, a fatal error.’ A forfeiture is
not allowed unless a plain abuse or neglect of power, by
which the corporation fails to fulfil the design of its crea-
tion, is shown.” Repeated and wilful acts of misuser or
nonuser by a corporation, relating to matters which are of
the essence of the contract between it and the State, of
course constitute a just ground of forfeiture of the franchise.®
Some specific illustrations may prove of service. A rail-
road company, by constructing and operating a road, differ-
ent as to both its zermznz from those designated in its char-
ter, and connecting at the State line with a foreign road in

 

> State v. Oberlin Building & Loan
Assn., 35 O.S.258.

? 51 Miss. 602.

* People v. Albany & S. R.R. Co., 57
N. Y. 167. See §§ 67, 400.

4People v. Kingston & Middletown
‘T. R. Co., 23 Wend. (N. Y.) 193. If
a corporation is organized for the pur-
pose of imposing on the courts in ex-
ercising the right of eminent domain
in taking private property for private

uses, the State by its attorney-general
may interpose to correct the abuse, Peo-
ple v. Pittsburgh R.R. Co., 53 Cal. 697.

5 Examine § 22.

6 People v. Cheeseman, 7 Col. 376..
Compare Shephard v. Carriel, 19 Ill.
319.

* State v. Farmers’ College, 32 O. S..
487.

* State v. Council Bluffs & Neb. Ferry.
Co., 11 Neb. 354, and cases cited..
338 FORFEITURE. § 408
violation of law, incurs a liability to forfeiture proceedings.”
The constant and wilful violation by a bank of the funda-
mental articles of its charter by discounting paper at higher
rates than those prescribed by law, is a ground for such a
procedure.* So it is a ground of forfeiture that the corpo-
ration has erected a building in violation of its charter, the
building not being needed for corporate purposes.’ So,
also, a bank which makes a general assignment in trust for
creditors, may be proceeded against for a forfeiture by the
State. So a company may lose its charter by forfeiture if
it be shown that it has discontinued all business except
settling up its concerns. It is a cause of forfeiture that a
corporation agreed to give to a certain party all he could
obtain from the legislature in excess of a certain sum, as
an appropriation to aid the corporation.® So the charter
may be lost, or judgment of ouster rendered : where the cor-
porators assume privileges not conferred ;7 where the corpo-
rate books and offices are kept out of the State ;* or where
there is a non-compliance with incorporating statutes.® In
a case before the Supreme Court of Illinois the court say
it is difficult to conceive of a greater abuse of a company’s
franchise than to continue taking risks and accepting pre-
miums when there is no probability of its ever being able
to pay losses. Such an abuse of its franchises is a good
cause of forfeiture independent of the statute. A statute

 

1Commonwealth v. Franklin Canal
Co., 21 Pa. St. 117.

?Commonwealth v. Commercial
Bank, 28 Pa. St. 383. See State v.
Commercial Bank, 33 Miss. 474.

3 New Haven v. City Bank, 31 Conn.
106.

4State v. Real Estate Bank, 5 Ark.
596.

5 In re Jackson Marine Ins. Co., 4
Sandf. Ch. (N. Y.) 560.

6 People v. Dispensary & Hospital
Society, 7 Lans. (N, Y.) 304.

‘See People v. Utica Ins. Co., 15
Johns. (N. Y.) 358.

* State v. Milwaukee, L. S. & W. Ry.
Co., 45 Wis. 579.

° State v. Central Ohio Mutual Relief
Assn., 29 Ohio St. 399. See State v.
Vanderbilt, 37 O. S. 591. The attor-
ney-general may maintain an infor-
mation against a corporation to re-
strain an abuse of its powers. Attorney
General v. Jamaica Pond Aqueduct Co.,
133 Mass. 361.
§§ 409, 410 FORFEITURE, 339

upon the subject is but declaratory of the common law and
cannot be considered ex post facto.

§ 409. Non-performance of conditions. — A non-perform-
ance of the conditions of the act of incorporation is deemed,
per sé,a misuser that will forfeit the grant even at common
law,’ and it has been argued that a franchise to be a corpo-
ration may be likened to a public office, which is held upon
the implied condition of diligently and faithfully executing
the duties belonging to it, and which might be forfeited by
general neglect or wilful refusal to perform. As we have
seen, the ingredient of a bad or corrupt motive need not
enter into the case; it is enough if the duty is neglected
or designedly omitted.* Lord Holt said:* ‘ All franchises
which are granted are upon condition that they should be
duly executed according to the charter that settles the
constitution. And ¢ha¢ being a condition annexed to the
grant, the citizens cannot make an alteration; but if they
neglect to perform the terms of the patent, it may be re-
pealed by sczve faczas.”*

§ 410. Failure to act within reasonable time.—There is an
implied contract on the part of the corporators that they
will perform the duties and exercise the privileges confer-
red by the charter within a reasonable time after the same

 

Wis. 592; The King v. The City of
London, 8 Howell’s State Trials 1271;

Ward v. Farwell, 97 Ill. 593. A
railroad company which has completed

its road between the ¢ermznz named
in its charter forfeits its franchise by
abandoning or ceasing to operate a
part of its route; it cannot, however,
incur a forfeiture at its own option;
but the remedy is either by wandamus
indictment, or a proceeding to annul
its charter, not by suit in equity. Peo-
ple v. Albany & Vermont R.R. Co., 24
N. Y. 261. ;

? The People v. The Waterford & S.
Turnpike Co., 2 Keyes (N. Y.) 330; S.
c. 3 Abb. App. Dec. (N. Y.) 584; State
v. Milwaukee, L. S. & W. Ry. Co., 45

The People v. Fishkill & B. P. R. Co.,
27 Barb. (N. Y.) 452.

5 See § 408.

4 City of London v. Vanacker, 1 Ld.
Raym. 499.

5In Bissell v. Michigan Southern &
N. I. R.R. Co., 22 N. Y. 268, Com-
stock, Ch. J., said that the companies
might have been proceeded against by,
the States, “not on the ground of a
usurpation of powers and privileges
which did not belong to them, but for
a total nonuser of the franchises which
did belong to them.”
340 FORFEITURE. §§ 411, 412

have been granted, where no specific time is named.
Failing so to do, the charter may be declared forfeited by
legislative act or in guo warranto proceedings.’ What is
a reasonable time within which the corporators should
begin the performance of their duties under the charter,
depends much upon the particular circumstances of each
case.

§ 411. Absence from State——In a case which arose in Wis-
consin, it was held, on demurrer, that an information set-
ting forth that the principal office of the defendant corpo-
ration (a Wisconsin railroad) was in New York city; that
its books and records had always been kept there; and
that none of its principal officers resided in Wisconsin, re-
cited sufficient ground for adjudging a forfeiture of the
company’s charter.’

$ 412. Forfeiture of railroad charter.—A railroad company
assumes duties for the benefit of the general public.? Hence,
where, for a period of five years, such a corporation failed
to construct the whole line of railroad indicated in its char-
ter, but merely condemned a right of way, and constructed
and operated a narrow track, about two and one-half miles
in length, to some coal mines owned by the principal incor-
porators, and operated no passenger cars, it was held to be
“not only a nonuser of the powers, franchises, and privi-
leges” conferred upon the corporation, but ‘“‘a palpable mis-
use of them.”* In an action which arose in Virginia,® the
charter provided that, if the railroad should not be completed
by a given date, ‘‘the company shall forfeit to the State of
Virginia, their corporate franchises and rights, together
with their railroad track, roadbed, and all work and ma-

 

' Chincleclamouche L. & B. Co. v. 506. See § 408. Commonwealth y.

Commonwealth, roo Pa. St, 438. Franklin Canal Co,, 21 Pa. St. 117;
* State v. Milwaukee, L.S.& W.Ry. People v. Albany & Vt. R.R. Co., 24
Co., 45 Wis. 579, N. Y. 261,
3 See Chap, XII. ° Silliman v. Fredericksburg, O. & C.

* The State v. Railway Co., 40 0. S. R.R. Co., 27 Gratt. (Va.) 125.
$ 413 FORFEITURE. 341

terials thereon, and other property, to hold the same as a
trustee for the benefit of herself, the corporation of Fred-
ericksburg, and other private stockholders of the original
Fredericksburg Railroad Company, according to the re-
spective amounts of the stock in that company originally
subscribed and held by them.” The corporation gave a
mortgage upon its property and issued bonds; but failed
to complete the road within the time specified. The State
thereupon proceeded to declare a forfeiture, took posses-
sion of the road and franchises, and turned the same over
to the stockholders named in the act, who organized a new
company. It was held that the new company acquired the
property and franchises free from the mortgage, and the
State having entered and elected to hold to the forfeiture,
no inquisition or judicial proceedings, or inquest, or finding
of any kind, was requisite to consummate such forfeiture.’

§ 413. Insufficient ground of forfeiture —It is no ground of
forfeiture that a Pennsylvania corporation has obtained a
charter from another State; nor that, under cover of such
a charter, it has instituted a suit in a Federal court against
the Pennsylvania corporation to declare an act of assembly
void.” Again: ‘No mere intention or purpose in a corpo-
ration to violate its duty can constitute a case of forfeiture,” ®
As we shall see, a trifling variation from the requirement of
the charter will not forfeit the franchise. There must be not
only a breach of the letter, but of the intent and meaning
of the law. The fact that trustees of a mutual benefit as-
sociation illegally voted themselves back pay, and issued
unauthorized certificates of membership, is not sufficient

 

1Compare People v. O’Brien, 45 B.Co., 47 N. Y. 593, and cases cited

Hun (N. Y.) 519. in able opinion of Rapallo, J.; People
2 Commonwealth v. Pittsburg & Con- v. Kingston & M. T. R. Co., 23 Wend.

nellsville R.R. Co., 58 Pa, St. 26. (N. Y.) 193. See People v. Cheeseman,
* Commonwealth v. Pittsburg & C. 7 Col. 376.

R.R. Co., 58 Pa. St. 45. 5 See Thompson v. People, 23 Wend.

4People v. Williamsburgh T. R. & (N. Y.) 585.
342 FORFEITURE. $§ 414, 415
ground for ousting the association of its franchise.* So,
insolvency,’ and omission to exercise corporate powers, are
not always grounds of forfeiture. A cashier ‘“ cannot
cause a forfeiture of the charter by a direct and palpable
violation of his authority or instructions.”* An insurance
company will not lose its charter through nonuser, by re-
fusing to insure against extra-hazardous risk;° and the
stopping of specie payment by a bank, where there is a
general suspension, does not establish insolvency.’ It
is not a ground of forfeiture of a charter that a railroad
company, by reason of the insufficiency of passenger busi-
ness, withdraws its train from a branch road.”

$ 414. Accident or mistake no ground of forfeiture.—To
constitute a ground of forfeiture, there must be, as we have
said,® something wrong arising from wilful abuse or gross
neglect; something more than accidental negligence, or
excess of power, or mistake in the mode of exercising an
acknowledged power.’ It would seem, however, that it
ought not to be a question of honest intentions on the part
of the officers and agents of a corporation, but rather that
the inquiry should be directed to ascertain whether or not
there has been a plain misuse of, or departure from, the
chartered powers,”

§ 415. Evidence in action for forfeiture —W hen the question
comes up whether equity and good conscience required the

 

' State v. People’s Mut. Benefit Assn.,
42 Ohio St. 579.

9 State v. Bailey, 16 Ind. 46. Com-
pare Commercial Bank v, State of Mis-
sissippi, 14 Miss. 600.

3 Attorney General v, Bank of Niag-
ara, Hopk. Ch. (N. Y.) 354.

4 State of Mississippi v. Commercial
Bank, 14 Miss. 237.

® Corwin v, Urbana & C. M.I. Co.,
14 Ohio 6,

® Livingston v. Bank of New York,
- 26 Barb. (N. Y.) 304.

™ Commonwealth v. Fitchburg R.R.
Co., 12 Gray (Mass.) 180.

® See § 408.

*State v. Merchants’ Ins. & Trust
Co., 8 Humph, (Tenn.) 251; State v.
Pawtuxet Turnp, Co, 8 R. I. 182;
Bank Commrs. v. Bank of Buffalo, 6
Paige (N. Y.) 497; State v. Colum-
bia & H. T. P. Co., 2 Sneed (Tenn.)
254; Harris v. Mississippi Valley & S.
I. R.R. Co., 51 Miss. 602.

See People v. Kingston & Middle-
town T. R. Co., 23 Wend. (N. Y.) 193.
$§ 416-418 FORFEITURE.

343

forfeiture of the charter of a bridge company for failure to
make lawful returns, evidence is admissible to show how
the corporation has been managed, the amount of its tolls
and expenditures, and how far the bridge is necessary to
meet the future wants of the public.’ Rules as to pleading
forfeiture have been given.*?, We may observe here that to
a guo warranto, or an information in the nature of one,
the defendant must either disclaim or justify, and the State
is bound to show nothing.®

§ 416. Mandamus against attorney-general.—In Louisiana,
the attorney-general cannot be compelled by mandamus to
institute a suit for the forfeiture of the charter of a corpo-
ration. A discretion as to bringing suit is vested in him
by the legislature.

§ 417. Judgment of partial ouster.—A corporation that has
usurped certain franchises, but not in bad faith, will be
merely ousted from them with a nominal fine.®

§ 418. Judgment upon information—In Massachusetts,
upon an information in the nature of a guo warranto, which,
in the practice in that Commonwealth, has superseded the
ancient writ of guo warranto, the judgment may be “that
the franchise usurped be seized into the sovereign’s hands,
if it be one which the sovereign can repossess and enjoy,
or it may be a judgment of ouster.”® In the case of a busi-

ness corporation, where the
merely to declare the charter

object of the information is
forfeited and to exclude the

 

1 State v. Barron, 58 N. H. 370.

2 See § 124,

3 See State v. Ashley, 1 Pike (Ark.)
513; State v. Harris, 3 Pike (Ark.) 572;
People v. Utica Ins. Co., 15 Johns. (N.
Y.) 358.

* State v. Attorney General, 30 La.
Ann. Part IT. 954.

+ Stewart v. Father Matthew Society,
41 Mich. 74. Compare State v, Penn.
& O. Canal Co., 23 Ohio St. 121; Peo-

ple v. Rensselaer & S. R.R. Co.,, 15

Wend. (N. Y.) 113.

6 Campbell v. Talbot, 132 Mass. 177,
citing Rex v. Mayor of London, 1 Show.
274, 280; Rex v. Mayor & Aldermen
of Hertford, 1 Ld. Raym. 426, and 1
Salk. 374; Com. Dig. Quo Warranto
C., 5; Cole on Information, 336; At-
torney General v. City of Salem, 103
Mass. 138, and cases cited.
FORFEITURE. $§ 419, 420

344

corporation from the right to further exercise its franchises,
a judgment of ouster is appropriate. Strictly and techni-
cally, a judgment, either of seizure or of ouster, probably
does not dissolve the corporation, but it at least suspends
the right to exercise its franchises.’

§ 419. Effect of judgment.—Although a corporation is for
all practical purposes dissolved by a legal seizure and for-
feiture of its franchises, the latter are not thereby destroyed ;
they exist in the custody of the State, and may be granted
again.” If the State continues to recognize the association,
it is considered to be a corporation de facto.°

§ 420. Waiver of forfeiture—It is clear that the right to
enforce a forfeiture may be waived or forgiven,* and it is
the duty of the State to do so when the infraction of its
provisions is not wilful.° Thus, where plaintiffs were in-
corporated, and authorized to erect and maintain a toll-
bridge, with the further provision that bonds should be
given to the State that the work should be finished in six
years, it was held that the giving of the bond was a matter
subsequent, not precedent, and that the neglect to give one
worked no forfeiture, unless taken advantage of by the
General Assembly, and that it was waived by a later act
accepting the bridge. Mr. Waterman says: “If the legis-

 

1 Campbell v. Talbot, 132 Mass.177; Dressel, 34 Md. 503; KanawhaCoalCo.

2 Kyd Corp. 395, 516.

2 Bank of Vincennes v. State, 1
Blackf. (Ind.) 267. See Oakland R.R.
Co. v. Oakland B. & F. V. R.R. Co.,
45 Cal. 365.

3 Lagrange & M. R.R. Co. v. Rainey,
7 Cold. (Tenn.) 420.

4 Rice v. National Bank of Common-
wealth, 126 Mass. 300; State v. God-
winsville, etc. Road Co., 44 N. J. Law
496; People v. Manhattan Co., 9 Wend.
(N. Y.) 351; Jz re N. Y. Elevated R.R.
Co., 70 N. Y. 327; Davis v. Gray, 16
Wall. 203; State v. Mississippi, O. &
R.R. R.R. Co., 20 Ark. 495; Basshor v,

v. Kanawha & O. Coal Co., 7 Blatchf.
391; Central & G. Road Co. v. People,
5 Col. 39; CentralCross Town R.R. Co.
v. Twenty-third St. R.R. Co., 54 How.
Pr. (N. Y.) 186. See Baltimore & O.
R.R. Co. v. Supervisors, etc. of Mar-
shall County, 3 W. Va. 319; Ormsby v.
Vermont Copper Mining Co., 65 Barb.
(N. Y.) 360; Commonwealth v. Union
F, & M. Ins. Co., § Mass. 232.

* Central & G. Road Co. v. People, 5
Col. 39.

* The Enfield Toll Bridge Co. v. The
Conn. River Co., 7 Conn. 52.
$ 420 FORFEITURE. 345

lature, with a distinct knowledge of a breach of duty by a
corporation, thinks proper by an act to remit the penalty, or
to continue the corporate existence, or to deal with the cor-
poration as lawfully existing notwithstanding the known
default, such conduct will be taken to be intended as a
declaration that the forfeiture is not insisted on, but that
previous defaults are waived.”* Mere lapse of time is not
a bar to the enforcement of a forfeiture by the State.? And,
furthermore, ‘‘ the intent to waive or release conditions, or
to make a new grant, must be expressly declared or plainly
be inferred from some act of the granting power.”* The
waiver will not revive a corporation which, by its own de-
fault, has ceased to exist, where the legislature is prohibited
from granting special charters.*

 

1 2 Waterman on Corps. § 429. 4 Compare Jz re Brooklyn W. & N.
2 State v. Pawtuxet Turnpike Co.,8 Ry. Co., 72 N.Y. 245; Oroville & V.
R. I. 521. R.R. Co. v. Plumas Co., 37 Cal.

3 State v. Godwinsville, etc. Road 354.
Co., 44 N. J. Law 499.
§ 421

422.
423.
424.
425.
426.
427.
428,
429.
430.
431.
432.

433.

; CHAPTER Xx.

CONSOLIDATION.

Motives for consolidation—Defi-
nition.

Amalgamation and consolida-
tion.

Right to effect consolidation— |

Power of the State.

Encouragement to effect con-
solidations,

Consent of stockholders to con-
solidation.

Protecting dissenting stockhold-
er,

No lien in favor of original share-
holders.

Succession and _ consolidation
distinguished.

‘What corporations may consoli-
date.

Consolidated company a new
corporation.

Effect of consolidation on prop-
erty and debts.

Liability to amount of property
received.

Title to assets and franchises of
consolidating bodies.

§ 434

 

435
436.
437.
438.
439.
440.
441.
442.
443.
444.
445.
446.
447.
448,

449.

Assumption of obligations.

Effect of consolidation upon liens.

Sale of consolidated railroad.

Judgment against consolidated
company.

Consolidated company not a
purchaser without notice.
Effect of consolidation on sub-

scriptions.
Right to question consolidation.
Setting aside consolidation.

Eminent domain as applied to
stocks and franchises.

Receivers of consolidated corpo-
rations.

Insolvency of consolidated cor-
porations.

Domicil of consolidated com-
pany—Jurisdiction in differ-
ent States.

Immunity from taxation.

Pleading consolidation.

Consolidation as affecting pend-
ing actions,

Removal of suits to Federal
courts.

§ 421. Motives for consolidation—Definition When a cor-
poration becomes financially embarrassed, or the scheme in
which it has embarked seems likely to fail by reason, it
may be, of sharp competition, or lack of capital, resources,
power, or influence, it is common experience to find the
organization forming a consolidation with some other cor-

poration.

This process of consolidation, concerning which

we will now treat, has been called a turning of two corpo-

rations into one.

In an Indiana case—and that State fur-
§ 421 CONSOLIDATION. 347

nishes many authorities upon the subject—consolidation is
described as ‘‘a surrender of the old charters by the com-
panies, the acceptance thereof by the legislature, and the
formation of a new corporation, out of such portions of the
old as enter into the new.”’ In another case in the same
State, in speaking of the effect of a consolidation of three
corporate bodies, the court describe it as a “‘ dissolution of the
three corporations named, and, at the same instant, the crea-
tion of a new corporation, with property, liabilities and stock-
holders, derived from those then passing out of existence.” *
It will become apparent, as we progress, that a general defi-
nition of a corporate consolidation, sufficiently accurate for
all purposes, is not, in the nature of things, possible. Cor-
porate enterprise is too diverse, legislators too careless, and
our language too imperfect a vehicle of expression, to render
this possible. The definitions quoted will, in some cases,
be found wide of the mark. As corporations are created
chiefly to promote large enterprises, requiring the combina-
tion of money and numbers, it is not strange that these
artificial or fictitious bodies should often seek to gain ad-
ditional power and achieve greater success by amalgama-
tion. The perilous nature of corporate enterprise, as we
have seen, leads to a desire to distribute the risk of the cor-
porate undertaking, and this object is as frequently fur-
thered by consolidation as by a direct increase of stock or
stockholders of a single corporation. Individuals form co-
partnerships to effect a union of strength, skill and capital,
and corporations perfect arrangements for consolidation
with the same general purposes in view. As schemes for
corporate consolidation generally arise where some of the
uniting bodies are in financial distress, and as insolvency
not infrequently overtakes the consolidated enterprise,

 

1 State v. Bailey, 16 Ind. 46, 51, citing ® McMahan v. Morrison, 16 Ind.
Lauman v. Lebanon Valley R.R. Co, 172. See Clearwater v. Meredith, 1
30 Pa. St. 42.. Wall. 4o.
CONSOLIDATION,

348 § 421

these features may be assigned as a reason for alluding
somewhat to the general subject in this connection.

It will be found that many questions concerning wtra
vires acts of corporations grow out of these attempted con-
solidations, especially with regard to the reorganization of
railroad corporations. The reader must keep in mind, in
approaching this branch of our discussion, that, in the ab-
sence of express statutory sanction, directors, though their
acts may be endorsed by a majority of the stockholders, do
not, ordinarily, possess’ the power to alienate all the assets
of a corporation, or to effect a long lease of its property to

another corporation.’

Nor can a corporation change its

 

"See Boston & P. R.R. Co, v. New
York & New England R.R. Co., 13 R.
I. 260; Blatchford v. Ross, 54 Barb.
(N. Y.) 42; Troy & B. R.R. Co. v.
Boston, H. T. & W. Ry. Co., 86 N.Y.
107; Kean v. Johnson, 9 N. J. Eq.
401; Charlton v. Newcastle & C. Ry.
Co., § Jur. N.S. 1096; Winch v. Birk-
enhead, L. & C. J. Ry. Co, § De G. &
Sm. 562; Thomas v. Railroad Co.,
tor U. S. 71; Abbott v. Johnstown,
G. & K. H. R.R. Co., 80 N. Y. 27;
Cass v. Manchester Iron, etc. Co., 9
Fed. Rep. 640; Black v. Delaware &
Raritan Canal Co., 22 N. J. Eq. 130,
399, and cases cited; Stevens v. Davi-
son, 18 Gratt. (Va.) 819; Pennsylvania
R.R. Co, v. St. Louis, A. & T. H. R.R.
Co., 118 U.S. 290; South Georgia &
F. R.R. Co. v. Ayres, 56 Ga. 230;
Archer v. Terre Haute & I. R.R.
Co., 102 Ill. 493; s.c. 7 Am. & Eng.
R.R. Cas. 249; Commissioners of Tip-
pecanoe Co. v. Lafayette, M. & B.
R.R. Co., 50 Ind. 85. The chancel-
lor, in an important and leading case
in New Jersey (Black v. Delaware &
Raritan Canal Co., 22 N. J. Eq. 400;
see Ss, C. reversed 24 N. J. Eq. 455),
in speaking of the inability of a corpo-
ration, without legislative warrant, to
sell or lease its franchises and prop-

erty, so as to render the organization
powerless to perform its corporate
functions, said: “ This rule is founded
on reason and principle. The fran-
chises granted by the State are often
parts of the sovereign power delegated
to a subject, and always privileges to
which other citizens are not entitled.
In these grants the State is supposed
to regard the character of the grantee,
or the guards and restrictions placed
upon the corporation, when the grant
is by a charter to persons continually
changing by transfer of stock.” In
Thomas v, Railroad Co., ror U.S. 83,
the court say that any contract which
disables a corporation from performing
those functions which it undertakes as
a consideration for the grant “is void as
against public policy.” s.p. Penn. R.R.
Co. v. St. Louis, A. & T. H. R.R.Co.,
118 U.S. 290. By statute in New York
State one railway company may lease
another railroad (examine Abbott v.
Johnstown, G. & K. H. R.R. Co., 80 N,
Y. 27; Woodruff v. Erie Ry. Co., 93 N.
Y. 609; Troy & Boston R.R. Co. v.
Boston, Hoosac Tunnel & W. Ry. Co.,
86 N. Y. 107; Laws 1839, ch. 218),
but there has been much litigation
over railroad leases and consolidation
agreements in that State.
§ 422 CONSOLIDATION, 349

business against the will of a stockholder.’ But we do not
apprehend that the right of the legislature to authorize a con-
solidation of two or more corporations, or a merger of one
corporation into another,® has ever been seriously ques-
tioned.* Indeed, the subject is one peculiarly within legis-
lative control, As will presently appear, the consolidation
may be effected by a permanent amalgamation of all the
property rights and control of the consolidating bodies in
a distinct corporate organization, or by uniting the general
management of two or more corporations in one, and re-
taining distinct organizations. A favorite reason for per-
petuating separate organizations after consolidation is to
effect a winding up of past transactions, and to preserve in-
tact the rights of creditors of the consolidating bodies.

It is not every union of the business of two or more cor-
porations that creates the relationship the nature of which
we are considering. Manifestly, temporary co-operation, or
running of two or more railroads under a general manage-
ment for purposes of mutual convenience, does not effect
technical legal consolidation.t There must be some act
more decided and radical than this, such as a union, or
substitution, of stock, a concentration of corporate power
and authority in a single set of officers and board of direct-
ors, and a practical extinction, as regards future transac-
tions, of all, or at least all but one, of the consolidating
bodies. .

§ 422. Amalgamation and consolidation—The term amal-
gamation seems to be employed in England somewhat in

 

1 Wiswall v. Greenville & R. P. R. ® See § 423.
Co., 3 Jones Eq. (N. C.) 183; Munt 3 Compare Lauman v, Lebanon Val-
v. Shrewsbury & C. Ry. Co., 13 Beav. ley R.R. Co., 30 Pa. St. 42; Abbott v.
1; Cherokee Iron Co. v. Jones, 52 Ga. Johnstown, G. & K. H. R.R. Co., 80
276; Kean v. Johnson, 9 N. J. Eq. N.Y. 27.
401; Ashton v. Burbank, 2 Dill. 435. 4Compare Archer v. Terre Haute
See Maunsell v. Midland G.W.Ry.Co, & I. R.R. Co., 102 Ill. 493; 8. ¢.7
1 Hem. & M. 130; Thomas v. Rail- Am. & Eng. R.R. Cas, 249.
road Co., 1o1 U. S. 82,
350 CONSOLIDATION. § 422

the sense that attaches to the word consolidation, as used
in America with reference to corporations. Vice-Chancel-
lor Wood said :! “I should rather assume an amalgamation
to be where both companies agree to abandon their respect-
ive articles of association, and to register themselves under
new articles as one body. That would be a new company,
formed by the coalition or amalgamation of the two old
companies.” If, however, the agreement to abandon the
old organizations, and the act of registering under new
articles implies a complete destruction of the consolidating
bodies, then possibly amalgamation differs from consolida-
tion as understood in American corporation law, for with
us the combining organizations are often perpetuated for
certain purposes, especially as regards past acts. The
meaning of the word “amalgamate” is not, however,
clearly understood even in England. In the case already
quoted® this language is also employed: “I do not find
anywhere any technical definition of the term ‘amalga-
mate,’ and I have some difficulty in getting at its exact
meaning ; but whatever its definite meaning may be, it
certainly does not imply an authority from a shareholder
to his directors to execute on his behalf the deed of an-
other company, and so to make him liable in respect of all
the engagements of that other company.” In this respect
amalgamation and consolidation are alike, for, as we will
show hereafter, a stockholder cannot, under the Ameri-
can decisions, be forced into the new organization against
his will.2 Mr. Brice, speaking of the expression “ true
amalgamation,” says:* “ An amalgamation in this sense in-
volves the following processes: 1. A destruction, either
actually by dissolution, or substantially by abeyance, of
the entity of the original or transforming corporations ;

 

' In re Bank of Hindustan, 2 Hem. * See § 425.
& M. 666, “Green's Brice’s Ultra Vires, p.
3 Thid. 606,
$ 423 CONSOLIDATION.

351
2. A transfer of corporate rights and liabilities out-and-out,
present or contingent—a transfer, in short, of the legal cor-
porate persona ,; 3. A transmutation of the members of the
former corporation into members of the latter; 4. A no-
vation of the rights of creditors of the former corporation,
so that their rights and claims against it are gone, and, in-
stead, the latter corporation is their debtor.” There are
few instances with us where this sweeping list of exactions
are met in cases of consolidations. There is a process re-
sorted to in England by means of which a corporation
may assign all its assets to another body, secure itself to be
wound up, and receive an indemnity from the purchaser as
to all existing and future corporate liabilities. This pro-
cess, it is submitted, possesses more of the elements of suc-
cession than of consolidation or amalgamation, but it has
been resorted to in many instances, as an indirect means
of avoiding the legal difficulty that directors have no
power to consolidate where statutory warrant is not shown
and stockholders object.’

§ 423. Right to effect consolidation—Power of the State.—
It should be borne in mind at the outset, that there must
be legislative authority for consolidation.* ‘‘ Corporations
at common law,” said Savage, Ch. J., “have certain pow-
ers, but not such as would authorize the forming of a part-
nership, or the consolidation of two corporations into
one.”? Speaking of a consolidation agreement, the Su-

 

1 As to the inability of a corporation
to impress its shareholders into a new
scheme, see Clinch v. Financial Corpo-
ration, L. R. 4 Ch. App.117. Jn re
Bank of Hindustan, Higg’s Case, 2
Hem. & M. 657. Compare /z re Lon-
don, B. & M. Bank, Drew’s Case, 36
L, J. Ch. 785.

2 New York & Sharon Canal Co. v.
Fulton Bank, 7 Wend. (N. Y.) 412.
See also Black v. Delaware & R. Canal
Co., 24.N. J. Eq. 455; 2” ve Era In-

surance Soc., 3 L. T. (N.S.) 314; Za-
briskie v. Hackensack & New York
R.R. Co., 18 N. J. Eq. 183; Lauman
v. Lebanon Valley R.R. Co., 30 Pa. St.
46; Abbott v. Johnstown, G. & K. H.
R.R. Co., 80 N. Y. 27.

8 New York & Sharon Canal Co, v.
Fulton Bank, 7 Wend. (N. Y.) 415.
Compare Bishop v. Brainerd, 28 Conn.
289; Black v. Delaware & R. Canal Co.,
24 N. J. Eq. 455; J ve Era Insurance
Soc., 3 L. T, N.S. 314.
CONSOLIDATION, $ 423

302
preme Court of Pennsylvania observe: ‘“ No one will de-
ny that, without the authority of the legislature, neither of
these companies has power to enter into such a contract.” *
The absence of the power to consolidate without statutory
authority may be attributed in the first place to the princi-
ple that the grant of the corporate charter is in the nature
of a compact between the corporation and the State, and
the latter is entitled to a voice in any scheme having in
view an alteration or enlargement of the purposes and ob- .
jects of the corporate body. In the second place, the con-
solidated body is a new corporation, which, as has been
shown, the legislature alone has the authority to create.
Private parties cannot construct a corporate body. The
legislative power to consolidate can be given in various
ways. Where it is bestowed in general language, all the
details may be adjusted by contracts between the parties.’
The power to consolidate may spring from the original act
of incorporation, or from general statutes* enacted before
and even after the incorporation of the original companies, if
prior to consolidation.* And an unauthorized consolidation
may be ratified.» Though corporate unions, as will appear,
are favored in some respects, yet statutes will not be strained
by construction to establish authority to consolidate. The
right must be given by fair intendment. Hence a general
statute, prospective in its language, authorizing consolida-

 

‘Lauman v. Lebanon Valley R.R.
Co., 30 Pa. St. 44.

? Dimpfel v. Ohio & M. Ry. Co., 9
Biss. 129.

Nugent v. The Supervisors, 19
Wail. 248.

4 Examine Black v. Delaware & R.
Canal Co., 22 N. J. Eq. 130; see S. c.
reversed, 24 N. J. Eq. 455; Clearwater
v. Meredith, 1 Wall, 39.

5See Mead v. New York, Housatonic
& N. R.R. Co., 45 Conn. 199; Bishop
v. Brainerd, 28 Conn. 289. In McAu-

ley v. Columbus, C. & I. C. Ry. Co., 83
Ill. 352, where the right to consolidate
was challenged, Chief Justice Sheldon
said: “ This amendatory act is a legis-
lative recognition of the existence of
this consolidated company, and of the
name of the consolidated company
adopted by the articles of consolida-
tion, amounting to a legislative ratifi-
cation of the consolidation which had
been effected ; and it is also a like rec-
ognition of the right of the company to
construct a railroad.”
§ 423. CONSOLIDATION. 353

\

tion, will not be construed to have a retrospective effect.'
Where separate corporations were created to construct
railroads, it was held that they did not possess the right to
unite and conduct their business under one management,
nor were they clothed with the power to establish a line of
steamboats in connection with the railroads. Following
out this principle, it was decided that a note given by the
consolidated company in payment for a steamboat so pur-
chased was not binding jointly upon the two corporations
where the attempted consolidation had been dissolved by
due course of law. Persons dealing with the managers of
a corporation acquire their rights with notice of the limita-
tions imposed by the act of incorporation.” We shall pres-
ently advert to this case again.?> A grant of power to con-
solidate must be pursued with reasonable strictness, and
does not carry with it the right to lease. Power to
consolidate has been characterized as being a power to
take in a partner, or to enter into an enterprise as a part-
ner, while authority to lease carries with it the right
to transfer the entire enterprise to a stranger.* In a con-
solidation, the stockholders of the respective companies
still retain, to a certain extent, control of their corporate
properties, but by the execution of a lease, the stockholders
of the leasing company part with the control of their cor-
porate property, hand it over to others, and practically aban-
don their enterprise. This distinction between leasing and
consolidating is luminous and well founded, and the courts
are entirely justified in declaring that the granting of one
of these powers does not embrace the other by implication.
In this connection, it may be recalled that a State has the
power—regard being had for the rights of stockholders—

 

1 Hatcher v. Toledo, W. & W. R.R. 3 See § 440.
Co., 62 Ill. 480. * Mills v. Central R.R. Co., 41 N. J.
* Pearce v. Madison & I. R.R.Co., Eq. 7. See Archer v. Terre Haute
21 How. 441. See Clearwaterv.Mere- & I. R.R. Co., 102 Ill. 493; S. c. 7
dith, 1 Wall. 27. Am. & Eng. R.R. Cas. 249. ,
23
354 CONSOLIDATION. § 424
to create a new corporation out of two or more corpora-
tions created by the same State, as well as of two or
more natural persons, or a State may create a corporation
composed of natural persons belonging to different States.’

§ 424. Encouragement to effect consolidations.—There are
certain considerations which tend to favor consolidation
schemes, as applied to railway corporations. Unity of
management, as affecting long lines of railroad, is en-
couraged to promote the convenience and speed of pas-
senger travel, save the expense of reshipment of freight,
and avoid complicated questions as to which one of several
carriers is liable for an injury to the person or damage to
property lost in course of transportation.* Then our coun-
try is blessed with different climates, and this leads not only
to a necessary interchange between the various sections of
productions and commodities not common to the whole
country, but to temporary annual or semi-annual changes
of residence by a goodly number of our citizens, With
our vast area of territory, subdivided by State boundaries,
the matter of encouraging consolidated or trunk railway
lines, under common management, equipped for the trans-
portation of through freight, or the convenience of long-
distance passenger travel, becomes of paramount import-
ance. It would seem to be especially important that the
operations of the great railway freight lines leading from
the heart of the continent to the oceans should not be in-
terfered with by State lines or harassed by local exactions.
With proper restrictions and safeguards against corporate

 

1 Bishop v. Brainerd, 28 Conn. 289;

of corporations of two States, legisla-
s. P. State v. Maine Central R.R. Co.,

tion of both States authorizing the con-

66 Me. 500; S.C. in error, 96 U.S. 499;
State Treasurer v. Auditor General, 46
Mich. 233, per Cooley, J.; Clearwater
v. Meredith, 1 Wall. 25. Compare
‘McMahan v. Morrison, 16 Ind. 172;
State v. Sherman, 22 Ohio St. 411.
A corporation formed by consolidation

solidation, is a corporation of each
State. Burger v. Grand Rapids & I.
R.R. Co., 22 Fed. Rep. 561; Colglazier
v. Louisville, N. A. & C. Ry. Co, 22
Fed. Rep. 568.

*See Dimpfel v. Ohio & M. Ry. Co.,
9 Biss. 129.
CONSOLIDATION, 355

§ 425
extortions, these trunk lines will prove a great blessing to
all sections of the country. It is observed in the New
York Court of Appeals: ‘‘ Whatever may be the rule in
other States or in England, the public policy of this State,
as manifested by numerous acts of the legislature, has al-
ways been, not only to afford the fullest scope for the con-
solidation and reorganization of non-competing railroads
and railroad corporations, but also for the transfer of the
use of such roads and their franchises by one corporation
to another.”

$ 425. Consent of stockholders to consolidation.—Legisla-
tive authority is not always the only question to be solved
in considering the legal validity of aconsolidation. Though
not universally conceded in its full scope,’ the true rule,
and the one quite generally recognized, is that a consolida-
tion of corporations cannot be completely effected against
the will of a stockholder.? The consolidation is considered
to be an infringement of the dissenting’ stockholder’s rights
in that it effects a material and fundamental change or
variation in the purposes and objects of the corporation :
in fact, the practical effect is to abolish the corporation of
which he is a stockholder.¢ In Clearwater v. Meredith,®
the court recognizes the right of a stockholder to prevent a
consolidation if he chooses, and says that he cannot be

 

’

1 Woodruff v. Erie Railway Co., 93
N. Y. 615.

?Lauman v. The Lebanon Valley
R.R. Co., 30 Pa. St. 42; The State v.
Bailey, 16 Ind. 46. Compare Black v.
Delaware & R. Canal Co., 24 N. J. Eq.
455; Trask v. Peekskill Plow Works,
6 Hun (N. Y.) 236.

3 Mowrey v. Indianapolis & C. R.R.
Co., 4 Biss. 85; Hamilton Mutual Ins.
Co. v. Hobart, 2 Gray (Mass.) 543; Za-
briskie v. Hackensack & N. Y. R.R.
Co., 18 N. J. Eq. 183; New Jersey Mid-
land Ry. Co. v. Strait, 35 N. J. Law

325; Blatchford v. Ross, 54 Barb. (N.
Y.) 46; Jz ve Empire Assurance Co.,
L. R. 4 Eq. 341. See Stevens v. Rut-
land & B. R.R. Co.,29 Vt. 545; Ter~
hune v. Midland R.R. Co., 38 N. J. Eq..
423. Compare Mills v. Central R.R.
Co., 41 N. J. Eq. 1.

4 Compare City of Knoxville v. Knox-.
ville & O, R. Co., 22 Fed. Rep..758;
Pearce v. Madison & I. R.R. Co,, 21.
How. 442; New Orleans, Jackson &
G. N. R.R. Co. v. Harris, 27 Miss. 517..

51 Wall. 40.
356 CONSOLIDATION. § 425
forced to join the new corporation, and adds: ‘“ When any
person takes stock in a railroad corporation, he has entered
into a contract with the company, that his interests shall
be subject to the direction and control of the proper au-
thorities of the corporation to accomplish the object for
which the company was organized. He does not agree
that the improvement to which he subscribed should be
changed in its purposes and character, at the will and pleas-
ure of a majority of the stockholders, so that new respon-
sibilities, and, it may be, new hazards, are added to the
original undertaking. He may be very willing to embark
in one enterprise, and unwilling to engage in another ; to
assist in building a short-line railway, and averse to risking
his money in one having a longer line of transit.” The'stock-
holders have the exclusive right to the corporate property
and earnings. ‘What the majority determine wzthin the
scope of this mutual contract they each agree to abide by ; but
there their mutual contract ends, and no majority, however
large, has a right to divert one cent of the joint capital to
any purpose not consistent with, and growing out of, this
original fundamental joint intention. To sell the road, to
abandon the contemplated investment, and embark in an-
other scheme, whether entirely different or only more ex-
tensive than the original contemplation, as apparent on the
face of the charter, is, it seems to me, clearly contrary to

the rights of the individual stockholders,” } Concerning

 

1 Kean v. Johnson, 9 N. J. Eq. 407.
In a case before the Supreme Court of
Pennsylvania, it is said that a dis-
sentient stockholder “may object that
his co-corporators have no power to
make a new contract for him, and
thereby constitute him a member of a
new and different corporation ; for it is
‘of the very nature of a contract relation
that it can be instituted only by the
real parties to it; unless it be a mere
‘constructive contract, which is only a
convenient form or fiction of law, in-

vented to enforce a corresponding legal
duty. He may object that even the
legislature cannot authorize this, for by
doing so, they would authorize the de-
struction of one private contract, and
the compulsory creation of another in
its stead, and would take away the
remedy by due course of law, which the
dissenting stockholder is entitled to,
because of the departure or diversion
of the association from its agreed pur-
poses; and would, besides this, change
the essential nature of contracts, which
CONSOLIDATION.

§ 426 357

the rights of dissenting bondholders, a somewhat analo-
gous question, the Supreme Court of the United States,
speaking by its late lamented Chief Justice, say: ‘“ To allow
a small minority of bondholders, representing a compara-
tively insignificant amount of the mortgage debt, in the ab-
sence of any pretence even of fraud or unfairness to defeat
the wishes of such an overwhelming majority of those as-
sociated with them in the benefits of their common security,
would be to ignore entirely the relation which bondholders,
secured by a railroad mortgage, bear to each other. Rail-
road mortgages are a peculiar class of securities. The
trustee represents the mortgage, and in executing his trust
may exercise his own discretion within the scope of his
powers. If there are differences of opinion among the
bondholders as to what their interests require, it is not im-
proper that he should be governed by the voice of the ma-
jority, acting in good faith and without collusion, if what
they ask is not inconsistent with the provisions of his
trust.”

§ 426. Protecting dissenting stockholder While it is man-
ifestly clear that an unwilling stockholder cannot be forced

 

even legislative Zower cannot do, and
much less legislative authority.” Lau-
man v. Lebanon Valley R.R. Co., 30 Pa.
St. 46. See this case reviewed in Mow-
rey v. Indianapolis & C. R.R. Co., 4
Biss. 85. A statute under which the
members of several fire insurance com-
panies are merged into a new corpora-
tion “which shall not affect the legal
rights of any person,” and is to take ef-
fect “when accepted by the members of
said corporations,” does not constitute
a dissenting member of an old company
a member of the new corporation, al-
though accepted by a majority of the
members of each body. Hamilton
Mutual Ins. Co. v. Hobart, 2 Gray
(Mass.) 543. In an English case, /z re
Empire Assurance Corporation, L, R.

4 Eq. 341, it is strenuously denied that
“dissentient shareholders” are “ per-
sonally bound to take part and lot in
the new concern.” The court char-
acterize it as taking a “prodigious
step” tosay “that a dissentient share-
holder, having been concerned in an in-
surance company, shall be obliged to
become subject to all the liabilities of
another company, which is not only
an insurance company but a guaranty
company, and'a company for the pur-
chase of houses and various other
things as well.”

1Shaw v. Railroad Co., 100 U. S.
611. Compare Canada Southern Ry.
Co. v. Gebhard, 109 U.S. 527; Gates
v. Boston & N. Y. Air Line R.R. Co.,
53 Conn. 346.
358 CONSOLIDATION. § 426

into a consolidated corporation, yet a disposition is mani-
fested in certain authorities to find some means by which
a dissenting member, who is unreasonably or vexatiously
opposing a promising scheme of reorganization, may be
paid for his stock, or its value appraised’ and secured to
him, or some provision made for it.? A practical legal
method of overcoming the captious objections of perhaps
a single dissenting member to an advantageous consolida-
tion scheme, is not, however, readily pointed out. Nor is
it an easy task to determine in what manner his interest
is to be secured, or his stock purchased, if he refuses to
accept its fair value or equivalent. In Mills v. Central
Railroad Company,’ Chancellor Runyon said: “It is urged
‘that if this court finds that the lease is invalid because it is
an infraction of the complainants’ rights, it will merely de-
cree payment to the complainants of the value of their stock,
to be ascertained here. There are many cases in which,
where a corporation authorized to take property by the
exercise of the right of eminent domain, takes it without
making compensation, but under circumstances entitling
it to the consideration and protection of equity, this court
will refuse to disturb its possession, or to permit it to be
disturbed, provided due compensation, to be fixed by this
court, be made. But to take that course in this case would,
in fact, be to condemn the complainants’ stock (for which
this court has no warrant), and that, too, in the interest and
for the protection of those who are without any claim to
equitable interference. It is for the legislature to say
whether the stock of dissenting stockholders shall be taken
as for'a public use under the exercise of the right of emi-
nent domain. It has not said that it may be so taken in
this case. Those who, in such a matter as this, act without

 

1See Laws N. Y. 1867, ch. 960. Co., 30 Pa. St. 46; Black v. Delaware
*See in this connection Trask v. & R. Canal Co., 24 N. J. Eq. 455.
Peekskill Plow Works, 6 Hun (N. Y.) 84a N. J. Eq. 13.
236; Lauman v. Lebanon Valley R.R.
$ 426 CONSOLIDATION. 359

the acquiescence of all the stockholders, do so at their peril,
and must take the consequences if their act be undone at
the instance of dissentient stockholders.” The exercise of
the power of eminent domain*® would seem to be the
most effectual method of acquiring the interest of a non-
consenting stockholder, with a view to complete a consol-
idation scheme. The statutes enacted in certain States per-
mitting an appraisal of the objecting members’ stock, and
payment to the objectors of the value so ascertained, have
worked beneficial results in certain cases. Concerning the
character of the assent given we may remark in this con-
nection that where stockholders have consented to a lease,
the terms of it as proposed cannot be varied without their
consent.® In a celebrated case in New York,‘ after observ-
ing that a lease must be made with the assent of the stock-
holders, Van Brunt, J., said: “If the board of directors
could not make a new lease upon definite terms and con-
ditions, then clearly they could not radically modify the
old lease.” And the principle must also be kept in mind
that if, at the time of incorporation, clear statutory warrant
for leasing or entering into a consolidation scheme existed,
a minority cannot object to the exercise of the power, and
subscriptions to the stock of one of the consolidating
bodies will not be invalidated thereby.’ It is observed in
an English case,® a statute existing there authorizing radical

 

2 As to when dissenting stockholders 4 Metropolitan Elevated Ry. Co. v.
are bound by a scheme of reorgan- Manhattan Ry. Co., 15 Am. & Eng.
ization, see Middletown v. Boston & R.R. Cas. 1, 51; S. C. 14 Abb: N.C.
N.Y. A. L. R.R. Co., 53 Conn. 351; (N. Y.) 103, 235.

s.c. 2 New Eng. Rep. 553; Gates v. 5 Sparrow v. Evansville & C. R.R.
Boston & N. Y. A. L. R.R. Co., 53 Co., 7 Ind. 369; Bish v. Johnson, 21
Conn. 333; S.C. 1 New Eng. Rep. 464. Ind. 299; Nugent v. The Supervisors,
Compare Canada Southern Ry. Co. v. 19 Wall. 241; Bates County v. Winters,
Gebhard, 109 U. S. 527; and see also 112 U. S. 325; Niantic Savings Bank
Chap. XXI. . v. Town of Douglas, 5 Brad. (I1l.) 579.

2 See § 442. See § 439.

3 See March v. Eastern R.R. Co., 43 6 Simpson v. Denison, 10 Hare 56.
N. H. 515.
360 CONSOLIDATION. §§ 427, 428
corporate changes, that ‘‘every person who becomes a
shareholder in such a company must be considered as hold-
ing, and contracting to hold, those shares, subject to the

provisions of this statute.”

§ 427. No lien in favor of original shareholders.—We may
observe, concerning a shareholder’s title to corporate assets,
that he has no such interest in real estate owned by his cor-
poration as will entitle him to a vendor's lien thereon as
against a company formed by the consolidation of his com-
pany with another." The doctrine of a vendor's lien does
not, for obvious reasons, apply in his favor to the case of a
transfer of assets of uniting corporations to the consolidated
body. The consolidation of the stock and property of
several corporations into one is not, in the first place, strictly
speaking, a sale; and, in the second place, it affects fran-
chises and personal property as well as real estate.”

$ 428. Succession and consolidation distinguished.—Succes-
sion differs from consolidation, in that a purchaser acquires
the property, and sometimes the franchise, of the corpora-
tion, but does not, as a general rule, become responsible for
its debts ;* while a consolidated corporation, on the other
hand, usually assumes, or becomes bound for, the liabilities
of the corporations of which it is composed.‘ To illus-
trate: Where a new bank was incorporated bearing the
same name as the old bank whose charter was expiring, the
new bank was held not to be responsible for the notes of
the defunct bank, although the major part of the stock-

 

‘Cross v. Burlington & S. W. Ry. Cook v. Detroit G. H. & M. Ry. Co.,

Co., 58 Iowa 62.

? Wabash, St. L. & Pac. Ry. Co. v.
Ham, 114 U.S. 597. See Green Co,
v. Conness, 109 U. S. 104.

3 Examine Sappington v., Little Rock
M.R.& T. R.R. Co., 37 Ark. 23; City
of Menasha v. Milwaukee & N. R.R.
Co,, 52 Wis. 414; Gilman v. Sheboygan
& F.du Lac R.R. Co., 37 Wis. 317;

43 Mich. 349; Hammond v. Port
Royal & A. Ry. Co., 15 S.C. 10; 5c.
16 S. C, 567; Vilas v. Milwaukee &
P. du Chien Ry. Co., 17 Wis. 502;
State v. Chicago & N. W. Ry. Co., 18

‘Wis. 17; Wright v. Milwaukee & St.

P, Ry. Co., 25 Wis. 46,
“See §§ 431, 434.
§ 429 CONSOLIDATION. 361
holders were the same in each bank. Story, J., said, in
the course of the opinion: ‘The similarity of name, of
officers, or of members, or even of objects, cannot then, Jer
se, establish the identity of corporations created at differ-
ent times by different charters and having a distinct inde-
pendent being. . . . . There is indeed a repugnancy in the
statement of the proposition that wo corporations are in
point of law the same, for it would at the same time estab-
lish that there is but oxe corporation.”* It would follow, on
general principles, that a purchaser of railroad property at
foreclosure sale is not liable for a judgment against the in-
solvent company ;? nor does a purchaser assume the con-
tracts of the defunct body,® or become liable for damage-
claims against it.*

$ 429. What corporations may consolidate—As has been
shown, any corporation receiving legislative warrant so to
do, may consolidate with another corporation® In a case
before the New York Court of Appeals, in which it ap-
peared that statutory power had been given to a railroad
corporation to consolidate with axy other, it was held that
whatever other corporation was selected by it for a union,
and was willing to join it, and not incapacitated from en-
tering into the union with it, acquired the power from the
statute to consolidate, though not named therein.®

 

' Bellows v. Hallowell & A. Bank, 2
Mason 31, 44. Compare Booth v. Bunce,
33. N. Y. 139. In Green County v. Con-
ness, 109 U. S. 104, 106, Mr. Justice
Bradley said: “If only a sale of the
road to another company had been au-
thorized and made, then it might very
plausibly have been contended that the
purchasing company took and held it
under its own charter only, without the
franchises and privileges connected with
it in the hands of the vendor company ;
but ‘consolidation’ is not sale, and
when two companies are authorized to
consolidate their roads, it is to be pre-

sumed that the franchises and privi-
leges of each continue to exist in re-
spect to the several roads so con-
solidated,” citing Tomlinson v. Branch,
15 Wall. 460, and Branch v. City of
Charleston, 92 U. S. 677.

2 Gilman v. Sheboygan, etc. R.R. Co.,
37 Wis. 317.

® City of Menasha v. Milwaukee & N.
R.R. Co., 52 Wis. 414.

4Hammond v. Port Royal & A. Ry.
Co., 16S. C. 567; 8. C. 15 S.C, Io,

5 See § 423.

6 Matter of Prospect Park & C. I.
R.R. Co., 67 N. Y. 371.
CONSOLIDATION.

362 § 43

$ 430. Consolidated company a new corporation. — The
legislature may incorporate by means of consolidation.’
Indeed, consolidation is, in a sense, re-incorporation. As
we have shown, the legislative power is the fountain of
corporate existence.? It follows that effectual corporate
consolidation cannot rest in contract between private parties.
It may be observed that when a corporation is formed out
of two bodies, the latter ceasing thereafter to exist,? the law
forming the new corporation governs and controls its cor-
porate functions and rights. But consolidation signifies
something more than succeeding to corporate rights and
franchises. The new corporation is not to be considered
as a stranger to the former associations. The duties and
obligations resting upon the several component corpora-
tions, must be recognized and performed by the consoli-
dated organization, unless otherwise provided in the con-
solidation statute. Thus, it was said in Illinois: “When a
new corporation is formed by amalgamation, under the au-
thority of the State, of two or more distinct corporations
into one, such new corporation succeeds to all the faculties
and rights of the several components, and must, as a neces-
sary consequence, be subject to all the conditions and duties
imposed by the law of their creation,’ except so far as it
may be otherwise provided by the act under which such

 

*State v. Maine Central R.R. Co., 66
Me. 506,

2 See § 423.

?The consolidating bodies cannot
usually sue or be sued by their old
names. Indianola R.R. Co. v. Fryer, 56
Tex. 609. Compare Ridgway Town-
ship v. Griswold, 1 McCrary 151.

4Cheraw & S. R.R. Co. v. Commis-
sioners of Anson, 88 N. C. 519, 525;
Indianapolis, C, & L. R.R. Co. v. Jones,
29 Ind. 466. See Shields v. Ohio, 95 U.
S. 319; Railroad:Co. v. Maine, 96 U.S.
499; Delaware Railroad Tax (Minot y.

Phila, W. & B. R.R. Co.), 18 Wall.
206; Railroad Company v. Georgia, 98
U.S. 359; Union Trust Co. v. Roch-
ester & P. R.R. Co., 29 Fed. Rep.
609; S.C. 1 Railw. & Corp. L.J.17. In
New York, under Laws 1869, ch. 917,
a corporation organized by the con-
solidation of various foreign and do-
mestic railroad companies, is considered
to be a domestic corporation. Sage v.
Lake Shore & M. S. Ry.Co.,70 N.Y.220.

'See Gould v. Langdon, 43 Pa. St.
365; Tomlinson v. Branch, 15 Wall.
460,
§ 430 CONSOLIDATION. 363

consolidation is effected.” Hence the consolidated body
is bound to restore to a condition of usefulness a stream,
the flow of which was interfered with by one of the con-
solidating organizations? And a purchaser of a railroad
franchise under statutory authority, takes the same subject
to restrictions as to transportation charges.*? But the new
company only assumes and becomes bound to perform the
obligations of the consolidating bodies as they existed at
the time of the consolidation. Hence, where a railroad
corporation enters into a contract to haul cars over all its
tracks, and subsequently forms a consolidation, the new
corporation is not bound under the contract to haul cars
over lines not owned or controlled by the contracting cor-
poration.* In Shields v. Ohio,® Swayne, J., speaking of
the legal effects of consolidations, employs this language :
““When the consolidation was completed, the old corpora-
tions were destroyed, a new one was created, and its powers
were ‘granted’ to it, in all respects, in the view of the law,
as if the old companies had never existed, and neither of
them had ever enjoyed the franchises so conferred. The
same legislative will created and endowed the new corpo-
ration.” In the same case, Strong, J., said, in a dissenting
opinion: ‘I agree that, by the consolidation effected under
the statutes, a new corporation was created, with the powers
and restrictions of the constituent corporations.”® Chief
Justice Waite, speaking of a consolidated organization,
said: ‘It is a new corporation created by the dissolution

 

1The Chicago, R. I. & P. R.R. Co.
v. Moffitt, 75 Ill. 528; Peoria & R.I.
Ry. Co. v. Coal Valley Mining Co., 68
Ill. 489; Tennessee v. Whitworth, 117
U.S. 147.

*See Chicago, R. I. & P. R.R. Co.
v. Moffitt, 75 Ill. 524.

3 Campbell v. Marietta & C. R.R. Co.,
23 Ohio.St. 168. Compare Daniels v.
St. Louis, K, C. & N. R.R. Co., 62
Mo, 43.

4 Pullman Palace Car Co. v. Missouri
Pacific Ry. Co., 115 U.S. 595.

595 U.S. 323.

®See Ridgway Township v. Gris-
wold, 1 McCrary 151; Philadelphia &
W.R.R. Co. v. Maryland, 10 How. 393 ;
Cooper v. Corbin, 105 Ill. 224; Light-
ner v. Boston & Albany R.R. Co., 1
Lowell 338; Indianola R.R. Co. v.
Fryer, 56 Texas 616,
364 CONSOLIDATION, $ 43

of several old ones, and the establishment of this in their
place. It has new powers, new franchises, and new stock-
holders.” Where the stocks of the two companies are to
be consolidated, this necessarily supersedes the old corpo-
rations.® The stocks constituted the capital and substance
of the consolidating bodies. In a New Jersey case this
language is used: ‘The consolidated companies, in the
nature of things, cannot be the same as any one of their
constituents. Such a company has larger purposes, wider
powers, and heavier responsibilities than those inherent in
either of its component parts.”® Mr. Justice Bradley has
said: “The keeping alive of the rights and privileges of the
old company, and transferring them to the new company
in connection with the property, indicates the legislative
intent, that such property was to be holden in the same
manner and subject to the same rights as before. The
owners of the property were to lose no rights by the trans-
fer, nor was the public to lose any rights thereby. Of
course, these remarks do not apply to those corporate rights
and franchises of the old company, which appertain to
its existence and functions as a corporation. These become
merged and extinct. But all its rights and duties, its privi-
leges and obligations, as related to the public or to third
persons, remain, and devolve upon the new company.” *
The reader must remember, however, that the consolida-
tion does not necessarily work a complete dissolution of
both corporations, though it may effect a creation of a new
corporation. Whether or not a dissolution results, depends
upon the legislative intent, as manifested in the consolidation
statute. One company, as we have said, may be merged

 

1 Pullman Palace Car Co, v. Missouri 359, 364; Louisville & Nashville R.R.
Pacific Ry. Co. 115 U.S. 594; citing Co. v. Palmes, 109 U.S. 244.
Clearwater v. Meredith, 1 Wall. 42;  ? Railroad Company v. Georgia, 98
Shields v, Ohio, 95 U. S. 319, 323; U.S. 362.

Railroad Co. v. Maine, 96 U. S. 499, ®’ New Jersey Midland Ry. Co. v.
508; Railroad Co. v, Georgia, 98 U.S. Strait, 35 N. J. Law 325,
“Tomlinson y. Branch, 15 Wall. 465.
§ 430

CONSOLIDATION,

365

in and absorbed by the other consolidating body.’ That the
consolidating bodies may be kept in existence, is evidenced
in the case of Lightner v. Boston & Albany Railroad Com-

 

'Central Railroad & Banking Co. v.
Georgia, 92 U.S. 665,670. Strong, J.,
said : “It is of vital importance to this
case to examine the effect of the union
of the two companies, under what is
called ‘the consolidation act of the legis-
lature,’ of Aug. 24, 1872. Did the act
contemplate a surrender of its charter
by the Central Railroad and Banking
Company, and the grant to it of a new
charter, or a re-grant of the old? It may
be that the consolidation of two corpo-
rations, or amalgamation, as it is called
in England, if full and complete, may
work a dissolution of them both, and
its effect may be the creation of a new
corporation. Whether such be the ef-
fect or not, must depend upon the
statute under which the consolidation
takes place, and of the intention therein
manifested, If, in the statute, there be
no words of grant of corporate powers,
it is difficult to see how anew corpora-
tion is created If it is, it must be by
implication; and it is an unbending
rule that a grant of corporate existence
is neverimplied. Inthe construction of
a statute, every presumption is against
it. True it is that in McMahan v.
Morrison, 16 Ind. 172, where three cor-
porations had consolidated under an act
of the legislature, authorizing them to
merge and consolidate their stock ‘and
make one jotnt company, it was said
that the effect of the act and the terms
of consolidation under it was a dissolu-
tion of the three corporations, and at
the same instant the creation of a new
corporation with property, liabilities,
and stockholders derived from those
then passing out of existence. And
this language was quoted approvingly
by this court in Clearwater v. Meredith,
1 Wall. 40. But in neither case was an

assertion of this doctrine necessary to
the decision made. The first was a
suit against the consolidated company
on aclaim against one of the old com-
panies, and the other was a suit by a
party who had consented that the
stock of a railroad company should be
merged and consolidated with that of
another company, against one who had
guaranteed that the stock should be
worth a certain price at a fixed time.
After having consented that the stock
thus guaranteed should be consolidated
with other stock, he was not permitted
to recover. And, indeed, we find no
case decided in this country where the
question directly arose, or was neces-
sarily determined. There are numerous
cases where a consolidated company,
has been held liable for the debts of the
old companies, and where it has been
held to possess the rights of the old
companies; but this does nat neces-
sarily imply a surrender of all the old
charters, So there are cases where it
has been held that a consolidation can-
not be consummated against the con-
sent of a stockholder in one of the
companies unless his stock is purchased.
This, however, may be doubted as ap-
plicable to all cases; but, if universally
true, it leaves open the question, whether
the consolidation is the creation of a
new company. Lauman v. Lebanon
Valley R.R. Co., 30 Pa. St. 46, was a
bill by a stockholder for an injunction
against consolidation ; and all that was
decided was, that his interest must be
protected before consolidation could
take place. We are not called upon,
however, now to determine whether a
consolidation, effected under a statute
making no express grant of a new cor-
porate existence, may not,in some cases,
366 CONSOLIDATION. § 430

pany,' where Lowell, J.,said: “It is.true that the defendant
corporation is distinct from either of its component corpo-
rations, but that is a mere matter of detail and convenience.
The old corporations have never been dissolved, and might
well enough be held to exist for all purposes for which their
continuance is necessary.” In New York, the point is ex-
pressly taken that consolidation is not a complete surrender
of personal identity or corporate existence by either of the

corporations.”

The continued existence of the combining

 

work a dissolution of the existing cor-
porations, and, at the same time, the
creation of a new company; for, in the
present case, we think the act of 1872
plainly contemplated no such thing. It
is true, the act speaks of union and
consolidation. It authorizes the two
companies to unite and consolidate
their stock, and all their rights, privi-
leges, immunities, property, and fran-
chises; but it prescribes the manner in
which this may be done, and its effect.
It is to be done under the name and
charter of the Central Railroad and
Banking Company; that is, the union
is to be under that charter, not under
a new charter of a company bearing
that name. The union is also to be in
such a manner that every holder of the
shares of the capital stock of the Macon
and Western Railroad Company shall
be entitled to, and shall, on the sur-
render of their certificates, receive an
equal number of shares of the capital
stock, as a shareholder in the Central
Railroad and Banking Company of
Georgia, as declared in the fourth sec-
tion. But there is no provision for a
surrender of the certificates of stock of
the shareholders of the Central, and
none for the issue of other certificates
to them. Their rights, whatever they
may be after the union, are evidenced
only by certificates of stock of the
company chartered in 1835. If that
charter has gone out of existence,

1

they are stockholders in no company.
Again: the act declared that all con-
tracts of either of the companies should
be assumed by and binding on the
Central Railroad and Banking Com-
pany, and all benefits and rights under
the same—that is, under the contracts
—should vest in that company, not in
a new corporation then springing into
life. Nowhere in the act is there an
intimation of any legislative purpose
that the Central Railroad Company
should cease to exist. The Macon and
Western Railroad Company was un-
doubtedly intended to go out of exist-
ence: for provision was made for the
surrender ofall the shares of its capital
stock; and without stockholders it
could not exist. The existence of such
a provision in regard to the one com-
pany, and its absence in regard to the
other, is a strong argument in support
of the conclusion that it was not in-
tended the Central Railroad and Bank-
ing Company should surrender its char-
ter, or dissolve.”

ly Lowell 338, 340.

° Boardman v. Lake Shore & M.S.
Ry. Co., 84 N. Y¥. 181. See Prouty v.
Lake Shore & M. S. Ry. Co., 52 N. Y.
363; Chase v. Vanderbilt, 62 N. Y. 307.
In Wabash, St. L..& P. Ry. Co. v. Ham,
114 U.S. 595, Mr. Justice Gray said:
“But upon the consolidation, under ex-
press authority of statute, of two or
more solvent corporations, the business
$ 430 CONSOLIDATION.

367
companies is, as we have shown, often recognized for the
purpose of preserving the rights of creditors. In a leading
and very important railroad case in Alabama, it is con-
tended that the words “consolidate” and “consolidation,”
as used in statutes authorizing the union of several corpo-
rations, have never acquired a recognized judicial construc-
tion which necessarily imports that all the companies are
dissolved and merged into one new company. On the con-
trary, it was urged that the terms were equally applicable
to a union of two or more companies, in such a way that
one of them is continued in existence under a new name
and with enlarged powers, while others are merged in and
absorbed by it. When the statute authorizes the com-
panies to consolidate “to such an extent, and upon such
terms, as may be agreed on by and with the company or
companies entering into agreement with them,” the char-
acter of the consolidation is determined by the agreement.
In Louisiana’ this language is used: “ The articles of con-
solidation and the legislative act by authority of which they
were executed, evidently present a case of complete and
perfect amalgamation, the effect of which was, under Amer-
ican authorities, to terminate the existence of the original
corporations, to create a new corporation, to transmute the
members of the former into members of the latter, and to
operate a transfer of the property, rights, and liabilities of
each old company to the new one.” It will be apparent,
from a review of these authorities, that the legal effect of a

 

of the old corporations is not wound
up, nor their property sequestrated or
distributed, but the very object of the
consolidation, and of the statutes which
permit it, is to continue the business of
the old corporations. Whether the old
corporations are dissolved into the new
corporation, or are continued in ex-
istence under a new name and with
new powers, and whether, in either
case, the consolidated company takes

the property of each of the old corpo-
rations charged with a lien for the
payment of the debts of that corpora-
tion, depends upon the terms of the
agreement of consolidation, and of the
statutes under whose authority that
consolidation is effected.”

1 Meyer v. Johnston, 64 Ala. 604.

°’Fee v. New Orleans Gas Light
Company, 35 La. Ann. 413, 416.
368 CONSOLIDATION. § 431
consolidation of corporations is scarcely ever precisely the
same in any two given cases. The intent of the parties,
the character of the original charters, and the wording of
the consolidating statute must always be consulted in reach-
ing a conclusion as to the true character and results of an

attempted amalgamation.

§ 431. Effect of consolidation on property and debts.—As
has been shown, where one corporation goes entirely out
of existence by being annexed to or merged in another cor-
poration, if no arrangements are made respecting the prop-
erty and liabilities of the corporation which ceases to exist,
the subsisting corporation will be entitled to all the prop-
erty and be answerable for all the liabilities.1 The follow-
ing language is used in a case in Arkansas: ‘It is well
settled by numerous decisions that where two or more rail-
road companies form by union or consolidation a new or
consolidated company, the latter, unless restricted by the
laws under which the consolidation takes place, succeeds
to and possesses the franchises, rights, privileges, and
immunities of the several companies from which it is
formed.”* Ina Western case it is observed: ‘“ Instead of
two, there was now but one corporation, made up of the
mingled elements of the two pre-existing companies, so
combined and merged that neither could be separately
identified or brought into court.”* For the purposes of

 

and assumed their liabilities.”

1Thompson v. Abbott, 61 Mo. 177.
See Central R.R. & Banking Co. v.
Georgia, 92 U. S. 671; Tomlinson v.
Branch, 15 Wall. 460; Tysen v. Wa-
bash Ry. Co., 11 Bissell 510; S.C. 15
Fed. Rep. 763; Tennessee v. Whit-
worth, 117 U.S. 147. See §.428. In
Wabash, St. Louis & Pac. Ry. Co. v.
Ham, 114 U.S. 595, Mr. Justice Gray
said: “ The effect of the Ohio Consol-
idation Act was to merge the old cor-
porations into the new one, which took
their place, succeeded to their property,

Citing
Shields v. Ohio, 95 U.S. 319; Railroad
Co. v. Georgia, 98 U. S. 359.

* Zimmer v. State, 30 Ark. 680, cit-
ing Mayor, etc. of Baltimore v. Balti-
more & Ohio R.R. Co., 6 Gill (Md.)
288; Tomlinson y, Branch, 15 Wall.
460, See Tennessee v. Whitworth, 117
U.S. 147; Green County v. Conness,
109 U.S. 104.

3 The Indianapolis, C. & L. R.R. Co.
v. Jones, 29 Ind. 466,
§ 432 CONSOLIDATION. 369
answering for the liabilities of the constituent corporations,
the consolidated company should be deemed to be merely
the same as each of its constituents, their existence con-
tinued in it, under the new form and name, their liabilities
still existing as before, and capable of enforcement against
the new company in the same way as if no change had oc-
curred in its organization or name.’ Hence, where a rail-
road company is created by the consolidation of two other
corporations, and acquires the property and assumes the
debts of the two corporations out of which it is formed, it
will not be permitted to escape paying an unrecorded mort-
gage given by one of the original companies by pleading
ignorance of it.2, The consolidated company may be held
liable for a tort of one of the old corporations,®? occasioned
by neglect or breach of duty,* such as damages for personal
injuries.®

§ 432. Liability to amount of property received.—Some of
the cases establish the rule that the new corporation will
be liable for the debts of the old one, at least to the extent
of the assets of the old corporation received by it.6 Thus
in Brum v. Merchants’ Mutual Insurance Company,’ Par-
dee, J., said: ‘‘As the Home took all the property of the
old company, leaving nothing to pay the amounts due libel-
lants, and as it took them, not as creditors, but as owner, it
seems clear to me that it must pay the debts of the old
company, at least to the amount of the assets converted.”

 

‘Ibid.; s. Pp. Warren v. Mobile & M.
R.R. Co., 49 Ala. 582. See Pullman
Palace Car Co. v. Missouri Pacific Ry.
Co., 115 U.S. 596.

? Miss, Val. Co. v. Chicago, St. L. &
N. O. R.R. Co., 58 Miss. 846. See
McAlpine v. Union Pacific Ry. Co., 23
Fed. Rep. 168. See § 438.

See New Bedford R.R. Co. v. Old
Colony R.R.Co.,120 Mass. 397; Texas &
Pacific Ry.Co. v. Murphy, 46 Texas 356.

24

‘ Coggin v. Central R.R. Co., 62 Ga.
685; Texas & Pacific Ry. Co. v. Mur-
phy, 46 Texas 356; Chicago, R. I. &
Pac. R.R. Co. v. Moffitt, 75 Ill. 524.

5 Warren v. Mobile & Montgomery
R.R. Co., 49 Ala. 582; St. Louis &
San Francisco R.R. Co. v. Marker, 41
Ark. 542.

6 Hibernia Ins. Co. v. St. Louis & N.
O. Transp. Co., 13 Fed. Rep. 516.

716 Fed. Rep. 143-
CONSOLIDATION. § 433

370
The liability to this extent is certainly very clear. Indeed,
consolidation may be enjoined or prevented, or the prop-
erty followed where provision for the old debts is not
made.! The liability of the new corporation for the debts
of the consolidating bodies to the extent of the property
received by it, is analogous to the case of an heir being
held accountable to creditors of an intestate for the amount
of property received by inheritance. The logical result to
be deduced is that the consolidated body must in any event
answer for debts of the consolidating body to the extent
of the property received, and may in addition be liable for
all the debts by assumption, without reference to such value
or amount.?

$ 433. Title to assets and franchises of consolidating bodies.
—It results, from the conclusions already stated, that the
assets, choses in action, and franchises of the original asso-
ciations vest in the united body. Authority to exercise the
power of eminent domain;* to continue condemnation
proceedings ;* to use a patented invention under licenses
issued to the consolidating bodies ;° to receive an appro-
priation intended for one of the original associations ;° and
to mortgage,” may pass by consolidation to the new com-
pany. So the consolidated body acquires the right to sue
in its own name upon a chose in action the property of one
of the consolidating bodies.§ Indeed, its right to use any
name but its new one may be gravely questioned.’ And it

 

1 Examine Booth v. Bunce, 33 N.Y. York & Harlem R.R. Co, 67 N.Y.
139; Barclay v. Quicksilver Mining Co., 227.
9 Abb. Pr. N. S. (N. Y.) 283. Com- * Lightner v. Boston & Albany R.R.

pare Kelly v. Mariposa Land & Min-
ing Co,, 4 Hun (N. Y.) 632.

2See Prouty v. Lake Shore & M.S.
Ry. Co., 52 N.Y. 363.

8 South Carolina Railroad Co. y.
Blake, 9 Rich (S. C.) Law 233.

4 Toledo A. A. & G, T. Ry. Co. v.
Dunlap, 47 Mich. 456; Kip v. New

Co,, 1 Lowell 338.

® Scott v. Hansheer, 94 Ind. 1.

™ Mead v. N. Y., Housatonic & N.
R.R. Co., 45 Conn. 199.

* University of Vt., etc. v. Baxter’s
Estate, 42 Vt. 99.

* Indianola R.R. Co. v. Fryer, 56
Texas 609,
CONSOLIDATION. aI

§§ 434, 435
may compromise disputed claims existing against one of
the former corporations and sustain an action to enforce
the settlement.1| The consolidated company may even exe-
cute a mortgage upon the consolidated property, which will
be paramount to the unsecured debts of the constituent
companies.”

$ 434. Assumption of obligations.—The obligations of the
original companies may, as we have shown, become bind-
ing on the new corporation by express assumption.* In-
deed, there is authority to the effect that the liability of the
new company for debts of the old must be founded upon
agreement, express or implied. In some instances the con-
solidating act itself ‘‘makes the new corporation responsi-
ble for the contracts, debts, obligations, engagements and
liabilities at law or in equity of the several companies,” ®

§ 435. Effect of consolidation upon liens.—With respect to
the status of the property received by the united body, we
may state that a mortgage or lien existing upon a line of
railway at the time of consolidation remains a valid secu-
rity and may be enforced. So where parties purchased a
railroad, and left a part of the purchase money unpaid, and

 

1 Paine v. Lake Erie & L. R.R. Co.,
31 Ind. 283.

* Tysen v. Wabash Ry. Co., 15 Fed.
Rep. 763.

3 Prouty v. Lake Shore & M.S. Ry.
Co., 52 N. Y. 363; Chase v. Vanderbilt,
62N.Y.307. See Sappington v. Little
Rock, M. R. & T. R.R. Co., 37 Ark. 23.

4The Houston & T. C. R.R. Co. v.
Shirley, 54 Texas 125.

5 Philadelphia & W. R.R. Co. v.
Maryland, 10 How. 393. In Board-
man v. Lake Shore & Mich. So. Ry.
Co., 84 N.Y. 181, the court say: “It
is held that where two railroads are
consolidated, as far as one of the cred-
itors of one of the original companies
is concerned, the consolidated com-

pany is the successor of the old com-
pany ; but, in respect to the properties
of the other companies, it is a new and
independent company, and such cred-
itor has no claim against it upon their
original contract, but only by virtue of
its assumption of the obligations of the
old companies (Prouty v. Lake Shore &
M.S. Ry. Co., 52 N. Y. 363). The dis-
tinct point was taken, in the case last
cited, that the consolidation was not a
surrender of personal identity or corpo--
rate existence by either of the corpora-
tions. (See also Chase v. Vanderbilt,.
62 N. Y. 307; Sage v. Lake Shore &
M. S. Ry. Co., 70 N. Y. 220.) ”

* Rutten v. Union Pacific Ry. Co., 17
Fed. Rep. 480.
372 CONSOLIDATION. § 436

then incorporated, it was held that the company so formed
took the road subject to a lien for unpaid purchase money,
and this lien was not discharged by consolidation with an-
other company.! This is a necessary result, otherwise cor-
porations entering into consolidation schemes might be en-
abled to impair the obligations of contracts existing with
the consolidating bodies.* And, as we shall see, the new
corporation cannot avail itself of the protection accorded a
purchaser without notice as regards dormant or unrecorded
liens,?

§ 436. Sale of consolidated railroad.—Important questions
frequently arise concerning the enforcement of remedies
against the consolidated property. In a Virginia case, it
appeared that the original companies had mortgaged their
respective properties. After consolidation, the court or-
dered that the consolidated property be sold as an entirety,
the proceeds to be subsequently apportioned among the
several claimants upon the respective roads. The legality
of this procedure would seem to be questionable, but it was
plausibly maintained. The argument advanced was that
the value of a railroad depends largely in its length, con-
tinuity, connections, and the business which it can accom-
plish. Christian, J., said: “If cut up into parcels and sold
by divisions, it would lose its great value as a continuous
line of road. If thus sold, the lien holders on the different
divisions would not realize the same amount as if sold as
an entirety. It was argued that to sell the road as an en-
tirety would be in violation of the contract of mortgage-
liens upon the separate divisions. The plain answer to
this proposition is, that a sale of all the different divisions
.at the same time carries out effectually the contract to sell

 

' North Carolina R.R. Co. v. Drew, * The Key City, 14 Wall. 653; Miss,
-3 Woods 691. Val. Co. v. Chicago, St. L. & N.O,
* See City of Menasha v. Milwaukee R.R. Co., 58 Miss. 846.
.& N. R.R. Co., 52 Wis. 414.
§§ 437, 438 CONSOLIDATION. 373

upon default each separate division. And the fact that the
particular separate division on which the mortgage rests is
sold at the same time and together with other divisions of
the road, is in no manner a violation of the contract of the
mortgagee.” !

$ 437. Judgment against consolidated company.—The fol-
lowing case may serve as an illustration of one of the pecu-
liar results incident to consolidation, and tend to show in
what manner the consolidated company becomes the rep-
resentative of the associations joining in the consolidation.
Judgment was recovered against a consolidated corpora-
tion. After the rendition of the judgment, and before its
enforcement, the union of the companies was dissolved by
judicial decree, and the separate companies respectively
resumed their former separate existences. The plaintiff
served notice for execution on each company, and the
court held that the notice was properly served, and the
proceedings touching the union of the companies in no
way affected their liability on the judgment. The court
observed: “The order of the court dissolving the associ-
ation could not affect the plaintiff, nor destroy the validity
of his judgment. He was not a party to, nor bound by
said proceedings.” ?

$ 438. Consolidated company not a purchaser without no-
tice.— Where two corporations are consolidated, the new
corporation, to whom their property is transferred, cannot
avail itself of the doctrine applicable to a purchaser without
notice.2 It cannot avoid a contract for the sale of land
existing with one of the consolidating bodies. The con-

 

1 Gibert v. Washington City, Va.,M. Woods 691; Miss. Val. Co. v. Chicago,
& G.S. R.R. Co., 33 Gratt. (Va.) 586, St. L. & N.O. R.R. Co., 58 Miss. 846.

611. See § 431, but compare Whipple v.
* Ketcham v. Madison, I. & P.R.R. Union Pacific Ry. Co. 28 Kans,
Co., 20 Ind. 262. 474.

® The Key City, 14 Wall. 653. See 4 McAlpine v. Union Pacific Ry. Co.,
North Carolina R.R. Co. v. Drew, 3 23 Fed. Rep. 168.
CONSOLIDATION. $ 439

374

solidation is a transfusion of corporate existence. The
original bodies are in a certain sense intact, though ab-
sorbed by the new entity.

§ 439. Effect of consolidation on subscriptions.—Closely
allied to the question already considered, concerning the
necessity of securing the assent of stockholders to a con-
solidation,! is that of the effect of the union on a subscrip-
tion not yet paid in. Generally speaking, where a consoli-
dation of two or more corporations is effected, after a sub-
scription to the stock of one of the corporations has been
obtained, but not paid in, if the authority to consolidate is
subsequent to the subscription, or the object of the enter-
prise is changed by the consolidation, the subscriber is ab-
solved from payment.? The subscriber has a right to exer-
cise his individual judgment as to the character of the
enterprise in which he will embark. It may well be that
stock in one of the original bodies would constitute a con-
servative and secure investment, while an investment in the
consolidated scheme would imperil the subscriber's money.
It must be remembered, however, that when the consol-

 

1 See §§ 425, 426.

? See Harshman v. Bates County, 92
U.S. 569; McCray v. Junction R.R.
Co., 9 Ind. 358; Martin v. Junction
R.R. Co., 12 Ind. 605; New Jersey
Midland Ry. Co. v. Strait, 35 N. J.
Law 322; Clearwater v. Meredith, 1
Wall. 25; Booe v. Junction R.R. Co.,
10 Ind. 93. In New Jersey Midland
Ry. Co. v. Strait, 35 N. J. Law 324,
it appeared that a railroad company
agreed to deliver its bonds in consider-
ation of certain moneys to be paid in
installments, and afterwards by legis-
lative sanction became amalgamated
with other companies, tendered the
bonds of the consolidated organization
and sued for the subscription. Chief
Justice Beasley said in sustaining a
nonsuit: ‘Neither the court nor the

legislature can alter the bargain be-
tween these parties. The defendant
had the right to stipulate for the bonds
of a particular company, and it is clear
he cannot be required to accept, in lieu
of the promised consideration, the ob-
ligation of any other company, no mat-
ter how much the latter may exceed in
value the former. There is no legal
mode in which the contract of a man
can be improved from him against his
consent. As the bond of the contract-
ing company formed the entire consid-
eration for the promise of the defend-
ant, if such company have put it out of
its power to render such bond to the
defendant, it has destroyed this con-
tract by its own voluntary act, and
has, in consequence, discharged the
defendant,”
$ 440 CONSOLIDATION. 375
idation does not effect a fundamental change in the object
contemplated, then the subscription will not be invalidated,’
especially if statutory warrant for consolidation existed
when the subscription was effected.* A subscription by a
county to be paid in bonds to a railroad, made in full view
of a law that allowed amalgamation with another company,
cannot be avoided because a consolidation takes place be-
fore the bonds are delivered, where the transaction is con-
summated and the bonds passed into the hands of a dona
fide holder for value. To effect a release the alteration in
the arrangement must be fundamental, and of a character
not contemplated or provided for by the charter, or the
general laws of the State in force at the time of the sub-

scription.

§ 440. Right to question consolidation.— Defects and irreg-
ularities in the consolidation proceedings of two or more
corporations in the same State cannot usually be set up
by the consolidated company.* In a leading New York
case this forcible language is employed: “Can then two
railroad corporations, having connecting lines, thus unite
their business for the purpose of promoting their common
interest; charter another connecting road in furtherance
of the same policy; hold themselves out to the public as
carriers over the whole route; enter into contracts accord-
ingly ; receive the benefit of those contracts; and then,
when liabilities arise, interpose the violation of their own
charters to shield them from responsibility? Such a de-

'

 

1See Swartwout v. Michigan Air Wall. 241. See Bates County v. Win-

Line R.R. Co., 24 Mich. 389; Hanna
y. Cincinnati & Fort Wayne R.R. Co.,
20 Ind. 30, 31.

* Sparrow v. Evansville & C. R.R.
Co.,7 Ind. 369; Town of East Lincoln
v. Davenport, 94 U.S. 801; Mansfield,
Cc. & L. M.R.R. Co. v. Brown, 26 O.
S. 223; Bish v. Johnson, 21 Ind. 299.

?Nugent v. The Supervisors, 19

ters, 112 U.S. 325; Niantic Savings
Bank v. Town of Douglas, 5 Brad.
(Ill.) 579.

4See Racine & Miss. R.R. Co. v.
Farmers’ Loan & Trust Co., 49 III.
331, 347; Reynolds v. Myers, 51 Vt.
455; Callender v. Painesville & H. R.R.
Co., 11 Ohio St.516. Compare Carey v.
Cincinnati & Chicago R.R., 5 Iowa 357.
376 CONSOLIDATION. § 441

fense is shocking to the moral sense, and although it ap-
pears to have some support in judicial opinions, I think it
has no foundation in the law.” This quotation is taken from
a case in which it appeared that a passenger had sustained
injuries at the hands of the consolidated organization.
Manifestly he had sustained a wrong, and suffered damages
against his will. But the principle must be kept in view
that parties having con¢vact dealings with corporations are
bound to take notice of the limitations imposed by law
upon them, and this principle has been applied to cases
where the party dealt with a corporation that possessed no
power to consolidate in the manner in which the attempt
had been made. Hence, as already shown, notes given by
a consolidated railroad company in payment for steamboats
cannot be collected at law, the purchase of steamboats be-
ing entirely foreign to the business of a railroad. Justice
Campbell said, in this important case: ‘‘ There was no au-
thority of law to consolidate these corporations, and to
place both under the same management, or to subject the
capital of the one to answer for the liabilities of the other ;
and so the courts of Indiana have determined. But in
addition to that act of illegality, the managers of these
corporations established a steamboat line to run in connec-
tion with the railroads, and thereby diverted their capital
from the objects contemplated by their charters, and ex-
posed it to perils for which they afforded no sanction.
Now, persons dealing with the managers of a corporation
must take notice of the limitations imposed upon their au-
thority by the act of incorporation.”*

$ 441. Setting aside consolidation.—If an illegal consol-
idation is set aside, the stockholders of the new company
may recover back the amount paid in by them.’ And, as

 

‘ Bissell v. Michigan Southern & N, = * See Jz ve Bank of Hindustan, L. R.
Ind. R.R. Co., 22 N. Y. 263. 16 Eq. 417.
2 Pearce v. Madison & Ind. R.R. Co.,
21 How. 443.
§ 442 . CONSOLIDATION. 377

we have seen, where judgment is recovered against a con-
solidated body, and a dissolution of the consolidation
arrangement is then decreed, execution may issue, upon
notice to the respective bodies, with the same effect as
though the amalgamation were still in force. And where
an attempted consolidation was entered into and was de-
clared ineffectual, one of the consolidating bodies was held
liable for damages sustained by the negligence of persons
operating the road under the attempted consolidation.’
Landon, J., said: ‘If the association was the lessee of the
railway, defendant as a constituent of the association was
also one of the lessees. The defendant was not in a state
of quiescence or torpor; instead of operating the road
alone, it operated it with others. The transfer of its rail-
road by the defendant to the association being without legis-
lative authority, the defendant remained liable for injuries
caused by those operating it.”* But where the amalgama-
tion is valid, the consolidated body is alone liable for dam-
ages for injuries occurring after the union was effected.‘

§ 442. Eminent domain applied to stocks and franchises.—
In the exercise of the right of eminent domain the legisla-
ture may authorize shares in corporations and corporate
franchises to be taken for public uses upon just compensa-
tion. The title to this species of property is no more se-
cure against invasion when the public use requires it than is
the ownership of real estate. Underthis paramount right
in the public, subject to which all private property is held,
the franchises of one corporation have been and may be taken
and bestowed upon another. When authority is granted
for the consolidation of existing connected routes the pre-

 

1Ketcham v. Madison, I.& P.R.R. bott v. Johnstown, etc. Horse R.R.

Co., 20 Ind. 260. Co., 80 N, Y. 27. Compare Woodruff
*Latham v. Boston, H. T. & W. v. Erie Ry. Co., 93 N. Y. 609.
Ry. Co., 38 Hun (N. Y.) 265. *#Day v. New Orleans Pac. Ry. Co.,

* Latham v. Boston, H. T. & W. Ry. 37 La. Ann. 131.
Co., 38 Hun (N. Y.) 265; citing Ab-
378 CONSOLIDATION. §§ 443-445

sumption flows from the fact of the enactment being made
that the legislature decided upon its necessity. But it is
for the legislature to say whether the stock of a dissenting
shareholder shall be taken for public use under the ex-
ercise of the power of eminent domain. The court, as al-
ready shown, has no warrant to award damages and deprive
him of his stock.?

$ 443. Receivers of consolidated corporations. — Consoli-
dated corporations, as affecting their property in each State,
are subject to the jurisdictions of the respective courts of
the States as regards the appointment of receivers.? The
proceedings are in a certain sense independent of each
other. Where receivers are appointed in Ohio and New
York, and a New York creditor applies for relief in his
State, it will not be denied because the principal suit is
pending in Ohio.* And the Federal circuit courts may ap-
point receivers to control lines of railroad extending out-
side of their circuits.®

$ 444. Insolvency of consolidated corporations. — That a
domestic corporation has entered into a consolidation with
a corporation of another State, will not absolve it from lia-
bility to be proceeded against under the insolvent laws of
the State of its original creation. While it may be “ dis-
solved for certain purposes,” yet it is deemed “to subsist
so as to enable its creditors to proceed against it for the
collection of their debts.” °

$ 445. Domicil of consolidated company — Jurisdiction in
different States.—A railroad corporation made up of dis-

 

’ Black v. Delaware & R. Canal Co., Co., 55 How. Pr. (N. Y.) 275; Rich-
24 N. J. Eq. 455. Compare Millsv. ardson v. Vt. & Mass. R.R. Co., 44

Central R.R. Co., 41 N. J. Eq. 1. Vt. 613. See Chaps. 1X., X.
® Mills v. Central R.R. Co, 41 N.J. = 4 J ve U. S. Rolling Stock Co., 55
Eq. 13. How. Pr. (N. Y.) 286.

3 In re U.S. Rolling Stock Co., 55 5 Wilmer v. Atlanta & R. A. L. Ry.
How. Pr, (N. Y.) 286; Ellis v. Boston, Co., 2 Woods 409.

H. & E. R.R. Co., 107 Mass. 1; Tay- ° Platt v. New York & Boston R.R.
lor v, Atlantic & Great Western Ry. Co., 26 Conn. 571.
§$ 445 CONSOLIDATION. 379,

tinct corporations, chartered by different States, but having
a capital stock which is a unit, is said to possess a domi-
cil in each State, and, in the absence of statutory inhibi-
tions, stockholders, or directors, meetings may be held in
any one State which will bind the corporate property every-
where.*| And where railroad corporations having lines ex-
tending through several States are consolidated, each State
retains jurisdiction over that portion of the road lying with-
in its borders.* Neither State can absolutely relinquish its
jurisdiction within its own territorial limits. And the right
of a State to regulate railroad charges within its borders
being a governmental power, cannot be granted away ex-
cept by positive and unequivocal words.’ In the language
of Chief Justice Marshall, “its abandonment ought not
to be presumed in a case in which the deliberate purpose
of the State to abandon it does not appear.”* It follows
that a corporation of one State, leasing and operating a
railroad in another State, is, as to the leased road, subject
to local legislation to the same extent as the lessor would
have been had no lease existed.5 In Paine v. Lake Erie
& Louisville Railroad Company,’ this language is em-
ployed: “A very grave question is presented in the argu-
ment as to the power of two States to create one corpora- .
tion. It is claimed that, to maintain this action, the

 

1 See Graham v. Boston, H. & E.
R.R. Co., 118 U. S. 162; Burger v.
Grand Rapids & I. R.R. Co., 22 Fed.
Rep. 561; Covington & C. Bridge Co.
v. Mayer, 31 O.S. 317; Colglazier v.
Louisville, N. A. & C. Ry. Co., 22 Fed.
Rep. 568. See § 329.

2? See Eaton & Hamilton R.R. Co. v..

Hunt, 20 Ind. 466; Graham v. Boston,
Hartford & Erie R.R. Co., 118 U.S.
161; 8. C. 14 Fed. Rep. 753; Racine &
Miss. R.R. Co. v. Farmers’ L. & T.
Co., 49 Ill. 331 ; Stone v. Farmers’ Loan

& Trust Co., 116 U.S, 307; Stone v..

Illinois Central R.R. Co., 116 U.S.
347; Farnum v. Blackstone Canal
Co., 1 Sumner 46.

3 Stone v. Farmers’ Loan & Trust
Co., 116 U.S. 307.

* Providence Bank v. Billings, 4 Pe-
ters 514, 561. Compare Charles River.
Bridge v. Warren Bridge, 11 Peters
420, 548; Newton v. Commissioners,.
Ioo U. S. 548, 562.

5 Stone v. Illinois Central R.R. Co.,
116 U. S. 347.

* 31 Ind. 347. a
380 CONSOLIDATION. § 445
consolidation must have resulted in the formation of one
company, and that this is simply impossible. It is urged
that it might with as much propriety be argued that a child
can have two mothers, as that two States can create one
corporation. Under our view of the case, this question
becomes of no importance. It is admitted by the counsel
for the appellants that the effect of the consolidation might
be to create two corporations, with the same name and
stockholders, a unity of stock and interest. This suit, in
our judgment, can well be maintained under either view.
If there is but one corporation as the result of the consoli-
dation, then the suit is undoubtedly well brought ; if there
are two corporations, then all the parties necessary for a com-
plete settlement of the matter in dispute are before the court.”
In Racine & Mississippi Railroad Company v. Farmers’
Loan & Trust Company,’ Lawrence, J., said: “ Neither
Illinois nor Wisconsin, in authorizing the consolidation, can
have intended to abandon all jurisdiction over its own cor-
poration created by itself. Indeed, neither State could
take jurisdiction over the property or proceedings of the
corporation beyond its own limits. .... A corporation
cannot be created by the co-operating legislation of two
States so as to be the same legal entity in both States;
and where two States have each created a corporation with
the same name, for the same purposes, and composed of the
same natural persons, it must, nevertheless, be considered
as a distinct corporation in each State.”?

 

49 Ill. 331, 348.

cerned, both foreign and domestic. It
2 In McGregor, gud tam. v. Erie Ry.

may have a corporate entity in each

Co., 35 N. J. Law 118, Bedle, J., said:
“It is true that the Erie Railway
Company is a foreign corporation, yet,
at the same time, it is domestic to the
full extent of the powers and franchises
confirmed and invested in it here in
New Jersey. A corporation may have
a two-fold organization, and be, so far
as its relation to our State is con-

State, yet, in its general character, be
of a bi-fold organization. This doc-
trine is sustained, not only upon prin-
ciple, but by the following cases:
Sprague v. Hartford, P. & F. R.R. Co.,
5 R. I. 233; State v. Northern Central
Ry. Co., 18 Md. 194; Ohio & Miss.
R.R. Co. v. Wheeler, 1 Black 286;
State v. Metz, 32 N. J. Law 199.”
§ 446 CONSOLIDATION.

381

$ 446. Immunity from taxation. — The question as to
whether or not the consolidated corporation is to enjoy
the immunity from taxation which was accorded to one or
more of the consolidating bodies, is a vexed one, depend-
ent upon the peculiar facts involved in each particular case,
and the wording of the legislation pursuant to which the
consolidation is effected. In many cases the exemption is
continued,’ especially where the “rights and privileges” of
the consolidating bodies become vested in the new organ-
ization.” In other cases it is lost to the new body.’ The
right to claim a continuation of the exemption must be
clear and explicit. The new corporation cannot claim an
immunity from taxation enjoyed by the old companies, or
either of them, if such immunity was dependent on condi-

tions which the new corporation is not able to fulfill.4

 

tSee The Delaware Railroad Tax
(Minot v. Phila. W. & B.R.R. Co.),
18 Wall. 206; Central R.R. & Banking
Co. v.,Georgia, 92 U.S. 665; Chesa-
peake & Ohio R.R. Co. v. Virginia, 94
U.S. 718; Philadelphia & W. R.R. Co.
v. Maryland, 10 How. 376, 393; Hum-
phrey v. Peques, 16 Wall. 244; South-
western Railroad Co. v. Georgia, 92 U.
S. 676, note, Railroad Companies v.
Gaines, 97 U. S. 697, 711; Railroad
Co. v. Commissioners, 103 U.S. 1, 4;
Louisville & Nashville R.R. Co. v.
Palmes, 109 U. S. 244, 253; Chesa-
peake & Ohio Ry. Co, v. Miller, 114 U.
S. 176, 185; Tennessee v. Whitworth,
117 U.S. 145.

2? Tennessee v. Whitworth, 117 U. S.
145, and cases cited in opinion of Chief
Justice Waite.

3St. Louis, Iron M. & S. Ry. Co. v.
Berry, 113 U. S. 465; Louisville &
Nashville R.R. Co. v. Palmes, 109 U.
S. 244. Compare Memphis & L. R.
Railroad. Co. v. Railroad Commission-
ers, 112 U. S. 609.

4 State v. Maine Central R.R. Co., 66

‘their exemption.

Me. 488; affi'd Railroad Co. v. Maine,
96 U.S. 499. Field, J., said: “The
consolidation of the original com-
panies was a voluntary proceeding
on their part. The law made it de-
pendent upon their agreement; and
that law was presumably passed upon
their request, as they are named in it,
and they acted under it. Having thus
disabled themselves from a compliance
with the conditions, upon the perform-
ance of which the amount to be paid
as a tax to the State could be ascer-
tained, they must be considered as hav-
ing waived the exemption dependent
upon such performance. Their exemp-
tion was qualified by their duties, and
dependent upon them. They incapaci-
tated themselves from the performance

of those duties by a proceeding which

they supposed would give them greater
advantages than they possessed in their
separate condition, and they thus lost
The new company
was not charged with the duties which
they were to perform to the State, and
by which the State was to be governed
382 CONSOLIDATION. — $§ 447, 448

§ 447. Pleading consolidation—With reference to the rec-
ognition of consolidation proceedings by the courts, it
may be observed that an averment in a pleading that cer-
tain railroad companies were authorized by law to consoli-
date, and had done so, and become one corporation under
a certain name, is considered to be sufficient. The allega-
tions could not be more specific without setting forth in
detail all the steps taken by the different companies to
render the consolidation complete, and this would render
the pleading very prolix.’

$ 448. Consolidation as affecting pending actions.— Actions
instituted against one of the combining companies prior to
consolidation are not necessarily abated by consolidation.?
Lowrie, J., observed :* “A court of justice would not con-
sider the mere voluntary union of several corporations into
one as equivalent to the death of either of them ; or at-
tribute to the law-making power an intention of enabling
them to discharge their liabilities in such a summary way.
It is not a case of death, for the new corporation lives from
the life of the old one; their several lives are transferred
into it; and unlike ordinary cases of metempsychosis, this
translation is accompanied by full consciousness of the
former state and its liabilities.” In a case in Mississippi,‘
where the consolidation was effected pending the writ,

 

in its taxation, nor was the State under
any obligation to accept a substituted
performance from other parties, The
provision in the act authorizing the con-
solidation, that the new company should
have all the powers, privileges, and im-
munities of the original companies,
must, therefore, be taken with the
qualification that it should have them
so far as they could be exercised or en-
joyed by it, with its different officers
and distinct constitution. Where their
exercise or enjoyment required other
officers or a different constitution, the
grant was to that extent necessarily in-

operative.” Railroad Co. v. Maine, 96
U.S. 509.

‘Collins v. Chicago, St. Paul &
Fond du Lac R.R. Co., 14 Wis. 492.
See Chap. VI.

* Baltimore & S, R.R. Co. v. Mussel-
mar, 2 Grant’s Cas, (Pa.) 348; East
Tennessee & Ga, R.R. Co. v. Evans,
6 Heisk. (Tenn.) 607. See Prouty v.
Lake Shore & M, S. Ry. Co., 52 N. Y.
363.

® Baltimore & S. R.R. Co. v. Mussel-
man, 2 Grant’s Cas, (Pa.) 348, 352.

‘Shackleford v. Miss. Central R.R.
Co., 52 Miss, 160,
$ 449 CONSOLIDATION. 383

Campbell, J., said: ‘It was not competent for the legisla-
ture to authorize and the corporation to so act under such
authorization as to defeat or prejudice the rights of plain-
tiffs in pending suits against it. As to such the corpora-
tion exists for the purpose of judgment ; for as to them it
has not lost its individuality or identity. No act of a de-
fendant can defeat the right of plaintiff. At common law,
a feme sole defendant marrying after suit brought, though
she lost her identity, changed her name, and merged her
separate existence in that of her husband, did not neces-
sitate the taking of any notice by the plaintiff of her change.
He is entitled to judgment against her by her former name.”
But where the suit is pending against an original corpora-
tion, it is not legal to summarily take judgment against the
consolidated body; the Jatter must be brought into. the
action by proper steps.’ In Prouty v. Lake Shore & Michigan
Southern Railway Company,’ the principle is recognized that
the consolidated body is a successor of each of the old com-
panies, so far as creditors of any one of the original bodies are
concerned, but in respect to the properties of the other con-
solidating companies, it is a new and independent company,
liable for former debts of other bodies only by virtue of an
assumption. Accordingly it was held that in an action suc-
cessfully prosecuted against one of the original companies,
a summary order substituting the consolidated company
and its officers as defendants was error.’

$ 449. Removal of suits to Federal courts—When one
of the constituent corporations of a consolidated organiza-
tion is sued by its changed name in the State creating it, by
a citizen thereof, another of the constituent corporations,
created in another State, cannot remove the cause to the
Federal courts.*

' Selma, Rome & Dalton R.R. Co.v. 4Chicago & Western Ind. R.R. Co.
Harbin, 40 Ga. 707. v. Lake Shore & M.S. Ry. Co., 5 Fed.

*52N. Y. 363. Rep. 19.

2 Compare Boardman v. Lake Shore
& M.S. Ry. Co., 84.N. Y. 181.

 
CHAPTER XXI.

REORGANIZATION.

§ 450. Corporate reorganization. § 456. Compromise agreements.

451. Reorganization through fore-| 457. Texas statutes.
closure. 458. Curing defective organization.

452. Legislative power over securities. | 459. Reorganization of national bank,

453. Assent to reorganization. 460. Transfer of franchise.

454. Test of character of new corpo- 461. Fraudulent transfer to new cor-
ration. poration.

455. Title of purchaser is free from | 462. Who may unite to purchase.
debts. 463. Attacking reorganization.

$ 450. Corporate reorganization.—In his learned treatise
upon Private Corporations, Mr. Morawetz observes: “ Af-
ter a corporation has been dissolved, or has lost its fran-
chise or right to continue its operations, it may be reor-
ganized or revived pursuant to authority newly conferred
by the State.” There can be no doubt of the soundness
of this general proposition, The faithless action of corpo-
rate officers, or some cause of a temporary nature, may
strand a meritorious corporate enterprise, which public
or private considerations demand should be again placed
upon its feet. The immortal nature of corporate entities
admits of their resuscitation. ‘ Corporations,” said Lord
Kenyon, C. J., ‘are the creatures of the Crown: and on
their dissolution their franchises revert to the Crown. But
if the King choose that all their rights shall be revived,
it is competent to him to do so, either with the old or
new corporators; and thereby no person is injured, nor
is any rule of law infringed.”* The corporation is not nec-
essarily dissolved by a surrender.* The king may, by grant

 

*2 Morawetz on Corporations (2d *The King v. Pasmore, 3 T. R. 241.
ed.) § 1038. * The King v. Grey, 8 Mod. 361.
$451 REORGANIZATION. 385

or by proclamation under the great seal,’ reconstruct the
old organization, or create a new one in its place ;* and a
charter that has expired may be revived by a subsequent
statute? The term ‘reorganization” as relating to corpo-
rations has, it seems to us, been frequently misapplied in
this country. It has acquired a loose popular meaning rather
than a strictly scientific one. It has been made to relate
to cases where the assets and rights of a corporation have
been sold by judicial decree or otherwise, and purchased
in the interest of some or all of the members, or by stran-
gers, who forthwith formed or secured a charter for a new
independent corporate body. As the new company is cre-
ated to carry forward the stranded enterprise, and, generally,
the same plant and facilities are employed, the reasons for
the technical error committed by calling the new corpo-
ration a “reorganization” of the old one is manifest.
Strictly speaking, however, such a proceeding is more a
case of succession than of reorganization. The reader will
also find the expression “reorganization,” and the word
“reconstruction,” applied to cases where, in reality, a con-
solidation has been effected.* The student will readily
conjecture the confusion which will inevitably result in the
non-professional mind from a careless application of this
word to different sets of facts and dissimilar legal combi-
nations. .

$ 451. Reorganization through foreclosure.—The late la-
mented Chief Justice Waite said, in a very important case
on review from the Southern District of New York: “It
rarely happens in the United States that foreclosures of rail-
way mortgages are anything else than the machinery by
which arrangements between the creditors and other par-

 

1 Newling v. Francis, 3 T. R. 189. 3 Lincoln & K. Bank v. Richardson,
2See Mayor, etc. of Colchester vy. 1 Me. 80, See President, etc. of Port.
Seaber, 3 Burr. 1870; The King vy. Gibson v. Moore, 21 Miss. 157.
Amery, 2 T.R. 515; The King v. Pas- *See Chap. XX.
more, 3 T. R. 242.
25
386 REORGANIZATION. § 451

ties in interest are carried into effect, and a reorganization
of the affairs of the corporation under a new name brought
about.”! Secured creditors of a corporation are, technically
speaking, entitled to enforce their security against the
assets of the insolvent organization to the exclusion of
unsecured creditors and of stockholders. But the latter
classes of persons frequently have it in their power to em-
barrass. realization upon the security, and to delay the sale
of the corporate assets in foreclosure. Should the road be
placed in the hands of a receiver clothed with power to
operate it, the rights of the secured creditors may be fur-
ther imperilled by his improvident management of the
enterprise, and by the issuance of insidious receiver's cer-
tificates which will constitute a first lien upon the road.’
Hence cases of voluntary reorganizations, in which secured
and unsecured creditors and stockholders of the disorgan-
ized body participate on an agreed basis, are not infrequent.
Manifestly, the secured creditors cannot be forced into
an arrangement contemplating a variation of their security,
unless statutory warrant so to do existed, and thereby con-
stituted a part of the contract pursuant to which the secu-
rities were issued? Mr. Jones says:* “It is sometimes so
far within the power of the stockholders and unsecured
creditors to embarrass and delay proceedings for the fore-
closure of the mortgage and sale of the property, that it is
expedient for the mortgage creditors to arrange for a reor-
ganization, and give up something of their own security,
for the sake of avoiding litigation and delay.” The most

 

‘Canada ‘Southern Ry. Co. v. Geb- 8 Ch. 1064. J# re Cambrian Ry.

hard, 109 U. 5S. 539.

*See Chaps. XII, XIII.

3JIn some cases, by virtue of reor-
ganization statutes, the character of a
creditor’s securities may be changed
against his will. See 30 and 31 Vict.
127, §§6-16, Act of 1867, Compare
Stevens v. Mid-Hants Ry. Co., L. R.

Co.’s Scheme, L. R. 3 Ch. 278. Jn ve
Devon & Somerset Ry. Co., L. R. 6
Eq. 610; London Financial Ass’n v.
Wrexham, M, & C.Q, Ry. Co, L. R.
18 Eq. 566, and statutes in almost every
State of our Union.

“Jones on Railroad Securities, § 614.
§ 452 REORGANIZATION. 387

familiar form of what is commonly called ‘ reorgan-
ization” is accomplished by means of foreclosure. Espe-
cially in railroad cases where the property rights and inter-
ests of the parties are very extensive, and the claimants or
owners are numerous, the courts will favor combinations
or arrangements entered into with a view to acquire the
property, resuscitate the old corporation, or organize a new
one, to carry forward the stranded enterprise.’ Such organ-
izations are encouraged because they are necessary to create
competition, and to prevent great sacrifice and loss. The
foreclosure, as we shall see, unless impeached for absolute
fraud, extinguishes all the stockholders’ rights in the broken
corporation.? With regard to these reorganization schemes
we may note that the voice of a majority of bondholders
will have much weight in upholding a scheme of reorgan-
ization.®

$ 452. Legislative power over securities —In a recent case
in our highest court it is said that the Parliament -of Can-
ada possesses authority to grant to an embarrassed railroad
corporation,within the Dominion, power to make an arrange-
ment with its mortgage creditors for the substitution of a
new security in the place of the one held by such creditors,
and to provide that the arrangement shall be binding on all
the holders of obligations, secured by the mortgage, when
the scheme shall have received the assent of the majority,
provision being made for the protection of the minority in
the enjoyment of rights and privileges in the new security
identical with those of the majority.* This case would seem
to mark the extreme limit to which this power could by
any possibility be extended.®

 

1 Compare Robinson v. Philadelphia Line R.R. Co., 53 Conn. 345; Canada:
& R. R.R.Co., 28 Fed. Rep. 340. See Southern Ry. Co. v. Gebhard, 109 U..
§ 462. S. 537; Shaw v. Railroad Co., 100 U.

*See Thornton v. Wabash Ry. Co., S. 605.

81 N. Y. 462; Carpenter v. Catlin, 44 4 Canada Southern Ry. Co. v. Geb-
Barb. (N. Y.) 75. hard, rog U. S. 527.
3See Gates v. Boston & N.Y. Air * In the course of the opinion, in the-
388

REORGANIZATION, § 453

§ 453. Assent to reorganization.—Stockholders desiring to
secure the benefits of a reorganization scheme must prompt-
ly conform to its reasonable terms. In Vatable v. New
York, Lake Erie & Western Railroad Company,’ the court
say: ‘It would lead to intolerable inconvenience, confusion,
and difficulty if the stockholders of the old company could,
in such a case, take their own time to assent to the plan of
reorganization, and to assert their right to become members
of the new company upon such facts as they would be able

to establish in a court of equity.”?

And though a bond-

 

case cited, Chief Justice Waite said
(p. 537, ef seg.): “Every person who
deals with a foreign corporation im-
pliedly subjects himself to such laws
of the foreign government, affecting
the powers and obligations of the cor-
poration with which he voluntarily con-
tracts, as the known and established
policy of that government authorizes.
[See Chap. XVI.]_ To all intents and
purposes he submits his contract with
the corporation to such a policy of
the foreign government... . . He is
conclusively presumed to have con-
tracted with a view to such laws of
that government, because the corpora-
tion must of necessity be controlled by
them, and it has no power to contract
with a view to any other laws with
which they are not in entire harmony.
It follows, therefore, that anything done
at the legal home of the corporation,
under the authority of such laws, which
discharges it from liability there, dis-
charges it everywhere. .... The cor-
poration had become financially embar-
rassed, and was, and had been for a long
time, unable to meet its engagements
in the ordinary way as they matured.
There was an urgent necessity that
‘something be done for the settlement
of its affairs. In this, the public, the
creditors, and shareholders were all
interested. A large majority of the

creditors and shareholders had agreed
on a plan of adjustment which would
enable the company to go on with its
business, and thus accommodate the
public, and to protect the creditors to
the full extent of the available value of
its corporate property. The Dominion
Parliament had the legislative power to
legalize the plan of adjustment as it had
been agreed on by the majority of those
interested, and to bind the resident mi-
nority creditors by its terms. This pow-
er was known and recognized through-
out the Dominion when the corporation
was created, and when all its bonds
were executed and put on the market
and sold, It is in accordance with and
part of the policy of the English and
Canadian governments in dealing with
embarrassed and insolvent railway com-
panies, and in providing for their reor-
ganization in the interest of all con-
cerned. It takes the place, in England
and Canada, of foreclosure sales in the
United States.”

196 N.Y. 49, 57.

* Reversing 11 Abb. N.C. (N.Y.) 133.
In Shaw vy. Railroad Company, 100 U.
S. 612, the late lamented Chief Justice
Waite said: “ The power of the courts
ought never to be used in enabling rail-
road mortgagees to protect their secu-
rities by borrowing money to complete
unfinished roads, except under extraor-
§ 454 REORGANIZATION.

389
holder has signed a composition agreement calling for an ex-
change of securities, yet if he fails to conform to it, and
neglects to surrender his bonds when required, he cannot,
after the purchase of the railroad property and the forma-
tion of a new company, claim any benefits under the agree-
ment or insist upon the delivery of new bonds."

§ 454. Test of character of new corporation.—From the
considerations advanced in the last chapter, it may be con-
ceded that it is frequently difficult to determine whether or
not a corporation is a new and independent one, or an old
association with superadded powers and privileges; but,
when it is settled that it is a new one, it follows, in the ab-
sence of any provision in the statute creating it to that
effect, and for the reasons already set forth, that it is not
liable for the debts of the old one.? A State cannot con-
tinue to exact a bonus for corporate privileges and fran-
chises after a State bank has reorganized under the national
banking act.* Story, J., said: “To ascertain whether a
charter creates a new corporation, or merely continues the
existence of an old one, we must look to its terms, and
give them a construction consistent with the legislative
intent and the intent of the corporators.”* Mr. Water-

 

dinary circumstances. It is always bet-
ter to.... reorganize the enterprise on
the basis of existing mortgages as stock,
or something which is equivalent, and
by a new mortgage with a lien superior
to the old, raise the money which is re-
quired, without asking the courts to en-
gage in the business of railroad build-
ing. The result, so far as incumbering
the mortgage security is concerned, is
the same substantially in both cases;
while the reorganization places the
whole enterprise in the hands of those
immediately interested in its successful
prosecution.”

1 Carpenter v. Catlin, 44 Barb. (N. Y.)
75:

> Marshall v. Western N.C. R.R.Co.,

92 N. C. 331. See, however, Trustees of
University v. Moody, 62 Ala. 389. A
corporation formed by, and consisting
of, the members of a partnership, for
the purpose of conducting the partner-
ship business and taking the partner-
ship property, takes the latter freed
from partnership equities, all of which
are settled and extinguished by the
transfer. Francklyn v. Sprague, 121
Uz. S. 215.

3 State v. National Bank of Balto., 33
Md. 75. But see Coffey v. National
Bank of State of Mo., 46 Mo. 143;
Grocers’ National Bank v. Clark, 48
Barb. (N. Y.) 26; Thorp v. Wegefarth,
56 Pa. St. 82.

*Bellows v. Hallowell & A. Bank, 2
§ 455

39° REORGANIZATION.
man observes :! “ Corporations may be different, although
the names, the officers, and the members of each are the
same. The similarity of name, or even of objects, cannot,
er se, establish the identity of corporations created at dif-
ferent times by different charters, and having a distinct,
independent being; and one corporation may transact the
business and pay the debts of another corporation without
thereby merging in the latter its distinct corporate exist-
ence.” *

§ 455. Title of purchaser is free from debts.—A common-
law action for the debt of a railway corporation cannot be
maintained against those who have obtained control of its
franchises by purchase of its track and appurtenances on
foreclosure of a mortgage securing other indebtedness.?
Hence it is held in New York that the purchasers under
foreclosure sale of the property and franchises of a corpo-
ration are entitled to form a néw corporation and vest it
with the assets so acquired, and the stockholders of the old
corporation, being cut off by the decree and sale, can en-
force no claim against the new corporation. If the prop-
erty of the old company had become vested in the new
corporation without the intervention of any legal proceed-
ings, it might possibly be claimed that the rights of the old
stockholders were not extinguished.*

 

Mason 44. In Broughton v. Pensacola, for their payment otherwise, it will also

93 U. S. 270, Field, J., said: “ When,
therefore, a new form is given to an old
municipal corporation, or such a corpo-
ration is reorganized under a new char-
ter, taking in its new organization the
place of the old one, embracing sub-
stantially the same corporators and
the same territory, it will be presumed
that the legislature intended a con-
tinued existence of the same corpora-
tion, although different powers are
possessed under the new charter, and
different officers administer its affairs ;
and, in the absence of express provision

be presumed in such case that the legis-
lature intended that the liabilities as
well as the rights of property of the cor-
poration in its old form should accom-
pany the corporation in its reorganiza-
tion.” See § 390.

*2 Waterman on Corps. § 436.

*Citing Bellows v. Hallowell &
Augusta Bank, 2 Mason 31.

® Cook v. Detroit, G. H.& M. Ry.
Co., 43 Mich. 349.

4 Thornton v, Wabash Ry. Co., 81
N. Y. 462. See City of Menasha v.
Milwaukee & N, R.R. Co., 52 Wis.
§.456

REORGANIZATION,

o9t

$ 456. Compromise agreements.—Parties entering into a
reorganization scheme are only concluded by it when the
plan is carried out according to the terms of the agreement.
Thus, when a compromise agreement is entered into which

 

420; Neff v. Wolf River Boom Co., 50
Wis. 585; Gilman v. Sheboygan & F.
du Lac R.R. Co., 37 Wis. 317; Sap-
pington v. L. R., M. R. & T.R.R. Co.,
37 Ark. 23; Carpenter v. Catlin, 44
Barb. (N. Y.) 75. In Brum v. Mer-
chants’ Mut. Ins. Co., 16 Fed. Rep.
143, Pardee, J., said, however: “The
evidence with regard to the liquidation
of the Home Mutual and the organiza-
tion of the Home shows that the real
fact, stripped of the forms with which
the parties surrounded it, was that the
assets, business, good-will, and stock in
trade—everything which could be re-
lied upon belonging to the Home Mu-
tual to pay and satisfy its outstanding
liabilities—went into and constituted
the capital and assets of the new
Home. Calculations and arrange-
ments were made as to the known lia-
bilities of the old company, and some
stockholders in the old company were
allowed to withdraw their fro rata
value of stock in cash ; but the fact re-
mains that the capital of the new com-
pany was exclusively made up of what
was left of the assets of the old com-
pany. I have no doubt that everything
was intended and carried out in the
best of faith, and I am inclined to think
that if the debts due libellants for sal-
vage moneys had been known, that
they would have been provided for.
As the Home took all the property of
the old company, leaving nothing to
pay the amounts due libellants, and as
it took them, not as creditors, but as
owner, it seems clear to me that it
must pay the debts of the old com-
pany, at least to the amount of the as-
sets converted.” In Paine v. Lake
Erie & L. R.R. Co., 31 Ind. 283, 349,

the court said: “ It is clear to our minds
that the new company succeeded to the
rights of the old corporations. The new
was composed of the elements of the
old; it was the same under a new form.
It is only a play upon words to say that,
pheenix-like, the new arose from the
ashes of the old. There was no turning
to ashes necessary in the process, It
only required a commingling of the
elements of which the old was com-
posed. The new assumed the liabili-
ties and succeeded to the rights of the
old.” In City of Menasha v. Milwau-
kee & N. R.R. Co., 52 Wis. 420, the
court said: “ A purchaser of the prop-
erty and franchises is neither a succes-
sor nor assignee, and is in no way
bound by the contracts of the old com-
pany, except when such contracts are a
lien upon its property, or in some other
way bind the property or franchise.
The old company, under its charter,
had the undoubted right to extend its
road through the city, .... but by
its contract with the city, .... it
bound itself not to exercise that right.
Admitting that this contract is valid,
and that a court of equity would inter-
fere as between the parties to prevent
a violation of the same (which is, per-
haps. a question of grave doubt), it is
very clear that such contract cannot
bind another corporation purchasing
the property and franchises of said
company when the charter of such
purchaser authorizes it to build the
connecting road.” In an important
case in Connecticut, it is said: “In
this State, irrespective of legislative or
judicial authority in the special in-
stance, the effect of a foreclosure is to
vest absolutely the property of the
REORGANIZATION. § 457

392
provides for securing and preferring $955,000 of corporate
debts and obligations, and a mortgage for $1,200,000 is ex-
ecuted to carry out the arrangement, this is considered to be
such a substantial variation and enlargement of the agree-
ment as to justify parties who signed it with the expecta-
tion of surrendering up certain advantages, in declining to
carry it out, and they will be restored to their original
rights! Nor will a secret agreement to the advantage of
one of the parties to a reorganization scheme be tolerated in
the courts.?

$ 457. Texas statutes.—The general laws of Texas pro-
vide that when a railroad corporation is sold out, the pur-
chaser succeeds to the rights and powers of the sold-out

 

mortgagor in the mortgagee. It sim-
ply cuts off the right of redemption ex-
isting in the mortgagor, and there-
after the mortgagee stands with ref-
erence to the mortgaged property in'
the same relation as did the mort-
gagor. He has the title of the former
owner of the equity, and nothing more,
He holds the property subject to all
charges, duties, pledges, and equities
existing prior to the execution of the
mortgage deed. We have not adopted
the practice of selling the property upon
foreclosure. Necessarily, therefore, if
the trust mortgage was rightfully fore-
closed, and the title vested in the trus-
tee, in trust for the first mortgage
bondholders, the trustee and the bene-
ficiaries of the trust continue to hold
the property, subject to the same limi-
tations, duties, and obligations resting
upon the original corporation, includ-
ing, of course, the obligation to execute
the public trust cast upon themortgaged
property by devoting it to the public use
for which it wascreated. This property
could not be relieved from this trust
without the acquiescence of the State.
But the State has explicitly declared the
public intent that the franchises and

property vested in these bondholders
should continue to be devoted to the
public use declared in the original char-
ter, and has created a new corporation
for that purpose. In the organization,
control, and. management of this new
corporation, and in its property and
franchises, the plaintiff is, by the incor-
porating act, entitled to share propor-
tionally with all the other bondholders.
The new corporation is an instrument-
ality adopted by the State, with the ac-
quiescence of a majority of the bond-
holders, for carrying into effect the
original design, and devoting the prop-
erty to the only use which the law of its
creation permits ; and in thus applying
the trust property to the object and pur-
poses of the trust, no right of the plain-
tiff is impaired, so long as he retains
his original fro ra¢a share in the trust
property, subject to the execution of
that trust and the expenses necessarily
incident thereto.” Gates v. Boston &
N.Y. Air Line R.R. Co., 53 Conn. 333,
344.
1 Miller v. Rutland & W. R.R. Co.,
40 Vt. 399.

*Compare Ex parte White, 2 S.C.
469; Bliss v. Matteson, 45 N. Y. 22.
$$ 458, 459 REORGANIZATION, 393

corporation, and can transact business as fully as the old
corporation could have done. Nochange of name and no
notice of purchase or merger is necessary.’

§ 458. Curing defective organization Reorganization can-
not be resorted to with a view to accomplish a fraud. Thus,
a company which was apparently incorporated, and issued
paper, but subsequently discovered that its incorporation
was invalid, will not be permitted, by means of a dissolution
and a valid reincorporation, to evade responsibility when
sued upon the notes of the defective association.*

§ 459. Reorganization of national bank. — By the act of
Congress making provision for a national currency,’ it was
provided ‘that any bank incorporated by special law, or
any banking institution organized under a general law of
any State, may, by authority of this act, become a national
association under its provisions, by the name prescribed in its
organization certificate; and in such case the articles of as-
sociation and the organization certificate required by this
act may be executed by a majority of the directors of
the bank or banking institution ; and said certificate shall
declare that the owners of two-thirds of the capital stock
have authorized the directors to make such certificate, and
to change and convert the said bank or banking institution
into a national association under this act. And a majority
of the directors, after executing said articles of association,
and organization certificate, shall have power to execute all
other papers, and do whatever may be required to make its

 

1 Acres v. Moyne, 59 Texas 625. this last incorporation. It was held

2 Empire Mfg. Co. v. Stuart, 46 Mich,
483. See Merchants’ & Manufrs.’ Bank
vy. Stone, 38 Mich. 779. Certain persons
in California formed a corporation under
the act of April 11, 1862, and without
transacting any business, reincorpo-
rated themselves under the act of 1853,
‘and all their business was done under

that the validity of these corporate acts
must be determined by the act of 1853,
notwithstanding the first corporation
was not formally dissolved. Hyde v.
Doe, 4 Sawyer 133.

313 U. S. Statutes at Large, ch. 106,
p. 112, § 44.
REORGANIZATION.

394 § 460

organization perfect and complete as a national association.
The shares of any such bank may continue to be for the
same amount each as they were before said conversion ;
and the directors aforesaid may be the directors of the as-
sociation until others are elected or appointed in accord-
ance with the provisions of this act.” Under this act
and the legislation of Missouri, the bank of the State of
Missouri became a national banking association. It thus
passed from one jurisdiction to another, but its identity
was not thereby necessarily destroyed. It remained sub-
stantially the same institution under another name. ‘The
transition,” say the Supreme Court of Missouri, “ did not
disturb the relation of either the stockholders or officers
of the corporation, nor did it enlarge or diminish the assets
of the institution. These all remained the same under the
national as they were under the State organization. The
bank neither lost any of its assets nor escaped any of its
liabilities by the change. The change was a transition, and
not a new creation.” *

§ 460. Transfer of franchise.—The purchaser of the prop-
erty and franchises of a railroad corporation at a fore-
closure sale, may sell and transfer the same to an existing
corporation capable of holding the property and exercising
the franchises ; it is not indispensable that he should organ-
ize a new company.”

 

1 Coffey v. National Bank of State of
Mo., 46 Mo. 140. Compare Grocers’
Nat. Bank v. Clark, 48 Barb. (N. Y.)

R.R. Co., 58 N. Y. 65: “The pur-
chasers did not, by the purchase, take
the place of the pre-existing stockhold-

26; Thorp v. Wegefarth, 56 Pa. St.
82.

? People v. Brooklyn, Flatbush, and
Coney Island Railway Co., 89 N. Y. 75.
Compare Acres v. Moyne, 59 Texas
625; Wellsborough & T. P. R. Co. v.
Griffin, 57 Pa. St.417. Speaking of a
sale of a railroad in bankruptcy, Grover,
J., said, in Metz v. Buffalo, C. & P.

ers of the defendant, and thereby be-
come its corporators, acquiring the cor-
porate entity. True, they acquire the
railroad tracks, fixtures, rolling stock,
etc., together with the right or franchise
of using it for the same purposes that
the defendant was authorized to use it,
subject to the same duties to the pub-
lic as the defendant had been.”
§§ 461-463 REORGANIZATION. 395

$ 461. Fraudulent transfer to new corporation.—Where a
second corporation has been formed by the acting members
of a former corporation, and the property of the latter has
been transferred to the new corporation with intent to
hinder, delay and defraud creditors of the old corporation,
the property thus transferred is still liable to be taken on
execution by creditors of the old corporation.’ This is a
familiar principle of the law affecting fraudulent convey-
ances. And where the persons interested in a railroad
company formed a new corporation, elected for its officers
the same persons who held the positions in the old asso-
ciation, and exchanged the stock of the new corporation
for the old, and the trustees conveyed the property of the
old corporation to the new, this was held to be a convey-
ance in fraud of creditors of the old corporation.? -

§ 462. Who may unite to purchase.— We have shown® that
bondholders and stockholders of a railroad company may
unite with a view to the purchase of the property.* “It is
a fair and wise course for them to pursue, to prevent a sac-
rifice of their property.”® . The law does not prohibit the
creditors of a corporation from combining for the purpose
of protecting themselves by purchasing the property of a
corporation when legally exposed for sale, provided it is
no part of the agreement to prevent competition at the
sale, or to use any unfair advantage.®

§ 463. Attacking reorganization.—The courts evince a dis-
inclination to disturb any rights gained by a completed

 

1 Booth v. Bunce, 33 N. Y.139. See
Blair v. St. Louis, H. & K. R.R. Co.,
22 Fed. Rep. 36. —

?San Francisco & N. P. R.R. Co. v.
Bee, 48 Cal. 398. It is fraudulent for
a majority of a corporation to dissolve
it, create a new corporation, and effect
a sale of the property of the dissolved
corporation to the new one at their
own valuation; Mason v. Pewabic
Min. Co. 25 Fed. Rep. 882.

3 See § 451.

4Pennsylvania Trans. Co.’s Appeal,
rot Pa. St. 576. See Sage v. Central
R.R. Co., 99 U.S. 334; Ketchum v.
Duncan, 96 U. S. 659.

5 Pennsylvania Trans. Co.’s Appeal,
Ior Pa. St. 576, 582.

5 Kitchen v. The St. Louis, K. C. &
N. Ry. Co., 69 Mo. 225, 256.
396 REORGANIZATION. § 463

reorganization. Where, after five years of litigation, a de-
cree was rendered foreclosing a mortgage on a railroad and
ordering a sale, a part of the bondholders purchased the
road, and formed a new organization. The court confirmed
the sale, and the confirmation ended with the words, “the
right to make any further order is reserved.” It was held
that a petition to set aside the sale brought by dissatisfied
bondholders, who had the opportunity to bid and to come
into the new company, would be overruled.* So, a bond-
holder, who has fully approved a plan of reorganization,
has no standing in equity to afterward repudiate the
scheme, no fraud or imposition on him being shown.?
Equity will, however, protect the rights of bondholders in
a voluntary reorganization arrangement.®

 

1 Wetmore v. St. Paul & Pacific R.R. ?Matthews v. Murchison, 15 Fed.
Co., § Dillon 531. Rep. 691.
8 Riker v. Alsop, 27 Fed. Rep. 251.
CHAPTER XXII.

DEFECTIVE INCORPORATIONS AS COPARTNERSHIPS.

§ 464. Unincorporated companies as | § 471. Withdrawing protection of the

copartnerships. statute.
465. The agency theory. 472. Liability for acts prohibited to
466. Two innocent parties. the corporation.
467. Rule in England as to promot- | 473. Corporations as copartnerships
ers. in foreign jurisdictions.
468. Grounds of individual liabil-| 474. The Massachusetts cases.
ity. 475. Denial of partnership liability.
469. Partnership theory—New York | 476. Estoppel as to corporate exist-
and other cases. ence,
470. Interest acquired after attempted | 477. Certain conclusions.
incorporation. 478. Trusts.

$ 464. Unincorporated companies as copartnerships.— The
consideration of certain somewhat isolated subdivisions of
our subject, more especially matters affecting the rights of
creditors; additional details of procedure; rules of evi-
dence common in corporation cases; lines of defense pe-
culiar to insolvency and other proceedings affecting corpo-
rations; the relations of stockholders and officers to the
corporation ; and the distribution of assets, will bring our
discussion to a close. Let us first briefly advert to the
cases in which creditors and others have endeavored to
treat defective incorporations or associations as copartner-
ships. Controversies of this nature naturally arise where
disaster and insolvency has overtaken the corporate enter-
prise. Much confusion prevails concerning the true na-
ture of the legal relationship existing among persons who
have attempted to form a company and failed to effect le-
gal incorporation, and especially with regard to the indi-
vidual liability of such persons to creditors of the defective
398 DEFECTIVE INCORPORATIONS. § 464

organization. The doctrine is asserted in a number of the
authorities, as is elsewhere shown,’ that the promoters or
members of these imperfect associations are copartners, at
least as regards third parties. Other authorities repudiate
this conclusion upon the theory that no contract of part-
nership was contemplated or entered into by the promoters
or members of the defective society, either as between
themselves or by representations or otherwise, as regards
third parties,” and no one member was empowered to act as
the agent of the others, as in case of a copartnership. The
further consideration is urged that stockholders do not
necessarily become such from motives of mutual confidence
in one another’s ability, skill, or integrity,® as in the case
of selecting a partner in an ordinary partnership. The
courts, as will presently appear, have taken decidedly an-
tagonistic views upon this general question. The advocates
of each of these theories have asserted that the opposing
views are illogical and unwarranted. The attempt to treat
“the question de novo would be fruitless, for it is already
somewhat threadbare from repeated discussion by judges
and text-writers, and many of the courts have expressed
decided views with reference to the controversy. The
opinion may be safely ventured that neither conclusion
reached is wholly illogical. Chancellor Walworth, in a
much-quoted case, said: “It is well known, however, that
there are and have been many joint stock, and even bank-
ing companies, which are mere partnerships as to every
person except their own stockholders, they never having
been legally incorporated. Whatever name such a com-
pany may assume and use in the transaction of its business,
it isa partnership, and not a corporate designation ; and every
suit upon a contract with the company must be brought
in the names of the several persons composing the firm,” 4

 

' See §§ 27, 471. * Fox v. Clifton, 9 Bing. 115,
* See Central City Savings Bankv. 4 Williams v. Bank of Michigan, 7
Walker, 66 N. Y. 424. Wend. (N. Y.) 542.
$ 464 DEFECTIVE INCORPORATIONS. 399

The opinion from which this quotation is taken has
been frequently cited as supporting a principle which in
reality is not to be found in the case. It appeared that
the bank in question had been lawfully incorporated ; that
the defendant was so situated as to be estopped from dis-
puting the incorporation, and that there was sufficient evi-
dence of acts of user under the charter. The case cannot
be considered an authority of importance in a controversy
arising upon a state of facts where it appears that no legal
incorporation has been effected.1 Mr. Dicey draws the
following distinction: ‘“‘An ‘unincorporated company’ is
fundamentally a large partnership, from which it differs
mainly in the following particulars, viz.: that it is not
bound by the acts of the individual partners, but only by
those of its directors or managers; that shares in it are
transferable, and that it is not dissolved by the retirement,

death, bankruptcy, etc., of its individual members.” ?

 

Voluntary assoctations——The sub-
ject is somewhat confused, even in
New York. See §342. In Park v.
Spaulding, 1o Hun (N. Y.) 132, Da-
vis, P, J., speaking of a social club,
said: ‘Where such a body of gentle-
men join themselves together for social
intercourse and pleasure, and assume a
name under which they commence to
incur liabilities by opening an account,
they become jointly liable for any in-
debtedness thus incurred.” This case
is, however, a disputed authority. See
Flagg v. Swift, 25 Hun (N. Y.) 624;
Ebbinghousen v. Worth Club, 4 Abb.
N. C. (N. Y.) 300, and the editor’s
very learned note. Local statutes af-
fect these decisions. In McMahon v.
Rauhr, 47 N. Y. 70, which was an ac-
tion on a contract between the associa-
tion and a member, the court say:
“The parties to this action are mem-
bers with other persons of a voluntary
association not incorporated. The ob-
ject of the association is innocent pleas-

ure, and not trade, business adventure,
or profit. It is not strictly a copartner-
ship, for it does not, in its objects, fall
within the definition of one (citing 3
Kent 23, Collyer on Part. 263). But
the rights of the associates in the prop-
erty, and the modes of enforcing them,
are not materially different from those
of partners in the partnership prop-
erty” (citing Beaumont v. Meredith,
3 Ves, & B. 180), See Sharp v. War-
ren, 6 Price 131,

? Dicey on Parties, 149. An unin-
corporated ‘religious society could not
sue at common law in its own name or
in the name of its agents or trustees.
Curd v. Wallace, 7 Dana (Ky.) 190;
S.C. 32 Am, Dec. 85. See The De-
troit Schuetzen Bund v. The Detroit
Agitations Verein, 44 Mich. 313; Sul-
livan v. Campbell, 2 Hall (N. Y.) 276,
All the members should be plaintiffs.
Mears v. Moulton, 30 Md.145. An
action should be prosecuted against
all, and not a part of the members of a
400 DEFECTIVE INCORPORATIONS. §§ 465, 466

§ 465. The agency theory.—The theory advanced in some
of the cases is that where the company turns out to be un-
incorporated, and consequently there is no principal to
whom resort can he had, the directors must be regarded as
principals. This is based upon the idea that if an agent
contracts, although as agent, but without a legally respon-
sible principal to whom resort can he had, the law presumes
that the agent contracts on his personal responsibility, and
intends to bind himself, and so holds him, for in no other
way could the contract have any validity.’ It has been also
asserted that if there never was a corporation, there could
be no creditors of the mythical body, but only a claim
against those who falsely represented themselves as corpo-

rate officers.’

§ 466. Two innocent parties. — Another principle upon
which directors might be held personally liable in cases

 

voluntary or unincorporated associa-
tion. But the defect of non-joinder of
defendants must be pleaded to be
available. McGreary v. Chandler, 58
Me. 537. In New York (Code, § 1919)
“an action or special proceeding may
be maintained by the president or treas-
urer of an unincorporated association
consisting of seven or more persons, to
recover any property or upon any cause
of action,” etc. ; and also, in like manner,
against the president or treasurer upon
any cause of action, for or upon which
_ the plaintiff could ordinarily have sued

all the members. Compare Tibbetts v.
Blood, 21 Barb. (N. Y.) 650; Sewell v.
Ives, 61 How. Pr. (N. Y.) 54; Corning
v. Greene, 23 Barb. (N. Y.) 33; Poult-
ney v. Bachman, 62 How. Pr. (N. Y.)
466; Hatheway v. American Mining
Stock Exch., 31 Hun (N. Y.) 575; Dun-
can v. Jones, 32 Hun (N. Y,) 12,
These statutes, it is said, must be
strictly followed (see Hughes y,
Thorpe, 5 Mees. & W. 667), and the

suit in New York is considered to be
improperly brought against the presi-
dent, secretary, and treasurer. See

Schmidt v. Gunther, 5 Daly (N. Y.)

452. In De Witt v. Hastings, 69 N.
Y. 524, it appeared that the incorpora-
tion proceedings were imperfect. Ra-
pallo, J., said: “I am unable to dis-
cover in the evidence any such user of
the corporate franchises as would cure
the defect in the organization of the
company, or any facts which would
estop the defendant from denying it.
This action cannot be maintained on
the ground of a partnership, for it is
not framed on any such ground. If it
had been, the defendant could have re-
quired the joinder of his associates.”

‘Booth v. Wonderly, 36 N. J. Law
255; Story on Agency, §§ 280, 281,
282; 2 Kent’s Com, 630; Dunlap’s
Paley on Agency, 374; Kelner v. Bax-
ter, L. R. 2 C. P. 174; Bay v. Cook,
22 N. J. Law 343. See § 469.

* Atty, Genl. v. Simonton, 78 N.C, 61.
§§ 467, 468 DEFECTIVE INCORPORATIONS. 401

where there was no legally formed corporation bound by
the contract, is that where one of two innocent parties must
suffer by the fraud of a third, he who gave the occasion for
the fraud or the means of the credit must bear the loss,'

$467. Rule in England as to promoters.—In England, when
a joint stock company is in the preliminary stages of form-
ation, before an act of incorporation is had, or complete
registration effected, and there is a preliminary board of
directors, those who have consented to become directors,
or knowingly allowed themselves to be held out to the
world as directors, are responsible, as principals or partners,
for all contracts, express or implied, within the scope of the
business of the direction.?

§ 468. Grounds of individual liability—Let us further con-
sider the reasons upon which this alleged personal liability
is predicated. In Humphreys v. Mooney,’ a case in some
features hostile to the view of some of the New York au-
thorities as to individual liability, the court concedes that
the facts in a given case may sometimes warrant a holding
of partnership liability, as where an already constituted
partnership seeks to become incorporated and exercises
corporate powers without color of right, or where an as-
sociated company, by deceit or misrepresentation, fraud-
ulently attempts to evade individual liability through a
false assumption of pretended corporate authority, or where,
in respect to the transaction in controversy, a corporation
in fact intended to assume partnership liability, and es-
pecially where, in consideration of such known or supposed’.
intent, the other party was induced to act in entering into
the contract. In the case of Whipple v. Parker,‘ the:

 

1 Booth v.Wonderly,36 N. J. Law 255. wood v. Berkeley, 15 C. B. (N. S.) 145;
* Compare Fox v. Clifton, 6 Bing. Bell v. Francis, 9 C. & P, 66; Collyer
776; S.C. again 9 Bing. 115; Maddick on Part. § 1086.
v. Marshall, 16 C. B. (N. S.) 387; 5.cC. #5 Col. 288.
in Exch. 17 C. B, (N. S.) 829; Colling- 429 Mich, 380.
26
402 DEFECTIVE INCORPORATIONS.

§ 469
parties had been doing business as a partnership prior to
the execution of the supposed articles of incorporation.
The court said: ‘“ Certainly, if they were already a partner-
ship before the attempt to form a corporation, they would
not by the failure of this attempt cease to be a partnership ;
but the attempt failing, the partnership continued,” Where
partnership debts exist,and the partners form a corpora-
tion, to which the copartnership assets are transferred, the
individual members of course remain primarily liable for
debts incurred before incorporation. And where partners,
having dealt with a party, become incorporated, and con-
tinue such dealings without giving notice of the change,
they will continue liable as partners unless knowledge is
brought home to such party from some other source.”

$ 469. Partnership theory—New York and other cases.—
In New York, as we have seen,’ and in other States, parties
assuming to act in a corporate capacity without legal or-
ganization, are, in certain cases, held liable as partners to
those with whem they contract.* A favorite ground for

 

1 Compare Francklyn v. Sprague, 121
U.S. 215; Broyles v. McCoy, 5 Sneed
(Tenn.) 602.

? Martin v. Fewell, 79 Mo. 4o1, 412.

3 See ante, §§ 27, 464.

4 Fuller v. Rowe, 57 N.Y. 26; Wells
vy. Gates, 18 Barb. (N. Y.) 554; Dennis
v. Kennedy, 19 Barb. (N. Y.) 526;
Kingsland v. Braisted, 2 Lans. (N. Y.)
17; Coleman v. Coleman, 78 Ind. 344;
Hill v. Beach, 12 N. J. Eq. 31; Booth
v. Wonderly, 36 N. J. Law 255; Con-
ner v. Abbott, 35 Ark. 365; Abbott
v. Omaha Smelting, etc. Co., 4 Neb.
417; Kaiser v. Lawrence Savings
Bank, 56 Iowa 104; Hurt v. Salisbury,
55 Mo. 310; Bigelow v. Gregory, 73
Ill. 197; Hess v. Werts, 4 Serg. & R.
(Pa.) 356; Martin v. Fewell, 79 Mo.
410; Ridenour v. Mayo, 4o O. S. 9.
See note to Phipps v. Jones, 59 Am.

Dec. 708, 711; S. C. 20 Pa. St. 260;
Holbrook v. St. Paul Fire & M. Ins. Co.,
25 Minn, 229. Compare Merchants’ &
Manufacturers’ Bank v. Stone, 38 Mich.
780, A band of musicians is a part-
nership: Danbury Cornet Band v, Bean,
54 N.H.524. “The general principles
which require to be borne in mind, are,
first, that unincorporated companies
are not at common law distinguishable
from partnerships ; and, secondly, that
incorporated companies are distin-
guishable from them, and that the
shareholders in such companies are
not liable for the corporate debts and
engagements save so far as they are
rendered so by act of Parliament.”
1 Lindley on Part. 375, citing Hill's
Case, L. R. 20 Eq. 595. It is perhaps
unnecessary to recall to the reader’s
attention the rule that “by the com-
§ 469 DEFECTIVE INCORPORATIONS.
seeking to enforce individual liability against stockholders
or corporators, is that of a failure to comply with the law
in the attempted incorporation—some substantial defect in
the preparation, signing, publishing, or filing of the papers.!
There must, however, be a substantial compliance with
each and all of the provisions of the act authorizing incor-
poration before the corporation can be considered zx esse.*
If there is a material deviation, or the organization is not
formed under any statute, “it becomes a voluntary associa-
tion, like any other partnership, and must be governed by the
law regulating that relation,” is the very general language of
the Supreme Court of Ilinois.? Walker, J., said: “The law
is well and uniformly settled that persons may not, as to
themselves, be partners, and yet, as to other persons, incur
the same liabilities as if they were, in fact, partners.”
Where parties do acts entirely independent of corporate
powers, the mere fact of a corporate existence will not
shield them from individual liability. In a New York
case it appeared that the charter of a corporation had ex-
pired, and the stockholders had agreed to continue the
business, and had appointed one of their number as agent
with managing powers, A debt contracted by him in the
name of the defunct corporation was held to bind the par-
ties as partners.° The agreement to continue the business

403

 

mon law .... every member of an 410; Frost v. Walker, 60 Me. 468.

ordinary partnership is liable, to the
utmost farthing of his property, for the
debts and engagements of the firm,
The law, ignoring the firm as anything
distinct from the persons composing
it, treats the debts and engagements
of the firm as the debts and engage-
ments of the partners, and holds each
partner liable for them accordingly.”
1 Lindley on Part. 375.

1See Abbott v. Omaha Smelting, etc.
Co., 4 Neb. 416; Garnett v. Richardson,
35 Ark. 144; Martin v. Fewell, 79 Mo.

Compare Unity Insurance Co. v. Cram,
43 N.H. 636. Immaterial deviations or
omissions will not be regarded. Mc-
Clinch v. Sturgis, 72 Me. 296; Trow-
bridge v. Scudder, 11 Cush. (Mass.)
83.
* Harris v. McGregor, 29 Cal. 127;
Mokelumne Hill Canal & Mining Co.
v. Woodbury, 14 Cal. 424.

3 Pettis v. Atkins, 60 Ill. 457.

4 Ridenour v. Mayo, 4o O. S. 9.

'The National Union Bank of Wa-.
tertown v. Landon, 45 N, Y. 410,
DEFECTIVE INCORPORATIONS. § 469

404
was, however, considered to constitute the basis of the
partnership liability in this case. In the absence of such
an agreement, the stockholders, it was said in a later case,
would not be liable for debts contracted in the name of the
old corporation by its former general agent, who had con-
tinued to carry on the business.’ “To constitute a part-
nership,” said Allen, J., “there must be the assent of the
individuals to the creation of that relation between them.”®
In cases where a corporation has been illegally formed, the
stockholders are not relieved from individual liability by
reason of the good faith of the corporators or the actual
transaction of business by the defective organization. So
held in Iowa, where the action was brought to recover from
the defendant, on the ground of partnership, money de-

posited in a bank illegally incorporated.’

 

1 Central City Savings Bank v. Walk-
er, 66 N. Y. 424.

2 Central City Sav. Bank v. Walker,
66 N. Y. 430. See Planters’ & Miners’
Bank v. Padgett, 69 Ga. 164.

8 Kaiser v. Lawrence Savings Bank,
56 Iowa 104; S.C. 41 Am. Rep. 85.
See Hurt v. Salisbury, 55 Mo. 310.
The defendant insisted, in Kaiser v.
Lawrence, 56 Iowa 104, that in order
to establish the corporate existence of
the bank as against the plaintiff, it was
sufficient to show lawful authority to
create the corporation attempted to be
formed, a Jona fide attempt on the part
of the corporators to become incorpo-
rated, and the transaction of business
apparently as a corporation. “A case
in New York (Buffalo & Allegany
R.R, Co. v. Cary, 26 N. Y. 77) was
cited, in which the court said that “if
the papers filed, by which the corpora-
tion is sought to be created, are color-
able, but so defective that, in a pro-
ceeding on the part of the State
against it, it would for that reason be
dissolved, yet by acts of user under

such an organization it becomes a
corporation de facto, and no advan-
tage can be taken of such defect in
its constitution, collaterally, by any
person.” Ss. P. Krutz v. Paola Town
Co., 20 Kans. 403. See Humphreys
v. Mooney, 5 Col. 282. It should be
observed that in the case last men-
tioned the defendant set up the want
of incorporation of the plaintiff, and
sought to escape liability upon that
ground, while in Kaiser v. Lawrence
Savings Bank, 56 Iowa 104, the de-
fendant contended that the dona fide
attempt to become incorporated, and
the transaction of business under a
claim of incorporation, were sufficient
to create the exemption. In other
words, there may be irregularities, or’
omissions to comply with statutory
provisions which are merely directory,’
which would be sufficient to sustain an
action brought to declare a forfeiture,
but insufficient to support a collateral
action instituted to enforce an individ-
ual liability of a member. But where
the attempt at incorporation is under a
§§ 470, 471 DEFECTIVE INCORPORATIONS, 405

$ 470. Interest acquired after attempted incorporation.—In
a Connecticut case,! the rule is conceded to be that a joint
stock corporation may be so defectively or illegally organ-
ized and conducted as to become an ordinary partnership,
and its members, under certain circumstances, held liable
as such. It is said to be too clear for argument that a
member cannot be held liable as a partner on the ground
of any express contract; that if liable at all it is by reason
of some rule of law that imposes a liability upon him by
implication from certain ascertained facts, It appeared in
the case cited that the defendant was not one of the original
corporators; took no part in the proceedings attendant
upon the defective organization, and, in fact, did not know
when the attempt to organize the corporation was made.
He received his certificate after the happening of these
events. The court held that this state of facts imposed no
liability upon him.?, The point must not be lost sight of
that it is necessary to prove that the party sought to be
charged as a partner was so acting at the time the obliga-
tion sued upon was created.®

§ 471. Withdrawing protection of the statute—It is pro-
vided by statute in New York that, until the capital stock
of a corporation is paid in, and a certificate to that effect
filed, stockholders shall be liable for the debts of the com-
pany to the amount of their stock respectively. This is
considered in effect to withdraw the protection of the incor
poration from the stockholders, and to render them liable to

 

general law, and there is a non-com- Conn. 447. But see Richardson. v.

pliance with the law in a material re-
spect, such want of incorporation re-
sults that exemption from individual
liability is not secured. Kaiser v. Law-
rence Savings Bank, 56 Iowa 109; Mo-
kelumne Hill Canal & Mining Co. v.
Woodbury, 14 Cal. 424.

1 Stafford Nat. Bank v. Palmer, 47

Pitts, 71 Mo, 128,

? Rhodes, J., said, in Blanchard v.
Kaull, 44 Cal. 451: ‘‘ A partnership
or a joint stock company is not neces-
sarily the result of an abortive attempt
to organize a corporation.”

3 Fuller v. Rowe, 57 N. Y. 23. Gom=
pare McGuire v. O’Hallaran, Hill &
Denio (N. Y.) 86.
406 DEFECTIVE INCORPORATIONS. § 472

the extent of the amount of their stock as copartners.* In
a case which arose in Illinois, it appeared that the statute
provided that “whenever default shall be made in the pay-
ment of any debt or liability contracted by said corporation,
the stockholders shall be held individually responsible for
an amount equal to the amount of the stock held by them
respectively.” The court, following the New York rule,
decided that the effect of this provision was simply to with-
draw from the stockholders “to an amount equal to the
amount of stock held by them respectively,” the protection
of the incorporation, and leave them liable as partners.”

§ 472. Liability for acts prohibited to the corporation.—In a
case which arose in Ohio,’ it appeared that a corporation
organized for free banking, was expressly forbidden by law
from engaging in a certain line of business until after the
deposit of certain securities with the State auditor. No
such securities were deposited, and the prohibited business
was entered upon. The court said: ‘‘Where the entire
business, carried on by persons in the name of a corpora-
tion, is such as the corporation is prohibited by law from
doing, they cannot interpose the corporate privileges be-
tween them and the liabilities which the law imposes upon
individuals in the transaction of similar business without
the use of the corporate name. It by no means follows,
that all the subscribers to the stock of the corporation are
personally responsible for the debts contracted in the trans-
action of such business ; for that is not the legal import of
the subscription contract, and the business may be thus
carried on without the knowledge or participation of all °

 

*Corning v. McCullough, 1 N. Y. * Buchanan v. Meisser, 105 III. 643,
47; Wiles v. Suydam, 64 N. Y. 176, citing Fuller v. Ledden, 87 Ill. 310;
See Douglass v. Ireland, 73 N. Y. 104. McCarthy v. Lavasche, 89 Ill. 270;
Compare Jessup v, Carnegie, 80 N. Y. Wincock v. Turpin, 96 Ill. 143; Corn-
457; Wheeler vy. Millar, 90 N. Y. 353; ing v. McCullough, 1 N. Y. 47; Wiles
Lowry v. Inman,'2 Sweeny (N. Y.) v. Suydam, 64 N. Y. 176.

117, aff'd 46 N. Y. 119; Flash v. — *Medill v. Collier, 16 Ohio St. 599,
Conn, 109 U.S. 371. 613.
$ 473 DEFECTIVE INCORPORATIONS. 407

the stockholders. The law would imply that they alone
assumed the liabilities of such business who engaged in it,
or who sanctioned or authorized it.”

$ 473. Corporations as copartnerships in foreign jurisdic-
tions.—Mr. Cook! draws attention to certain cases in which
corporations, or attempted corporate organizations, are
treated as copartnerships as regards third parties in foreign
jurisdictions. In a Kansas case? it is said that a corpora-
tion, in. order to have any legal or valid existence, must
have a home, a domicil, a principal place of doing busi-
ness, within the boundaries of the State which created it.
“Tf it attempts to migrate in a body, to go beyond the
jurisdiction of the laws which bind and hold it together, it
dissolves into its original elements, and the persons who
comprise it become only individuals. And even where a
corporation has a legal and valid existence in its own State,
the only recognition that other States will give to it is
such as the rules of courtesy and comity between States
require.” Following this doctrine, it was decided that a
corporation organized in Pennsylvania, but prohibited from
doing business or having officers in that State, would not
be recognized in Kansas. The court argued that no rule
of comity would “allow one State to spawn corporations,
and send them forth into other States to be nurtured and
do business,’ when the State of their creation “will not
allow them to do business within its own boundaries.” A
fire insurance company cannot be established in Jersey City
under a charter granted to enable such a corporation to
locate in Trenton. Such an attempt was denounced as “a
palpable and entire perversion of the object of the act,”
giving no corporate color to the association that the courts
would recognize for the protection of those who knowingly

 

Cook on Stock and Stockholders, ? Land Grant Railway & Trust Co.
§§ 237, 238, 239. v. Commissioners of Coffey County, 6
Kans, 253.
408 DEFECTIVE INCORPORATIONS. § 474

x

lent themselves to the scheme.! In Hill v. Beach, certain
parties, for the purpose of quarrying stone at Belleville,
New Jersey, undertook to form themselves into a corpo-
ration by complying with the New York statute (act of
February 17, 1848). This was treated as a fraud upon the
laws of both States, and the court said that the individ-
uals “must be treated and dealt with by the law as part-
ners trading under the name they have assumed.”* These
cases, however, are not closely followed in New York‘ or
Ohio.®

$ 474. The Massachusetts cases.—We will briefly notice
the leading Massachusetts cases, In the much-quoted case
of Fay v. Noble® the court said: ‘We are not aware of
any authority .... to warrant the instruction, that, in
consequence of an omission to comply with the requisitions
of law in the organization of a corporation, by which its
proceedings were rendered void, persons who had sub-
scribed for and taken stock in the company, thereby be-
came copartners. The doctrine seems to us to be quite
novel and somewhat startling. Surely it cannot be, in the
absence of all fraudulent intent, (and none was proved or
alleged in this case,) that such a legal result follows as to
fasten on parties involuntarily, for such a cause, the en-
larged liability of copartners; a liability neither contem-
plated nor assented to by them. The very statement of
the proposition carries with it a sufficient refutation. No
such result can follow, unless a principle of law be estab-
lished, founded on no authority, and required by no public
exigency. Corporations are known and recognized legal
entities, with rights and powers clearly defined and well
understood, and wholly distinct and different from those

 

‘Booth v. Wonderly, 36 N. J. Law * Merrick v. Van Santvoord, 34 N. Y.
254. 208,
°12.N. J. Eq, 31. * Second Nat. Bank of Cincinnati v.
*See Ss, P. Kruse v. Dusenbury, 19 Hall, 35 Ohio St. 158.
Weekly Dig. (N. Y.) 201. °7 Cush. (Mass) 192.
§ 474 DEFECTIVE INCORPORATIONS. 409

of individuals and copartnerships. Persons who subscribe
for and take stock in them are subject to certain fixed and
limited liabilities, which they voluntarily assume, and these
liabilities are not to be extended and enlarged, so as to
affect innocent parties, beyond the letter of the law. A
copartnership cannot take upon itself the functions of a
corporation, nor can a corporation or its members be made
subject to the liabilities of a copartnership, in the absence
of all statutory provisions imposing such liabilities.”* This
question was up again in a case decided by Chief Justice
Gray, in which he observes that even if the organization of
the corporation had been defective, there would have been
great difficulty in holding the associates to be subject to
the liability of copartners, which they never intended to
assume.” The same principle will be found embodied in
Ward v. Bingham.® Several persons had signed articles of
association, chosen officers, fixed the amount of the capital
stock, and issued certificates, intending to form a corpora-
tion, but had failed to effect legal incorporation. Two of
the subscribers, who had taken possession of the property
and carried on the business which it was expected the cor-
poration would continue, filed a bill in equity against all
the other subscribers as partners, seeking a settlement of
the alleged partnership affairs. The bill was dismissed be-
cause the relation of copartners was not contemplated by
any of the parties. The court added: ‘‘ Those who acted
as agents for the inchoate corporation acted without a
principal behind them, because there was no body corpo-
rate capable of appointing agents, and so became principals
in the transaction. Their mistake, though shared by the
defendant subscribers to the stock, does not make those
subscribers partners in the business done.”* It is to be

 

1s. p, Trowbridge v. Scudder, 11 Ward v. Brigham, 127 Mass. 27.

Cush, (Mass.) 83. Compare Second Nat. Bank of Cincin-
* First Nat. Bank of Salem v. Almy, nati v. Hall, 35 Ohio St. 165; Planters’
117 Mass. 476. & Miners’ Bank v. Padgett, 69 Ga.

3127 Mass. 24. 164; Ash v. Guie, 97 Pa. St. 493.
410 DEFECTIVE INCORPORATIONS. $ 475

noted that this latter case arose between the subscribers
themselves, and no question as to the rights of third parties
was involved.

§ 475. Denial of partnership liability—In a recent case in
Georgia, the Supreme Court of that State, adopting al-
most word for word the views of Mr. Morawetz, say that,
having contracted with the company as a corporation,
through its officers or agents, both parties believing the
corporation to exist de jure as well as de facto, and with
no intention, at the time, of giving credit to or binding the
members individually or as partners, an action cannot be
maintained against them as partners on that contract. It
would be to make a new contract for the parties, never con-
templated when the real contract which they made them-
selves was executed. The members never agreed to enter
into the contract either severally or jointly, and it is diffi-
cult to see how they can be bound by it. They never
agreed to be bound as partners, nor did they hold them-
selves out to the world as such.’ The contract was intended
to bind the association in a corporate capacity only.” It
must be remembered, however, that it is “no violation of
law” to give to a firm the name commonly applicable to a
corporation.* In a Louisiana case‘ the court say: ‘“Ob-
ligors are bound not by the style which they give to them-
selves, but by the consequences which they incur by reason
of their acts. It matters not what they choose to call
themselves.” The denial of liability on the theory that
the parties never agreed to become copartners, or repre-

 

‘Planters’ & Miners’ Bank v. Pad- Towing Company,” James, J., said:

gett, 69 Ga. 164. “The parties to a copartnership may
? Morawetz on. Priv. Corp., 2d ed., give it just such name as they please,
§ 748. and all contracts, obligations, or notes

* Crawford v. Collins, 45 Barb. (N. made with or given to such firm, may
Y.) 269; Lauferty v. Wheeler, 11 Abb. be prosecuted in the individual names
N. C. (N. Y.) 224. In Crawford v. ofits members.”

Collins, 45 Barb. (N. Y.) 271, in which —# Chaffe v, Ludeling, 27 La. Ann, 607,
case the firm was known as the “Union 611,
§$ 476, 477 DEFECTIVE INCORPORATIONS. 4Il

sented themselves to be such as regards third parties, if
pressed to its legitimate results, would practically subvert
the rule that parties may be held accountable to creditors
as copartners, or be estopped from denying the existence
of a copartnership, in many cases where this relationship
could not be established between the members of the as-
sociation.

§$ 476, Estoppel as to corporate existence.—Stockholders
and subscribers are often estopped from disputing the regu-
larity of the corporate existence. In Buffalo and Allegany
Railroad Company v. Cary,’ the court say: ‘‘ The articles
and affidavit were filed and recorded in the office of the
secretary of state; the capital stock was subscribed, and
partly paid in; the route of the road was surveyed and
located ; the right of way obtained ; a contract for the con-
struction of the whole road entered into, and liabilities in-
curred which have not been satisfied. This was sufficient
to constitute the plaintiff a corporation de facto, so that
neither it nor its stockholders can object that it is not
strictly a corporation de jure.” *

§ 477. Certain conclusions.—It is practically hopeless to
attempt to draw conclusions from this collection of irrec-
encilable authorities. Corporators subscribe for stock and
enter into the corporate agreement with a view to share in
‘the profits of the enterprise, at least to the extent of the
money contributed. Is there not here, as regards commer-
cial corporations, something more than a fancied resem-
blance to a partnership? Is there not a close analogy?
One objection urged against partnership liability as be-
tween the parties is, as we have stated, that a man has
the power to select his copartners, while any person may
become a fellow-stockholder, even against the will of the

 

126 N. Y.77. 7 Cush. (Mass.) 188, Compare Krutz
? See Holbrook v. St. Paul Fire & M. v, Paola Town Co,, 20 Kans, 402.
Ins. Co., 25 Minn, 229; Fay v. Noble,
412 DEFECTIVE INCORPORATIONS. § 477

other subscribers. The stock is sold in open market.
The point made, however, is not as to their being co-
partners in the full sense of the term, so as to render
each stockholder an agent of the others, but of holding
them liable as partners as regards third parties : an entirely
different thing. They have assumed to exercise functions
not possessed by them, and should the court permit the
colorable corporate relationship to fall to pieces like a rope.
of sand, to the prejudice of innocent creditors? Is there
not here a case for a proper application of the principle
that a man cannot take advantage of his own mistake or
wrong? There isa marked distinction between stockhold-
ers and active agents, or promoters of the defective organ-
ization, such as directors or officers. The latter, as we have
seen, might reasonably be held accountable to creditors
upon the theory that, as they had assumed the task of
binding a principal, and failed to accomplish that object,
they are themselves liable as principals. An objection is
sometimes urged that an action by a creditor for damages
against those who actively participated in the management
of the defective association is certain to precipitate hotly
contested issues of fact which could not arise if the part-
nership theory was enforced. Mr. Cook says! that the
clear weight of authority supports the rule that a corporate
creditor seeking to enforce the payment of his debt may
“ignore the existence of the corporation, and may proceed
against the supposed stockholders as partners, by proving
that the prescribed method of becoming incorporated was
not complied with by the company in question.” It is con-
sidered that a creditor ‘‘is not estopped from so doing,
since he is not repudiating a contract, but is enforcing it.
The fact that he contracted with them under a corporate
name is immaterial, since, at common law, parties may
carry,on business under any name they choose.”

 

* Cook on Stock and Stockholders, § 233.
$ 478 DEFECTIVE INCORPORATIONS. 413

$ 478. Trusts.—The nature of “stock trusts,” or of com-
binations devised to control or monopolize particular com-
modities or industries by placing corporate stock of differ-
ent rival associations in the hands of trustees, might be no-
ticed in this connection but for the fact that the principles
of law which are to govern these nondescript compacts are
not as yet fully divulged. The subject is one of growing
importance, and is beginning to attract wide public atten-
tion and to excite a feeling of uneasiness in our midst.
The public press teems with philippics against these unholy
combinations, and Congressional and legislative committees
have made these insidious enemies to legitimate business
competition and good government the subject of diligent
investigation. The writer’s belief is that these compacts
are fraught with mischief to the general public and to the
business community. Petroleum, gas, cotton-seed oil, su-
gar, rolling stock, cattle, and other commodities ‘are mo-
nopolized by these peculiar contrivances. Mr. Stimson
says: “The objects of the ‘trust’ may be broadly stated :
to be either (1) monopoly, (2) concentration of power in
few hands, (3) evasion of the laws regulating corporations,
—any or all of them.”* The combination of corporations
is usually effected by assigning to or depositing with cer-
tain persons called “trustees” the stock of a number of
corporations under a pooling agreement, the exact nature
of which is generally kept a profound secret, even as re-
gards the stockholders. Trust certificates are generally is-
sued in lieu of the stock, and these float on the exchanges,
The “trustees” attempt to wield the voting power of the
stock, while the substantial pecuniary ownership remains

 

1 See article on “ Trusts,” 1 Harvard the American Bar Association in 1885,
Law Rev. 132; Woodruff v. Dubuque (American Bar Association Reports,
& S.C. R.R. Co., 19 Abb. N.C.(N.¥.) vol. 8, p. 277); Cook on “Trusts,”
437, and note on stock trusts and N. Y. 1888.
pools; and also paper read by Francis °*1 Harv. Law Rev. 132.

Rawle, Esq., of Philadelphia, before :
§ 478

in the stockholders. The trustees claim no incorporation
as regards the trust; do not admit that either they or the
certificate-holders are partners; but ‘attempt to evade
alike the laws relating to partnership and corporations, the
personal liability of partners, and the very inconvenient
doctrine of «/tra vires, which circumscribes the active op-
erations of corporations.” We confidently believe that
this mongrel form of association will ultimately be sup-
pressed! in this country, whether the result be attained by
judicial declaration, legislative enactment, or, if need be,
by revolutionary measures, or by violence. Prodigious
schemes to monopolize and “corner” the commonest ne-

414 DEFECTIVE INCORPORATIONS.

 

1 See State of Louisiana v. American
Cotton Oil Trust, 1 Railway & Corp.
L. J. 509; Vanderbilt v, Bennett, 19
Abb. N. C. (N. Y.) 460; Fisher v.
Bush, 35 Hun (N. Y.) 641; Noel v.
Drake, 28 Kans, 265; Hafer v. N. Y.,
Lake Erie & W.R.R. Co., 19 Abb. N.
C. (N. Y.) 454. Compare Ricker v.
Am. Loan & Trust Co., 140 Mass. 346.
Mr. Abbott says, ina note to Woodruff
v. Dubuque & S.C. R.R. Co., 19 Abb.
N. C. (N. Y,) 437, 448: “The mys-
tery which in the minds of some ob-
scures this subject is a business mys-
tery, not a legal mystery. Each of the
legal principles which have rendered
these combinations possible is easily
comprehended and generally familiar.
Nearly all of them have long been rec-
ognized and frequently separately ap-
plied. The modern spirit of organiza-
tion has recently discerned the results
that can be worked out through the
combination of these familiar princi-
ples; and the secrecy which has at-
tended the operation of the device is a
matter of business policy, simply. Pre-
viously, efforts to secure concert of ac-
tion among corporations have been
principally made either (1) by one cor-
poration taking stock in another, (2) by

one leasing the property of another,
(3) by contracts between the boards
of directors having one or more com-
mon members. These involve, in
one form or another, embarrassments
arising out of the limits of the powers
of corporations and their directors,
and out of the fiduciary relation of
directors to stockholders, and the in-
capacity of a director in two boards
to sanction a contract between them.
The fact that stockholders have not
hitherto been regarded as holding any
fiduciary relation to each other or to
their company has led to the inven-
tion of these trusts of stock for the con-
trol of corporations. A ‘Trust,’ so
called, is a device to secure concert of
action among a number of corporations
of similar interests by separating the
voting power and the ownership of the
stock in each one to a sufficient extent
to concentrate the voting power of a
majority of the stock in each corpora-
tion in the hands of a single committee
or association, whose policy will there-
fore animate all the boards of directors
(or who may even put the same per~
sons into the several boards), so that
the corporate action of all may be
identical without contract.”
$ 478 DEFECTIVE INCORPORATIONS. 415.

cessities of life will never be permitted to flourish in a free
country, where the people depend upon one another for an
interchange of necessaries! These compacts, it would
seem, may be attacked and overturned as illegal, in that
they constitute combinations in restraint of trade, or trust
agreements of indefinite duration against the general policy
of our law, or that they result in establishing an unlawful
separation of the voting power of stock from its actual
ownership.

 

'The car trusts are considered as for in rentals would seem to be legiti-
copartnerships. The business of buy- mate. See Ricker v. American Loan
ing and leasing rolling stock to be paid & Trust Co., 140 Mass. 346.
CHAPTER XXIII.

EVIDENCE,

§ 479. Evidence affecting corporations. ) § 491. Proving election and vote of
480, Charter of private corporation. directors.
481. General laws. 492. Proof of membership.
482. Construction of charters. 493. Establishing subscription.
483. Proof of incorporation. 494. Evidence of authority of agent.

484. Admission of corporate exist-| 495- Declarations affecting corpora-
ence, tions.

485. De facto corporation. 496. Establishing notice to corpora-

486. De facto officers. tion, ;
487. Presumption concerning corpo- 497. Proof of receiver's appointment.
rate existence. 498. Good faith and value.

 

488. Corporate seal. 499. Investigation as to motives,

489. Signatures. 500. Notice to produce.

490. Presumptions affecting corpo- | 501. Ordinances and resolutions.
rate acts. 502. Evidence of adverse possession.

§ 479. Evidence affecting corporations.—In cases where cor-
porations are parties to a litigation the rules of evidence
are, in the main, the same as those prevailing in actions in
which individuals are the exclusive litigants, and, in the
very nature of things, cannot be adverted to in this discus-
sion, but must be sought for in treatises devoted exclusively
to evidence. There are, however, certain questions and
principles of evidence peculiar to corporation cases, or that
most generally arise in proceedings affecting corporate asso-
ciations, which it will be serviceable to briefly consider.
Corporate insolvency being the most important phase of
our theme, the attention of the reader may be here recalled
to the principle already advanced, that a judgment and
execution returned unsatisfied, constitute evidence of in-
solvency on the part of, or inability to collect from, the
§ 480 EVIDENCE.

417
corporation ; but such proofs are not by any means exclu-
sive. The condition of insolvency may be established by
other modes.! In Paine v. Stewart? the court said: “We
are of opinion that the evidence that the bank was insol-
vent, and all its property had gone into the hands of a re-
ceiver, was sufficient proof that no property could be found,
and excused an effort to collect by suit against the bank.
Proof of the fact that no property can be found is not con-
fined to an unsuccessful demand on execution. That is one
mode of proving the fact, and it is declared by the statute
to be a sufficient mode. But any other sufficient evidence
may be given; and the vesting of all the property in a re-
ceiver, and the withdrawal of it thereby from the reach of
an officer, is sufficient.” This principle of evidence must
not, however, be confused with the prevalent rule else-
where set forth that a creditor of a corporation, seeking
to enforce in equity against a stockholder the payment of
his demand, must first exhaust the remedy at law by re-
covery of judgment against the corporation and the return
of execution.®

§ 480. Charter of private corporation.—The discussion has
made it manifest that a corporation cannot be constituted
or placed upon its feet, merely by the agreement of private
parties. Such an association can be created only by or pursu-
ant to legislative enactment.* ‘A corporation is the crea-
ture of legislation, and may be endowed with such powers

as its creator sees fit to give.”°

Hence proof of incorpora-

 

i See §103. Terry v. Tubman, 92 U.
S. 156, 160; Camden v. Doremus, 3
How. 533-
’ £33 Conn. 531.
- *See §97. Terry v. Anderson, 95 U.
S. 636; Baker v. Louisiana Portable
RR. Co., 34 La. Ann. 754, 758; Mat-
ter of Louisiana Savings Bank & S. D.
Co., 35 La. Ann. 199; Appeal of Means,
85 Pa. St. 75; Wright v. McCormack,

a7

4

17 O.S.95; Wheeler v. Miller, 24 Hun
(N. Y.) 541, aff'd 90 N. Y. 353.
4Stowe v. Flagg, 72 Ill. 397. See
Relfe v. Rundle, 103 U. S. 225; Atkin-
son y. Marietta & C. R.R. Co., 15 Ohio
St. 33; People v. Manhattan Co., 9
Wend. (N. .Y.) 393; Medical Institus
tion of Geneva College v. Patterson, 1
Denio (N. Y.) 61; Pennsylvania Rail-
road Co. v. Canal Comrs., 21 Pa. St. 22.
5 Relfe v. Rundle, 103 U. S, 225,
418 EVIDENCE, § 480
tion, to be relevant, must be in a line that emanates from a
legislative source. As has been made apparent,’ corpora-
tions are divided or classified as public and private. The
inquiry may be briefly directed to the manner in which the
existence of a private corporation may be established or
shown in the courts. It has been said that, in a court of
chancery, a private statute must be pleaded as well as
proved.? A private act, we may here note, is, generally
speaking, one that relates to particular persons or private
concerns.® But this popular definition is not strictly accu-
rate, for the charter of an incorporated railroad company is
a private statute of which the courts will not take judicial
notice* And yet, as already shown, a railroad is a guasz
public corporation, clothed with the power and burdened
with the duty of discharging certain public functions. Pri-
vate charters, as will become apparent, may be read in evi-
dence from authorized government publications. The
proof of incorporation is sometimes made by the produc-
tion of a certified copy of the act, under the seal of State,
or, in some cases, of the corporate records;® or of an
authenticated copy of the certificate of incorporation.’
Several steps are usually essential to complete corporate
creation. The actual transaction of business is not neces-
sarily one of these. ‘The life of a corporation dates from
its organization, and not from the time it begins to do busi-
ness.” * This question as to the exact time when a corpora-

 

1 See §§ 16, 17.

* See 1 Greenl. Ev., § 480.

3 See Wheeler v. Philadelphia, 77 Pa.
‘St. 338.

4 Perry v. New Orleans, M. & C. Rail-
road Co., 55 Ala. 413. See Methodist
Episcopal Union Church y. Pickett, 19
N. Y. 486.

5 Howell v. Ruggles, 5 N. Y. 444;
Wood v. Jefferson County Bank, 9
Cow. (N. Y.) 194.

® See Duke v, Cahawba Nav, Co., 10
Ala, 82.

"Compare Leonardsville Bank v.
Willard, 25 N. Y. 574; Reynolds v.
Myers, 51 Vt. 444; Stone v. Great
Western Oil Co., 41 Ill. 85; De Witt
v. Hastings, 40 N. Y. Superior 463,
aff'd 69 N. Y. 518; Commonwealth v.°
Bakeman, 105 Mass. 53; South Bay
Meadow Dam Co. v. Gray, 30 Me.
547; Utica Ins. Co. v. Tillman, 1
Wend. (N. Y.) 555. See § 483.

*Hanna v. International Petroleum
Co., 23 O. S. 625.

.
q
$ 481 EVIDENCE. 419
tion may be said to be fully fledged or created came up in
an important case in Massachusetts. By a legislative enact-
ment in that State it was provided that ‘“ persons who shall
have associated themselves together by. articles of agree-
ment in writing, etc., . . . . shall be and remain a corpora-
tion under any name indicated in their articles of associa-
tion, etc.” In construing this act, Gray, J., said: “The
manifest intent of the first section, viewed in connection
with the rest of the chapter, is, that a corporation shall ex-
ist at least as soon as the first meeting has been held and
officers have been elected, if not immediately upon the sign-
ing of the fundamental articles of association, by which the
intention of the associates to avail themselves of the privi-
leges conferred by the legislature is manifested, the name
of the corporation determined, the amount of the capital
stock fixed, and the place in which and the purpose for
which the corporation is established are specified.”' It may
be recalled in this connection that no presumption will be
indulged that the courts are acquainted with the charters of
foreign corporations.* Proof of the existence of the for-
eign incorporation must be adduced.

§ 481. General laws.—The courts will, on the other hand,

 

1 Hawes v. Anglo-Saxon Petroleum
Co., 101 Mass, 395, citing Utley v.
Union Tool Co., 11 Gray (Mass.) 139;
Perkins v. Union Button-Hole & Emb.
M. Co., 12 Allen (Mass.) 273; New-
comb v. Reed, 12 Allen (Mass.) 363.

® Savage Manufg. Co. v. Armstrong,
17 Me. 34. See Chap. XVI. In United
States Bank v. Stearns, 15 Wend. (N.
Y.) 315, Chief Justice Savage said:
“When a suit is brought by a foreign
corporation, as the plaintiffs must be
considered in this court, I apprehend
an exemplification should be produced
if required, The courts of the State of
‘New York have no judicial knowledge

of acts of Congress creating corpora-
tions. When they are necessary as
evidence, they must be proved as the
acts of our sister States must be proved.
In my opinion the proof of the existence
of the corporation was insufficient. The
trarisaction of business by the defend-
ant with the plaintiffs was probably an
admission that they had capacity to
transact business as a company; but
not that they were an zucorporated
company. Many commercial compa-
nies not incorporated do business by
officers and agents, and are capable of
suing, but not otherwise than: in their
individual capacities.” _
420 EVIDENCE. § 482

take judicial notice of general laws,’ under which corpora-
tions are formed.? This rule is followed in Federal tribu-
nals. Thus Chief Justice Taney said: ‘Wherever a law
of a State is held to be a public one, to be judicially taken
notice of by the State courts, it must be regarded in like
manner by acourt of the United States, when it is required
to administer the laws of the State.”® In a litigation in
Arkansas this language is employed by the court: “Tf,
therefore, the act under which this corporation was brought
into existence is a public law, defining the powers and
capacities of the corporation to contract, the court was
bound judicially to take notice of it, and no proof under
the issue upon this point was necessary.”* In a contro-
versy before the courts of Indiana, in commenting upon
the character of an incorporating statute, the court ob-
served: “It is said to be a private act, because the corpo-
ration to which it relates is a private one. But sucha
consequence does not necessarily follow. A private cor-
poration may have charge of an interest of so public a con-
cern as to render its charter a public act.”* |

§ 482. Construction of charters.—According to general
statements embodied in many authorities, charters of cor-
porations are to be construed liberally as to the public, and
strictly as to the grantee.* To confer rights upon a corpo-
ration by a forced construction of its charter would be such
an exercise of judicial charity as the courts would not tol-
erate.” Corporate powers, says a very distinguished

 

1In Wheeler v. Philadelphia, 77 Pa.
St. 348, the court said that ‘a statute
which relates to persons or things as a
‘class, is a general law.”

See Methodist Episcopal Union
Church v. Pickett, 19 N. Y. 486,

8 Covington Drawbridge Co. v, Shep-
herd, 20 How. 227, 232.

4 Alderman, etc. v. Finley, ro Ark,

427. See Hays v. Northwestern. Bank
of Va., 9 Gratt. (Va.) 127; Anderson v.
Kerns Draining Co., 14 Ind. 199. ©

5 State v. The Trustees of Vincennes
University, 5 Ind. or.

° Pittsburgh & L. E. R.R. Co. v.
Bruce, 102 Pa. St. 33; Burritt v. City of
New Haven, 42 Conn. 202, See § 566,

7 Ibid,
§ 482 EVIDENCE.

421
judge, can never be extended by implication.’ When
the interpretation of a charter is doubtful, that con-
struction is to be followed which is most favorable to
the people, provided it be equally reasonable? “It is
an unbending rule that a grant of corporate exist-
ence is never implied. In the construction of a statute
every presumption is against it.”* The learned Thompson,
J., says:* “As against the king, the State, or the public,
corporations take nothing in their charters by implication,
unless the implication is necessary for the purpose. of giv-
ing effect to powers expressly granted, This rule, laid
down and followed by the most eminent judges of the
past, ignored, departed from, and even trifled with by
courts in more recent times, must still be regarded as the
settled law.”® * The rule of strict construction against cor-

 

1 Black, C. J., in Pennsylvania R.R.
Co. v. Canal Commrs., 21 Pa. St. 22;
Auburn & C. P. R. Co. v. Douglass, 9
N. Y. 444; Burns v. Multnomah R.
Co., 15 Fed. Rep. 185.

2 Central & Georgetown R. Co. v.
The People, 5 Col. 45.

® Central R.R. & Banking Co. v. Geor-
gia, 92 U.S.670; Memphis & L.R. R.R.
Co, v. Railroad Commissioners, 112 U.
S. 618,’ Black, C. J., said, in Common-
wealth v, Erie & Northeast. R.R. Co.,
27 Pa. St. 351: “ An act of incorpora-
tion is and always must beinterpreted by
a rule so simple that no man, whether
lawyer or layman, can misunderstand
or misapply it. That which a company
is authorized to do by its act of incor-
poration, it may do; beyond that all
its acts are illegal. And the power
must be given in Z/azz words, or by
necessary implication. All powers not
given in this direct and unmistakable
manner are withheld. It is strange
that the attorney-general, or anybody
else, should complain against a com-
pany that keeps itself within bounds,

which are always thus clearly marked,
and equally strange that a company
which has happened to transgress them
should come before us with the faintest
hope of being sustained. In such
cases ingenuity has nothing to work
with, since nothing can be either proved
or disproved by logic or inferential
reasoning. If you assert that a corpo-
ration had certain privileges, show us
the words of the legislature conferring
them, Failing in this, you must give
up your claim, for nothing else can
possibly avail you. A doubtful charter
does not exist; because whatever is
doubtful, is decisively certain against
the corporation.”

* City of St. Louis v. Missouri R.R.
Co., 13 Mo. App. 524, 530.

5 Citing Charles River Bridge v. War-
ren Bridge, 11 Peters 544; Minturn v.
Larue, 23 How. 435; Home of the
Friendless v. Rouse, 8 Wall. 430; Penn-
sylvania R.R. Co. v. Canal Comrs., 21
Pa, St, 22; Blair v. Perpetual Ins. Co.,
Io Mo. 559; Ruggles v. Collier, 43
Mo. 353; Stourbridge Canal v. Whee-
422 EVIDENCE. § 482

porate charters was founded in part upon the irrevocable
nature of the contracts contained in the charters. The
Supreme Court of Ohio says: ‘In those days a corporation
was 4 monopoly. It was necessary to strictly construe the
grants made, in order to protect the interests of the State
and of people generally. But now the legislature has far
more power over corporations than over individuals. It
may alter, or repeal, all acts granting corporate power ; it
may impose new conditions of its exercise. It can mould
the statutes as experience or legislative caprice may dictate.
There is no longer reason to hesitate to apply to the lan-
guage of acts of incorporation precisely.the same rules of
interpretation as are applied to like words in azy contract
or statute.”’ The power of the British Parliament to
grant, alter, revoke, or annihilate charters; is, as already
shown, sweeping and complete ;* and in Canada there is
no constitutional prohibition against the passage of laws
impairing the obligations of contracts. The Dominion
Parliament has “ plenary legislative powers as large and of
the same nature as those of the Imperial Parliament.” ®
The conclusion would seem to follow that the question of
the irrevocable nature of a corporate charter has no neces-
sary bearing upon its construction in England or its col-
onies, The words strict or liberal, as applied to the con-
struction of charters, are often little more than mere epi-
thets, the use of which tends to create confusion of thought.
In the consideration of the true intent of incorporating acts}
should not the ordinary and natural meaning of the words
be accepted, as best calculated to reflect the intention of
the legislature ?

 

ley, 2 Barn. & Adol. 793; Burns vy. * Great Western Ry. Co. v. Rushout,
Multnomah R. Co., 15 Fed. Rep. 177, 5 DeG.& Sm. 290, 307. See § 15, 2.

185. "City of Fredericton v. The Queen,
‘Nat. Bank of Washington v. Insur- 3 Canada Sup. Ct. 505, quoted in Can-
ance Co., 41 Ohio St. 11. ada Southern Ry. Co. v. Gebhard,

109 U. S. 532.
$ 483 EVIDENCE, 423

§ 483. Proof of incorporation—In our modern procedure
proof of incorporation is often dispensed with unless the
answer contains a specific denial of the fact of incorpora-
tion. Where this proof becomes necessary, it is, ordina-
rily, sufficient to show that the company is a corporation
de facto." Corporate existence, under general statutes, can
usually be established, as we have said, by the production
of the certificate of organization, with proof of filing ;?
and may, it seems, be proved, though not alleged in the
pleading. Evidence that a corporation is acting as such
has been said to prove its existence.» In New York it was
provided by statute that, in suits by or against domestic
corporations, the incorporation need not be proved, unless
denied by a verified allegation in the answer.® In a contro-
versy which arose in Maine, it was said that the proof of
incorporation may be completed without necessarily pro-
ducing a legal record of the first meeting, or establishing
any formal acceptance of the charter.’ It may be here re-

 

1See Star Brick Co. v. Ridsdale, 36
N. J. L. 229. Compare Gott v. Adams
Express Co., 100 Mass. 320; Chicker-
ming Lodge, etc. v. McDonald, 16 Wis.
112.

?See Rondell v. Fay, 32 Cal. 354;
Methodist Episcopal Union Church v.
Pickett, 19 N. Y. 482; Slocum v. War-
ren, 10 R. I. 124. See §§ 22, 23.

3 Jackson v. Leggett, 7 Wend. (N. Y.)
377; Chamberlin v. Huguenot Mfg.
Co., 118 Mass. 532; Spring Valley
Water Works v. San Francisco, 22
Cal. 434. See Eastern Plank Road Co.
v. Vaughan, 14 N. Y. 546; Hughes v.
Antietam Manuf. Co., 34 Md. 316;
Hawes v. Anglo-Saxon Petroleum Co.,
1o1 Mass, 385.

4See Phoenix Bank v. Donnell, 40
N. Y. 410; Camden & Amboy R.R.,
etc. Co. v. Remer, 4 Barb. (N. Y.) 127.
Compare Paine v. Lake Erie & L, R.R.
Co., 31 Ind. 354.

5 See People v. Frank, 28 Cal. 507;
Oakland Gas Light Co, v. Dameron,
67 Cal. 663; Rondell v. Fay, 32 Cal.
354. In Attorney General v. Simon-
ton, 78 N. C. 60, Rodman, J., observed :
“It is true that if the corporators named
in the act, or any one or more of them,
without having created any shares of
stock, or organized in any way, or paid
into the corporate fund the capital
which the law says shall be paid up,
pretend to be incorporated and hold
themselves out to the world as a cor-
poration, they would be estopped, as
to those who dealt with them on the
faith of those representations, to deny
them.”

6 See Moak’s Van Santv. Pl. 519.

Sampson v. Bowdoinham Steam
Mill Corporation, 36 Me. 81. One de-
reigning title through a corporation
must prove its legal existence. Sonoma
Co. Water Co, v. Lynch, 50 Cal, 503.
424 EVIDENCE, § 483
called that the judgment of a court of a State, upon the
question whether a corporation exists under its laws, will
be taken as conclusive when the question arises in other
courts! In the opening chapter, the principle of law
was adverted to that corporations of a political char-
acter may be proved to exist by prescription, which pre-
supposes a legitimate creation.? Mr. Waterman, referring
to this subject, says: ‘‘A corporation by prescription is
one which has existed from time immemorial, and of which
it is impossible to show the commencement by any partic-
ular charter or act, the law presuming that such charter or

act once existed, but that it has been lost by such accidents

as length of time may produce.”®

The fact of the con-

 

1 Secombe v. Railroad Co., 23 Wall.
108; Jessup v. Carnegie, 80 N. Y.
441. In the course of the opinion
in this latter case, Miller, J., said:
“In determining the interpretation
to be placed upon the statutes of a
State, it is important to ascertain
whether the courts of the State where
they were enacted have considered’the
subject, and the construction, if any,
which has been placed upon them. If
the courts of Iowa have passed upon
the question now presented, the courts
of this State ordinarily would feel
bound to respect the decision thus
made and should not reconsider the
subject, so as to decide de xove whether
the adjudication was erroneous and
should be disregarded. This course
has been substantially pursued, we
, think, in the State and Federal courts,
and any other or different rule would
lead to confusion, operate injuriously
in many cases, and would be in direct
hostility to the comity which is due to
the authority and power which is con-
ferred upon the lawfully constituted
tribunals of a sovereign State. If a
statute existing in the State of New
York, which had been interpreted by

the highest tribunal having jurisdiction
in this State, in such a case could be
construed differently in another State,
individuals who might be subject to
its operation would have no security
against a different construction else-
where, and thus liabilities might be
incurred which were never contem-
plated by the legislature of the State
which passed the statute, and great
injustice done. Any such a rule en-
forced in different States according to
the dex lJocz would be an infringement
upon the rights of individuals, and at
war with the policy of the law that no
man should be subject to liability at
the same time by reason of different
and conflicting constructions of the
same law in different localities.”

*See § 19. Robie v. Sedgwick, 35
Barb. (N. Y.) 326.

51 Waterman’s Corps. § 39, citing 1
Kyd on Corp. 41, 1 Blk. Com. 473.
See Dillingham v. Snow, 5 Mass. 547;
Hager’s Town Turnpike Road Co. v.
Creeger, 5 H. & J. (Md.) 122; New
Boston v. Dunbarton, 15 N. H. 201;
Londonderry v. Andover, 28 Vt. 416;
Bow v. Allenstown, 34 N. H. 365;
Jameson v. The People, 16 Ill. 259.
§ 484 EVIDENCE. 425

tinued operation of a school district for more than fifteen
years raises a presumption of its legal organization, it be-
ing shown that the records of the district are lost. In
Robie v. Sedgwick,? Johnson, J., said: ‘The evidence here
is presumptive only, but that may be resorted to where the
record containing the direct evidence cannot be produced.
The evidence shows, I think, that no record of the original
organization of this district can be found. It was admitted
by the defendants’ counsel that the plaintiffs were trustees
of school district No. 5, in the town of Bath, at the time
of the commencement of this action. It was also proved
on the part of the plaintiffs that the usual powers pertain-
ing to ordinary school districts, in the several towns of the
State, have been exercised by trustees by this name and
title, and in the same locality, ever since 1819. School
meetings have been held, trustees chosen, a school kept,
and school-houses built, as appears, in the ordinary man-
ner. This, I think, is abundantly sufficient to raise the
presumption that the district was duly organized, at an
early day after such organizations were authorized by the
revised laws of 1813, more than forty years before the com-
mencement of the action.”

§ 484. Admission of corporate existence—It is a familiar
principle of law that, by contracting with a corporation a
party admits its corporate existence? In Williams v.
Cheney‘ the court said: ‘‘ The production by the plaintiff, of
the notes declared on, duly indorsed, was sufficient przma
facte evidence that the corporation was duly organized and

 

1 Sherwin v. Bugbee, 16 Vt. 439. Dam Co. v. Gray, 30 Me. 547; Dutch-
* 35 Barb. (N. Y.) 326. ess Cotton Manufactory v. Davis, 14
’Black River & U. R.R. Co. v. Johns. (N. Y.) 245; Steam Navigation
Clarke, 25 N. Y. 208; Williams v. Co. v. Weed, 17 Barb. (N. Y.) 382;
Cheney, 3 Gray (Mass.) 220; Com- Palmer v. Lawrence, 3 Sandf. (N. Y.)
missioners of Douglass Co. v. Bolles, 170; Rafferty v. Bank of Jersey City,
94 U.S. 104; Cochran v. Arnold, 58 33N. J. Law 368.
Pa, St. 399; Cowell v. Colorado Springs 43 Gray (Mass.) 220.
Co., 100 U.S. 56; South Bay Meadow
426 EVIDENCE. § 484
competent to transact business. The defendants, by giving
their notes to the corporation in their corporate name, as
payees, admitted their legal existence and capacity to make
and enforce the contracts declared on, so far, at least, as to
render proof on that point unnécessary in the opening of
the plaintiff's case.” A plea of the general issue or to the
merits, as we have seen,’ admits the corporate existence.”
Mr. Waterman remarks :* ‘“‘ When the existence of a cor-
poration has been recognized by acts of the legislature, all
inquiry into the original creation of the corporation is pre-
cluded. It becomes by such recognition aso facto a legal
corporation, and any defect or irregularity in the proceed-
ings required by law to be taken for its organization will
be deemed to have been waived ;° the legislature having
the same power to confirm and validate an irregularly
organized corporate body that it has to bring into existence
a new one.”® In Michigan it is said that the rule that

 

1See § 136.

? Oldtown & L. R.R. Co. v. Veazie, 39
Me. 571; Pullman v. Upton, 96 U. S.
328 ; Penobscot & K. R.R. Co. v. Dunn,
39 Me. 587; Heaston v. Cincinnati &
Ft. W. R.R. Co., 16 Ind. 278; Inhabit-
ants of Orono v. Wedgewood, 44 Me.
50; Litchfield Bank v. Church, 29
Conn. 148; United States v. Insurance
Companies, 22 Wall. 99; West Win-
sted Sav. Bk., etc. Assoc. v. Ford, 27
Conn. 282; Society for Propagation of
Gospel v. Town of Pawlet, 4 Peters
480; Alderman, etc. v. Finley, ro Ark.
425. This language was employed in a
case in Connecticut: “ An objection to
the existence of a corporation plaintiff
cannot be raised upon the general issue.
It is preliminary in its character, like
all objections to the person or charac-
ter in which a plaintiff sues, and should
be pleaded in an earlier stage of the
cause. The existence of a corporation
and its capacity to sue are admitted by

a plea to the merits.” West Winsted
Savings Bank, etc. Assoc. v. Ford, 27
Conn. 288.

® Waterman on Corps. § 42.

‘Citing Society for Propagation of
Gospel v. Pawlet, 4 Pet. 480; White
Water Valley Canal Co. v. Vallette, 21
How. 414; Kanawha Coal Co. v. Kan-
awha & Ohio Coal Co., 7 Blatchf. 391 ;
McIntyre Poor School v. Zanesville -
Canal, etc. Co., 9 Ohio 203; Williams v.
Union Bank, 2 Humph. (Tenn.) 339;
Jameson v. The People, 16 Ill. 257;
People v. Farnham, 35 Ill. 562; Co-
well v. Colorado Springs Co., 3 Col. 82;
Matter of New York Elevated R.R.
Co., 70 N. Y. 338.

'Citing Black River & Utica R.R.
Co, v. Barnard, 31 Barb. (N. Y.) 258;
Basshor v. Dressel, 34 Md. 503; Atlan-
tic & Pacific R.R. Co. v. St. Louis, 66
Mo, 228.

°Citing Mitchell v. Deeds, 49 Ill.
416,
§ 485 EVIDENCE.
one recognizes an association as a corporation by dealing
with it as such, originated in equitable principles, and rests
upon the ground that the act of recognition creates rela-
tions and encourages conduct which there may be difficulty
in undoing. But this rule has no application where no new
rights have intervened and the recognition has itself been
brought about by fraudulent acts committed for the pur-
pose of entrapping a party into the act from which the
recognition is inferred.’ Mr. Justice Hunt, in delivering the
opinion of the United States Supreme Court, observed :?*
“It is settled by the decisions of the courts of the United
States and by the decision of many of the State courts that
one who contracts with an acting corporation cannot defend
himself against a claim on such contract, in a suit by the
corporation, by alleging the irregularity of its organization.
This was settled more than half a century since in the courts
of the State of New York, and has recently been affirmed
in this court.” ®

§ 485. De facto corporation.—Allusion has already been
made to the general characteristics of de facto corpora-
tions.* It may be further stated that two things are neces-
sary to be shown in order to establish the existence of a
corporation de facto: 1. The existence of a charter, or of
some law under which a corporation with the powers as-
. sumed might lawfully be created; and 2. A user by the
party to the suit of the rights claimed to be conferred by
such charter or law.> In Methodist Episcopal Union

427

 

1 Doyle v. Mizner, 42 Mich. 332. in the organization of a corporation

? Chubb v. Upton, 95 U. S. 667.

3 Citing Dutchess Cotton Manufac-
tory v. Davis, 14 Johns. (N. Y.) 238;
Sanger v. Upton, 91 U.S. 56; Upton
v. Tribilcock, 91 U.S. 45; Buffalo &
Allegany R.R. Co, v. Cary, 26 N.Y.
75; Bissell v. Michigan Southern & N.
I. R.R. Co., 22 N. Y. 258. In Sanger
v. Upton, 91 U.S. 64, this language is
employed: “Where there are defects

which might be fatal upon a writ of
guo warranto, a stockholder who has
participated in its acts as a corporation
de facto is estopped to deny its rightful
existence.” Eaton v. Aspinwall, 19 N.
Y. 119; Abbott v. Aspinwall, 26 Barb,
(N. Y.) 202.

4 See §§ 22, 23.

5 Methodist Episcopal Union Church
v. Pickett, 19 N. Y. 484. Compare
428 EVIDENCE. ° § 485

Church v. Pickett,’ Selden, J., said: ‘It is insisted by the
defendant’s counsel that there was no proof of user. The
degree of proof required on this subject depends to some
extent upon the nature of the incorporation and the law
under which it was organized. Where no provision is
made for any permanent evidence of the fact of organiza-
tion, more proof of user would be necessary than where,
as in this case, the essential steps by which the organization
is accomplished are required to be made a matter of record.
In such cases, if the record is perfect, then perhaps nothing
else need be shown; but if imperfect, it may still stand in
place of, and be equivalent to, a very considerable degree
of evidence of user. The imperfection of the record can-
not be taken advantage of by a private individual who has
entered into engagements with the corporation. The
rightfulness of its existence not being in issue, of course
evidence of any irregularities or defects in its organization,
short of such as would show a want of good faith on the
part of those concerned in the proceedings, would be
wholly irrelevant. If the law exists and the record exhib-
its a dona fide attempt to organize under it, very slight evi-
dence of user beyond this is all that can be required.”
Sedgwick, J., has said: ‘“ Evidently the acts to show user
must in their nature be corporate acts, or such as would be
corporate acts if the attempted incorporation had been per-
fected, and they must be unequivocally such. The corpo-
ration de facto must be proved. The testimony to prove
it must be certain, not speaking as much for non-incorpo-
ration as for corporation. In substance, user consists in
an enjoyment and exercise (although not rightful) of such
corporate franchises and powers as would be given by the
law to an association if the attempted organization had
been perfected. The contrast to that is, that acts of indi-

 

United States Bank v. Stearns, 15 Ig N.Y. 486.
Wend. (N. Y.) 314. See §§ 22, 23.
$$ 486, 487 EVIDENCE. 429

viduals which would -not be corporate acts if there were a
charter, will not be acts of user. The acts must at least
appear to be the acts of the association not rightfully incor-
porated, and the acts must be such as would be within the
objects of the incorporation, as stated in that part of the
proceedings under the statute that have been, in fact,
taken.” Certain defects which are considered insufficient
to invalidate corporate organization have been already con-
sidered.®

§ 486. De facto officers.—Persons acting publicly as off-
cers of a corporation are presumed to be rightfully in office,
and, in the absence of proof on the subject, it is not in-
cumbent on the party claiming under the acts of the officer
de facto to show that he has been properly elected.? But
general reputation is not competent to prove who are the
officers of a private corporation.‘ The principle already
stated may be recalled,’ that there must be an office de jure
in order that the existence of a de facto officer may be rec-
ognized.°

§ 487. Presumption concerning corporate existence.—In an
action which arose in Maryland, it is said that where a cor-
poration has gone into operation, and rights have been ac-
quired under its charter, every presumption should be made
in favor of its legal existence.” In the famous case of The
People v. Manhattan Company,® Sutherland, J., uses this
language: ‘The corporation having been shewn to have
been legally created and organized, is, in judgment of law,

 

1 De Witt v. Hastings, go N. Y.Su- 4 Litchfield Iron Co. v. Bennett, 7
perior 476; affi'd 69 N. Y. 518. Cow. (N. Y.) 234.
2 See § 22, also Chap. XXII. 5 See § 23.
3Selma & T. R.R. Co, v. Tipton, * Norton v. Shelby Co., 118 U. S,
5 Ala. 787; Ss. Cc. 39 Am. Dec. 344; .449; Carleton v. People, 10 Mich. 259.
Susquehanna Bridge & Bank Co. v. 7 Hager’s Town Turnpike Road Co.v,
_General Insurance Co., 3 Md. 305; Creeger,4 H.& J.(Md.) 125; Busey v.
S.C. 56 Am,!Dec.'740. Hooper, 35 Md. 15; 6 Am. Rep. 350.
*g Wend. (N. Y.) 351, 379.
EVIDENCE. § 488

430
supposed to continue to exist until the contrary is shewn,
and to have performed all its duties.” In an important
case in Massachusetts, the learned Chief Justice Shaw ob-
served: ‘The maxim of law is, that all things shall be pre-
sumed to have been rightly and correctly done until the
contrary is proved. This maxim is stated and explained,
and many instances given of its application to corporations,
and to acts and doings of their members, officers, and agents
in Bank of United States v. Dandridge.’ As the corpora-
tion could not proceed lawfully until duly organized, and
as they did proceed to act as a corporation, this presump-
tion has its effect. The defendants have the records, which
prove such organization, if it took place, and withhold
them. This maxim, under these circumstances, would go
far to establish the actual and regular organization of the
defendant corporation.”? In considering this subject of
presumptions concerning corporate existence imperfectly
established, the reader must be careful to remember that
“it is an unbending rule that a grant of corporate existence
is never implied,”* and must also keep in view the rules
already given as to the construction of charters.‘

§ 488, Corporate seal.—_In executing formal documents, a
corporation usually acts by its seal. A corporate deed of
land lacking the corporate seal is considered to be void.®
But when the seal appears upon an instrument, the pre-
sumption, as we shall show, will be indulged that it was
affixed by competent authority.° The private seal of one

 

1 72 Wheat. 70.

2 Narragansett Bank v. Atlantic Silk
Co., 3 Met. (Mass.) 287. See Dooley
v. Cheshire Glass Co,, 15 Gray (Mass.)
494.

§ Central Railroad & Banking Co. v,
Georgia, 92 U. S. 670.

4 See §§ 482, 566.

5 See Koehler v. Black River Falls
Iron Company, 2 Black 715,

*'Solomon’s Lodge v. Montmollin, 58
Ga. 547; Koehler v. Black River Falls
Iron Co., 2 Black 715; Evans vy, Lee,
11 Nev. 194; Wood v. Whelen, 93 III.
153; Trustees Canandarqua Academy
v. McKechnie, 90 N. Y. 628; Flint v,
Clinton Co., 12 N. H. 436; Chouquette
v. Barada, 28 Mo. 491; Cincinnati, H.
& D. R.R. Co. v. Harter, 26 Ohio St.
426; Osbornev. Tunis, 25 N, J, Law 633.
§$§ 489, 490 EVIDENCE, 431

of its officers may be used,’ for a corporation may adopt
any seal.» We have shown that the rule as to the necessity
for the use of a corporate seal is being much relaxed,’ and
some authorities have even asserted that a corporation
seal need only be appended when an individual would be
required to use a seal. But it is usual to require some
evidence of the authenticity of the seal,° and this may be
supplied by summoning as a witness any person familiar
with the device employed.®

§ 489. Signatures.—Signatures may be proved by the ad-
missions of the parties, by the testimony of. persons who
were present when the papers were signed,’ or by parties
having knowledge of the handwriting, regard being had
for the rule of law that a subscribing witness must be first
called.

§ 490. Presumptions affecting corporate acts.—The prom-
inent authorities relating to presumptions affecting corpo-
rations have been referred to in our opening chapter.®
Judge Story said that ‘the acts of artificial persons afford
the same presumptions as the acts of natural persons,”®
We have already seen” that corporate acts may be proved
much the same as the acts of individuals,” and that corpo-
rations are entitled to invoke the rule which imputes inno-
cence rather than guilt to the conduct of men.” We have

 

* Eureka Co. v. Bailey Co., 11 Wall.
488, 491.

3 Tenney v. East Warren Lumber
Co., 43 N.H. 343. Compare Haven v.
Adams, 4 Allen (Mass.) 80; Hutchins
vy. Byrnes, 9 Gray (Mass.) 367.

8 See § 10.

4 Crawford v. Longstreet, 43 N.J.L. .

325. See Hoag v. Lamont, 60 N. Y.
96.

5 Jackson v. Pratt, 10 Johns, (N. Y.)
_381; Den v. Vreelandt, 2 Halst. (N.
7 J ) Law 352.

6 Foster v. Shaw, 7 Serg. & R. (Pa.)

156; Leazuré v. Hillegeas, 7 Serg. &
R. (Pa.) 313; Tenney v. East Warren
Lumber Co., 43 N. H. 343, and cases
cited. é
7 Phil. & W. C. R.R. Co. v. Hick-
man, 28 Pa. St, 318.

® See § 10.

* Bank of the U.S. v. Dandridge, 12
Wheat. 64, 70.

2 See § 10.

" Southern Hotel Co. v. Newman, 30
Mo. 118.

1 Cheever v. Gilbert Elevated Ry.

‘Co., 43 N. Y. Superior 478.
432 EVIDENCE, $ 490

just shown that when the corporate seal is affixed to a
deed, the burden rests upon the party contesting the in-
strument to prove absence of authority as to its execution.’
The Supreme Court of the United States observe: “This
mortgage had the corporate seal attached, and the pre-
sumption was that it was there rightfully, and the court
properly admitted it to be read in evidence.”* The learned
Chief Justice Shaw said: ‘The deed, duly executed under
the corporate seal of the bank, and produced by the party
claiming under it, is Arzma facze a good title, and it is for
those who wish to set it aside to impeach it.”*> Chancel-
lor Walworth used this language: “ The seal of a corpo-
ration aggregate affixed to a deed is of itself przma facze
evidence that it was so affixed by the authority of the cor-
poration.”* In a case which arose in Massachusetts it was
held that where a deed of land, purporting to have been
executed under the authority of a corporation, by its presi-
dent, had been recorded, a certified copy of the instrument
was admissible to establish a part of a chain of title. Hoar,
J., said: ‘“‘There is nothing to be inferred, in case of the
admission of an office copy of the deed of a corporation,
which goes farther than this. It is presumed to be the
deed of the corporation, which it purports to be. The
seal is presumed to be the seal of the corporation, affixed
by its authority, as in the case of a private person. The
authority to execute the deed is of course essential to its
validity ; but so is the genuineness of the signature of the
grantor in any case ; and there seems to us as much reason
to infer the one from the existence of the record copy as
the other. The copy was admissible, because it purported

 

‘Miners’ Ditch Co. v. Zellerbach, 37 Paige (N.Y.) 60. See Hoyt v. Thomp-
Cal. 544. son, 5 N. Y. 335; Jackson v. Camp-
* Koehler v. Black River Falls Iron bell, 5 Wend. (N. Y.) 575; Flint v.
Co., 2 Black 717. ; Clinton Co., 12 N. H. 433; Clarke v.
* Burrill v. Nahant Bank, 2 Met. Imperial Gas Light, etc. Co., 4B. & Ad-
(Mass.) 166. 326; Berks & D. T. R. Co. v. Myers, 6
* Lovett v. Steam Saw Mill Ass'n, 6 S, & R. (Pa) 13, 15, , .
$$ 491, 492 EVIDENCE. 433

to be the duly executed deed of the corporation, and
was therefore presumed to be so; and the existence of all
the facts necessary to make it so, is presumed as a con-
sequence,” !

$ 491. Proving election and vote of directors—In Par-
tridge v. Badger,* Strong, J., said: ‘It was competent for
the plaintiff to prove by the testimony of witnesses who
were present at an election of directors of the company,
who were elected. The books of the company, if they
contain a record of the election, which does not appear,
although proper, are not the sole evidence to that point ;
and the fact of who were. the directors might also be
proved by the testimony of witnesses as to who acted as
such.” The acts of a board of directors of a corporation,
ordered to be entered of record, but which the secretary
by neglect or mistake did not enter, may be proved by
parol testimony,® but the record, if made, is the best evi-
dence of the corporate action.‘

§ 492. Proof of membership.—Membership of a corpora-
tion may be proved by any evidence which reasonably
identifies the person with the association. Thus, a jury
will be justified in finding a man to be a member of a cor-
poration who acted as trustee, a position which none but
stockholders could fill; who said he had an interest in the
company ; who paid an assessment ; and who was “on and
off” at the office of the company, etc.> A man may be-
come a stockholder and liable for corporate debts, who has
merely subscribed for stock, and not yet paid his subscrip-
tion, or performed any act as astockholder.’ Recognizing

 

1 Chamberlain v. Bradley, 1o1 Mass. Ind. 467; Cram v. Bangor House Pro-

190. prietary, 12 Me. 354.
* 25 Barb. (N. Y.) 171. 5 Taft v. Warde, 111 Mass, 519. See
*Bay View Homestead Ass'n v, Chap. XXVII.

Williams, 50 Cal. 353. ® Spear v, Crawford, 14 Wend. (N.

4 Edgerly v. Emerson, 23 N. H. 555. Y.) 20.
Compare Langsdale v. Bonton, 12
28
434 EVIDENCE. § 493

a subscription made-in a party’s name will render him a
subscriber! In Wheeler v. Millar,? when the question
came-up as to whether the defendant was a stockholder,
Finch, J., said: ‘It was proven that he was one of the
original corporators, and signed the articles of incorpora-
tion; that he subscribed for fifty shares of the stock, al-
though he had never paid for them ; that he was a trustee
of the company, and acted. as such, thus recognizing his
ownership of stock, without which he could not have held
such office ; that he was secretary of the company, and
actively engaged in the management of its affairs ; that he
appeared upon the stock-book of the corporation as a stock-
holder therein to. the extent of fifty shares of the stock ;
‘'and that, although called upon to produce such book, he
failed to do so, alleging that it was lost. It is now insisted
that all these facts establish only that he was a subscriber
to the stock and not a stockholder, and that he could. only
become the latter by the issue to him of a certificate, or by
actual payment for the stock. But the certificate is only
evidence of the ownership. Its issue and acceptance show
an acknowledgment of that fact on both sides, but such ac-
knowledgment ‘may equally be inferred from other facts
in the’ absence of a certificate. Nor is payment indispen-
sable.” ‘It may be here stated that the records of a corpo-
ration are competent evidence as to who are corporators
and as to the number of shares held by members, but
proof ‘may be introduced to destroy their effect.’

§ 493. Establishing subscriptions. —While, possibly, sub-
scriptions cannot be proved by mere records,‘ yet, in suits
against subscribers whose signatures are established by com-
petent proof, the records of the company may be used in
evidence to establish that ‘the es number of shares

 

1 Frost v. ‘Walker, 60 Me. 470.“ 8 ‘Penebecot Railroad Go. -v. White,
290 N. Y. 357. 41 Me. 5r2. -
4 Mudgett v. Horrell,. 33 3 Cal. 25.
§ 494 EVIDENCE. 435

has been subscribed, and the necessary steps taken for levy-
ing an assessment.’

$ 494. Evidence of authority of agent.—A corporation, as
we have seen, acts by agents,’ and these agents’are usually
‘the directors.? The authority of the agent is not to be pre-
sumed, but must be proved. The right to act as agent
may be express, or may be shown by the course of dealing
of the trustees, and by evidence tending to show such au-
thority from the corporation. It need not necessarily be
shown by a resolution of the board of directors or other
‘written evidence, but it may be inferred from facts and
‘circumstances. An explicit authority to a corporation
to employ an agent to perform services consonant with its
general design need not be'conferred by the charter, in or-
der to authorize such appointments,.® A resolution of the
board of directors of a corporation ratifying the act of one
claiming to be its agent is competent: evidence of the au-
thority of the agent.?. The principle must be kept in view
that the agent must act within the scope of' the general
powers or within the range of apparent authority under cir-
cumstances which would estop the corporation from deny-
ing that the real authority was’ not coextensive with the
apparent authority. Generally speaking, the corporation

 

1 Penobscot R.R. Co. v. Dummer, 4o
Me. 172; Marlborough Branch R.R.
Co. v, Arnold, 9 Gray: (Mass.) 159;
-White Mts. R.R. Co. v. Eastman, 34
:N. H,. 124; Woonsocket Union R.R.
‘Co. v. Sherman, 8 R. I. 564; Ryder v.
‘Alton & S. R.R. Co., 13 Il. 516; Ma-
-con & A. R.R. Co. v. Vason, 57 Ga.
314; Bavington v. Pittsburgh & S.R.R.
Co., 34 Pa. St. 358; Culver v. Third
‘National Bank, 64 Ul. 528.

. ? Twin Lick Oil.Co. v. Marbury, 91
-U. S. 589; Newton Manf. Co. v.
-White, .42 Ga. 160; Conro v. Port
Henry Iron Co., 12 Barb. (N. Y.) 53;
Factors’ & Traders’ Ins. Co. v. Ma-

rine Dry Dock, etc. Co., 31 La. ‘Ann.
151. See §§7, 13.
3 Buell v. Buckingham, 16 Tega ae
4 Foster v. Ohio-Colorado R. & M.
Co., 3 Colo. L. R. 537; 8. C. 17 Fed.

-Rep. 130.

5 Santa Clara Mining Asso. v. Niehet
dith, 49 Md. 389; s.c. 33 Am. Rep.

264; Bank of the United States v.
-Dandridge, 12 Wheat. 83. :

6 Kitchen v. Cape Girardeau & S.. L..
R.R. Co., §9 Mo. 514.

7 Dent v. North Amer, 5.5. Co., 49:
.N.'Y. 390.
.. * First Nat. Bank v. Ocean Nat..
Bank, 60 N.Y. 285... “fl
436 EVIDENCE. §§ 495, 496
is only bound by the acts of the agent within the limits of
the authority, and parties dealing with the agent must in-
quire concerning the scope of such authority.’

§ 495. Declarations affecting corporations. — Unless fully
authorized, the individual members of a corporation can-
not bind it by an express promise, nor can corporate en-
gagements be implied from their unauthorized and unsanc-

tioned acts or declarations. The acts or declarations of a
director in a corporation will not bind or in any manner
affect it unless such acts are shown to be within the scope
of his ordinary powers or of some special agency. Corpo-
rate rights are not to be frittered away by loose and unau-
thorized declarations made by persons who at the time had
no authority to bind the corporation; and this principle
applies as well to individual directors and employés of a
corporation as to strangers. This is not considered to
work any hardship, because, as was said in Cooper v. Lam-
peter Township,’ “‘ Every person is supposed to know the
restrictions upon the power of the officers of a corporation

of a public nature and the extent of their authority.” 4

§ 496. Establishing notice to corporation—The general

rule obtains that principals are always presumed to have
knowledge of all acts done or declarations made by or to

 

1 See Silliman v. Fredericksburg, O.
&C.R.R. Co., 27 Gratt. (Va.) 120. In
The Floyd Acceptances, 7 Wall.
680, Miller, J., said: “Our statute-
books are filled with acts authorizing
the making of contracts with the gov-
ernment through its various officers
and departments, but, in every in-
stance, the person entering into such a
contract must look to the statute un-
der which it is made, and see for him-
self that his contract comes within the
terms of the law.”

"Soper v.Buffalo & Rochester R.R.Co.,
19 Barb. (N. Y.) 312; Allegheny County
Workhouse v. Moore, 95 Pa. St. 412,

5 8 Watts (Pa.) 128.

* See Henry v. Northern Bank of Ala.,
63 Ala. 527; Hodge v. First Nat. Bank,
22 Gratt. (Va.) 51. In Hoag v. La-
mont, 60 N. Y. ror, Allen, J., said:
“The declarations of Walbridge, the
president of the company, in a matter
affecting the business of the corpora-
tion, and in respect to which he was
acting for it, would have been admis-
sible as evidence against the company
to establish its liability, and were,
therefore, competent against the de-
fendants to prove the obligation and in-
debtedness of the company.”
EVIDENCE,

§ 496 437

their agents, when acting in relation to the subject-matter
of the agency, and within the scope of an actual or appar-
ent authority conferred upon them.’ A notice addressed
to a president of a corporation officially is notice to the
corporation.’ ‘As a general rule,” say the Supreme Court
of Connecticut, ‘‘ what the directors know regarding matters
affecting its interests the corporation knows.”* In a
Louisiana case‘ it is said: ‘‘ Where knowledge in any form
will suffice, a corporation must be held to know what its
president and chief officers know.” Chief Justice Ruger
observed : ‘A corporation can acquire knowledge or re-
ceive notice only through its agents, and if they should be
thus debarred from receiving it, it would be deprived of an
essential and important function of its corporate existence.” ©
Notice to the directors or trustees of a corporation is notice
to their successors and to the corporation. But notice to
an individual director who has no duty to perform in rela-
tion to the subject-matter of such notice is not good con-
structive notice to the corporation. In other words, un-
official information gained by officers from channels open.
to all, as.to matters concerning which such officers are not
required to act, is not notice to the corporation if not com-
municated by the officers to the proper authorities.’? Notice

 

1 Smith v. Board of Water Comrs., Canal Co., 4 Paige Ch. (N. Y.) 128;

38 Conn. 218; Bank of United States
v. Davis, 2 Hill (N. Y.) 452. See
Holden v. New York & Erie Bank, 72
N. Y. 292; New Hope & Delaware
Bridge Co. v. The Phenix Bank, 3 N.
Y. 156.

2?See Smith v. Board of Water
Comrs., 38 Conn, 218.

*Toll Bridge Co. v. Betsworth, 30
Conn. 380, 391.

4Factors’ & Traders’ Ins. Co. v. Ma-
rine Dry Dock, etc. Co., 31 La. Ann.
149, 151.

5 Village of Port Jervis v. First Nat.
Bank, 96 N. Y. 559.

‘Fulton Bank v. New York & S.

Bank of United States v. Davis, 2 Hill
(N. ¥.) 452. See National Security
Bank v. Cushman, 121 Mass. 490.
™Compare Mechanics’ Bank v.
Schaumburg, 38 Mo. 228; Miller v.
Illinois Central R.R. Co., 24 Barb. (N.
Y.) 312; Winchester v. Baltimore & S.
R.R. Co., 4 Md. 231 ; United States Ins. °
Co. y. Shriver, 3 Md. Ch. 381. In First
National Bank of H.v. Christopher, 40
N. J. Law 436, Depue, J., said: “The
directors of a corporation are not indi-
vidually its agents for the transaction
of its ordinary business, which is usually
delegated to its executive officers, such
as the president or cashier. Directors
438.

EVIDENCE,

§ 497.

to a stockholder is not ‘notice to the corporation, for the:
stockholder is not an agent.’ Notice to a cashier of a bank.
is considered to. be notice to the corporation.?

But this general subject of notice affecting corporations:
is a very broad one, and its extended consideration would
involve an inquiry into the law of agency upon which we

cannot now venture.®

§ 497. Proof of receiver’s appointment.— The important
subject of receiverships affecting corporations has been con-

sidered.*

We may note that a copy of the order, together

with proof of the giving of a bond in conformity therewith,
is usually all that is required to establish the appointment

of a receiver.®

 

are possessed of extensive powers, even
to the extent of absolute control over
the management of its affairs, but these
powers reside in them as a board; and,
when acting as a board, they are col-
lectively the representatives of the cor-
poration. Notice to directors when
assembled as a board, would undoubt-
edly be notice to the corporation.
Under what conditions knowledge ac-
quired by a director in other than his
official capacity, will be constructive
notice to the corporation, and be bind-
ing on it, is not entirely settled in the
cases.’

: Housatonic Bank v. Martin, 1 Metc.
(Mass.) 294; Union Canal Co. v. Loyd,
4 Watts & S. (Pa.) 393.

* Duncan v, Jaudon, 15 Wall. 165;

Bank of America v. McNeil, 10 Bush

(Ky.) 54; Fall River Union Bank v.
Sturtevant, 12 Cush, (Mass.) 372;
Branch Bank v, Steele, 10 Ala. 915;
New Hope & Delaware Bridge Co. v.
Phenix. Bank, 3 .N. Y. 156. In the
case last cited the court said (p.
166): “In my opinion the plaintiffs

were chargeable with notice that Dela-

field had made the loan in question as
soon as that notice was received by.

their cashier. . . . . Every hank or
banking company has its cashier, who
is its agent for the purpose of writing:
and receiving letters on the subject of
its ordinary business. A letter from
the cashier (having no other agency or’
duty except what pertains to that office)’
on the business of his bank is a letter,
from his bank; a letter to the cashier
relating to the business of his bank is
a letter to his bank; and the bank is
chargeable with knowledge of the con-
tents of such letter.”

See note to Bank of Pittsburgh v.
Whitehead, 36 Am. Dec. 186; Waynes-
ville Nat. Bank v. Irons, 8 Fed. Rep. 1
and ote.

“See Chaps, [X.-XIII.

§ See Potter v. Merchants’ Bank, 28
N, Y. 641; Hayes v. Brotzman, 46 Md.
519; Helme v. Littlejohn, 12 La, Ani,
298. In Hayes v. Brotzman, 46 Md,
526, the court said: “ The order of the
Circuit Court for Baltimore City, of-
fered in evidence, appointing a receiver
of the property and effects of ‘this cor-,
poration, being the order of a court of
competent jurisdiction to pass it, carried
with it the presumption of regularity.
It was not necessary, as contended by’
§ 498

-§ 498. Good faith and value.—The issue of good faith and
value is constantly before the courts in suits against share-
holders and officers, We may remark here concerning one
of its phases, that where it is sought to make the holder
of stock, issued for the purchase of property, individually
liable for the debts of the company, it is not sufficient to
show that the property was purchased and allowed for at
an overvaluation through a mistake or error of judgment
on the part of the trustees, but it must be shown that the
price was agreed upon in bad faith and to evade the statute.*
The question, especially as regards the good faith, must be
submitted to a jury. The plaintiff, to succeed in such an
action, must establish: (1) that the stock issued exceeded
in amount the value of the property in exchange for which
it was issued, and (2) that the trustees deliberately and with.
knowledge of the real value of the property, placed an ex-
cessive valuation upon it. In a recent case before the Su-
preme Court of the United States, Mr. Justice Field said :*

EVIDENCE. 439

 

the appellee, that the appellant should
have gone further and offered proof
that the ‘Circuit Court had acquired
jurisdiction to pass the order by proper
averments in the bill of complaint or
petition. The order, standing, as it
does, in full force, must be taken as es-
tablishing, at least przma facze, that
all the necessary averments were made
and proceedings had to give jurisdic-
tion to the court. When the appoint-
ment, therefore, of this appellant as re-
ceiver was-established by the exhibition
of the order of the Circuit Court of
Baltimore City, we think his right to
maintain this action was sufficiently
shown.” In Helme v. Littlejohn, 12
La. Ann. 298, it was objected that the
plaintiff should have produced the whole
record in order to show that the court
had the right parties before it when the
réceiver was appointed, but the court
said: “There is force in the objection

under the ordinary rules of evidence.
But we think that to require the re-:
ceiver to produce in every suit he may
be required to bring a transcript of all
of the proceedings in the suit in which
he has received his appointment, would,
in great measure, deprive the parties.
of the benefit of his appointment, and
unnecessarily increase the cost of every
suit brought by the receiver. Wethink.
that the certified copy of the entry alone
making the appointment ought to be
deemed. przma facze proof that the
court had the proper parties before it,
when the appointment was made, leav-
ing the opposite party to rebut the pre-
sumption,”

1 Lake Superior Iron Co. v. Drexel,
go N. Y. 92; Douglass v. Ireland, 73
N.Y. 100. See § 583.

-? Coit v. Gold -Amalgamating Co.,
119 U. S. 345.
440 ; EVIDENCE. §§ 499, 500

“Where the charter authorizes capital stock to be paid in
property, and the shareholders honestly and in good faith
put in property instead of money in payment of their sub-
scriptions, third parties have no ground of complaint. The
case is very different from that in which subscriptions to
stock are payable in cash, and where only a part of the in-
stalments has been paid. In that case there is still a debt
due to the corporation, which, if it become insolvent, may
be sequestered in equity by the creditors, as a trust fund
liable to the payment of their debts. But where full-paid
stock is issued for property received, there must be actual
fraud in the transaction to enable creditors of the corpora-
tion to call the stockholders to account. A gross and ob-
vious overvaluation of property would be strong evidence
of fraud.” ?

$ 499. Investigation as to motives.—When the act of a cor-
poration is legal, the motive of the directors is not material.
Thus, where a conspiracy to get possession of plaintiff's
stock was charged, with an allegation that, to carry out the
scheme, an assessment was levied, which was unnecessary
for the purposes of the company, but was not claimed to be
in excess of the powers of the directors, Mr. Justice Field
said: “ As to the wisdom of an assessment, or its necessity
at the time, or the motives which prompt it, the courts will
not inquire, if it be within the legitimate authority of the
directors to levy it, and the objects for which the company
was incorporated would justify the expenditure of the money
to be raised. They will not examine into the affairs of a
corporation to determine the expediency of its action, or
the motives for it, when the action itself is lawful.” ?

§ 500. Notice to produce.—Questions concerning corpo-
rate books will be considered in the next chapter. We may

 

' Citing Boynton v. Hatch, 47 N. Y. —* Oglesby v. Attrill, 105 U. S. 609.
225; Van Cott v. Van Brunt, 82N. Y. See Bailey v. Birkenhead, L. & C. J.
535; Carr v. Le Fevre, 27 Pa. St. R’way Co. 12 Beav. 433; State v.
413, Taylor, 25 O. S, 282.
EVIDENCE,

§§ 501, 502 441

here state that a person not entitled to the custody of books
and papers of a corporate body, is not bound, as against
the corporation, to call its officer as a witness before offer-
ing secondary proof against it, but may give its attorney
notice to produce the records,’ and in default of compli-
ance, may prove the contents by secondary evidence.* Proof
of corporated@cts and copies of the certificates filed accord-
ing to law, are competent evidence in an action against a
corporation, to prove its organization, where notice to pro-
duce the records has been given and not complied with.®

§ 501. Ordinances and resolutions.—Courts are not bound
to take judicial notice of the ordinances and by-laws of a
corporation.* An ordinance may be proved by producing
the official volume in which it is published or a certified
copy of the ordinance.®

§ 502. Evidence of adverse possession.—The principle em-
bodied in the dictum of Chief Justice Parsons that ‘‘a cor-
poration cannot acquire a freehold by a disseisin commit-

 

1 Thayer v. Middlesex Mut. Fire Ins.
Co., 10 Pick. (Mass.) 326.

? Chief Justice Shaw said, inThayer v.
Middlesex Mutual Fire Insurance Com-
pany, Io Pick. (Mass.) 329: “ The rule,
that upon a trial of controverted facts,
the party having the custody and control
of books, documents, and papers, shall
on notice produce them, and that on
refusal to do so, the adverse party may
give evidence of their contents, and that
all inferences from such secondary evi-
dence shall be taken most strongly
against the party refusing to produce
them, is a highly reasonable and benefi-
cial rule, tending to the discovery of the
truth and to the promotion of honesty,
frankness, and fair dealing, and ought
not to be shackled or obstructed by
strict constructions or technical nice-
ties.”

3 Dooley v. Cheshire Glass Co., 15
Gray (Mass.) 494. See § 519.

* Lucas v. City of San Francisco, 7
Cal. 474; Harker v. The Mayor, etc.
of New York, 17 Wend. (N. Y.) 199;
Haven v. N. H. Asylum for Insane, 13
N. H. 532.

5 Compare Porter v. Waring, 2 Abb.
N.C. (N. Y.) 230; Howell v. Ruggles,
5 N. Y. 444. As already intimated,
the right of corporations to make by-
laws is unquestionable, but they must
be reasonable and conformable and
subordinate to the corporate charter,
St. Luke’s Church v. Mathews, 4 Des.
(S. C.) Equity 578; s.c. 6 Am. Dec.
619. See Leggett v. N. J. Manuf’g &
B. Co., 1 Sax. Ch. (N. J.) 541; S.C. 23
Am. Dec. 728; Matter of Long Island
R.R. Co., 19 Wend. (N. Y.) 37; S.C.
32 Am, Dec. 429.
442 EVIDENCE. § 502

ted by itself,”1 would seem to have no place in our modern
law. It is clear that a corporation may acquire title by ad-
verse possession,” and that the defense of adverse posses-
sion may be set up by a corporation incapable of acquiring
title? Evidence of the acts and declarations of the trus-
tees and agents of a corporation, both before and after
incorporation, while transacting the business. of ‘the corpo-
ration, and the testimony of witnesses as to’ what trans-
pired at business meetings of a congregation, are admissible
to show possession of land, and the extent of the bound-
aries claimed.

 

1 Weston y. Hunt, 2 Mass. 502, 3 Humbert v. Trinity Church, 24
"Sherman v. Kane, 86 N. Y. 57; Wend. (N. Y.) 604.
Robie v. Sedgwick, 35 Barb. (N. Y.) ‘See Magill v, Kauffman, 4S. & R.
319; Second Precinct in Rehoboth v. (Pa.) 320.
Carpenter, 23 Pick. (Mass.) 131; Sedg,
and Wait on Trial of Title, §7534.
CHAPTER XXIV.

CORPORATE BOOKS—INSPECTION——EVIDENCE.

 

§ 503. Comments upon the right of in- | § 518. Inspection by discovery i in equi-
spection. ty.
504. Stockholder’s right to inspec- 519. Notice to produce.
tion. 520. Disobedience of statute pun-
505. Right of directors to examine ishable by fine.
books, 521. Controversy as basis of appli-
506. Solicitor or plaintiff. cation. —
507. No inspection by strangers. 522. Books in custody of succeeding
508. What books may be exam- corporation. %
ined, 523. Examination before trial.
509. Inspection of stock transfer 524. Moving papers. -
books. 525. Minute books,:
510. Sealing up irrelevant portions. 526. What can be proved from
511. Effect of false entries. : books,
512. Making memorandum from 527. Corporate books as evidence—
books. General rule.
513. Manner of making inspection. 528, Not evidence against strangers.
514. Motive for inspection. ; 529. Proving corporate proceedings’
§15. Inspection denied, by parol.
516. Remedy by mandamus, 530. Books in foreign State.
517. Granting mandamus discretion- 531. Entries in bank books.
ary. 532. Books not conclusive.

§ 503. Comments upon the right of inspection —The right
to an inspection of the books.of a corporation by stock-
holders, and, in certain cases, by litigants, is more gener-
ally acknowledged in this country than in England. The:
assertion may be safely ventured that the existence and
exercise of this right is, in some respects, dangerous in its
effect upon corporate enterprise, aside from the interrup-:
tion and annoyance in the discharge of corporate functions
which the interference entails. If the papers and records,
of a corporation are to be subject'to the constant scrutiny
of each individual stockholder, it would seem to follow
®

444 CORPORATE BOOKS—INSPECTION—EVIDENCE. § 503
that a corporation is an unsafe instrumentality through
which to accomplish an important business undertaking
requiring any degree of secrecy prior to fulfilment. It
should be remembered that in a partnership a man pos-
sesses the power to select his partners, but the case of
corporations presents a different state of facts, because a
corporator can never tell who may become a fellow stock-
holder, and it is a matter which he is powerless to regulate.
The managers of a rival business concern, by corrupting a
single stockholder, or by purchasing a small amount of
stock in a competing company, may, with certain limita-
tions, be able to keep themselves constantly informed con-
cerning the important business movements of a competing
concern by an ingenious practical application of this doc-
trine. The tendency to the enlargement of the general
right of. inspection of corporate books and papers, mani-
fested in some of the authorities, and in certain statutory
enactments, may well be contemplated with distrust, for it
is certain to drive important business enterprises out of the
hands of corporations. Indeed, there is a prevalent dispo-
sition manifested to control and regulate corporate enter-
prises in accordance with the judgment and ideas of stock-
holders and courts rather than to trust the management of
these affairs to the directors and executive agents of the
organization with whom it would seem properly to rest.!

 

1 In The Queen v. Mariquita and N.G.
Mining Co.,1 El. & El. 293, Lord Camp-
bell, C. J., observed: “Both in com-
mon parlance, and in the Acts of Par-
liament on this subject, the proceedings
at meetings of the shareholders are
considered as the proceedings of the
company, and they are put in oppo-
Sition to the proceedings of the direct-
ors, the select body to whom the gen-
eral management of the business of
the company is intrusted. It is highly
proper that an inspection of the books’
containing the proceedings of the di-

rectors should be obtained on special
occasions and for special purposes ;.
but the business of such companies
could hardly be conducted if any one,
by buying a share, might entitle him-
self at all times to gain a knowledge of
every commercial transaction in which
the directors engage, the moment that
an entry of it is made in their books;
and we cannot find that any such right
of inspection is given.” In Pynchon vy.
Day, 18 Bradw. (IIl.) 149, it was said
that the power to compel the inspec-
tion of books should never be exercised
§ 504 CORPORATE BOOKS—INSPECTION—EVIDENCE, 445

As we shall presently discover, efforts have been made in
the courts, by the issuance of injunctions, or by the enforce-
ment of contempt proceedings, to prevent any person who
has gained information by an inspection of books and doc-
uments, from disclosing it to the detriment of the corpo-
ration. How much virtue these remedies possess we leave
the reader to surmise. The applications for inspections
‘originate almost uniformly with persons hostile to the ex-
isting corporate management, or possessing interests antag-
onistic to the corporation. It is not difficult to conjecture
the uses made of the information where people occupying
‘these inimical positions become possessed of the secrets
and business designs of a corporation.

§ 504. Stockholder’s right to inspectionLet us consider
some phases of the law relating to the subject of inspection.
The right of a stockholder to examine books of the cor-
poration is recognized in many cases.’ Redfield, J., ob-
served that stockholders “have the right, at common law,
to examine and inspect all the books and records of the
corporation, at all seasonable times; and to be thereby in-
formed of the condition of the corporation and its prop-
erty.”* It is said in Louisiana that a stockholder, in the
very nature of things, and upon principles of equity, good
faith, and fair dealing, has the right to know how the affairs
of the company are conducted, and whether the capital
contributed is being prudently and profitably employed or

 

so as to needlessly expose the private
affairs of those in whose custody the
books or writings might be,

1The Union National Bank v. Hunt,
-76 Mo. 445; Commonwealth v. Phoenix
Iron Co., 105 Pa. St. 116; Cotheal v.
Brouwer, 5 N. Y. 566; Hatch v. City
Bank of N. O., 1 Rob. (La.) 470; Dead-
erick v. Wilson, 8 Baxter (Tenn.) 108,
See People v. Pacific Mail S.S. Co., 50
Barb. (N. Y.) 281. Compare generally
People v. Northern Pacific R.R. Co.,

so N. Y. Superior 456. Though a
stockholder may examine the books
of a bank, yet as time and knowledge
of book-keeping would be required, he

may rely upon the assurance of the

officers of the bank as to their contents,
and not subject himself to the imputa-
tion of negligence for a failure to make
the examination. Union Nat. Bank y.
Hunt, 76 Mo. 445.

*Lewis v. Brainerd, 53 Vt. 519,
521.
446 CORPORATE BOOKS—INSPECTION—EVIDENCE. ‘§ 504

otherwise. Where a clause in a charter declared that “all
the powers of the corporation shall be exercised by a Board
of Directors,” it was held that this did not deprive a stock-
holder of his individual right of inspection. In discussing
this right in New Jersey, the language employed is perhaps
a little more guarded : ‘“‘ Stockholders are entitled to inspect
.the books of the company for proper purposes at proper
-times, And they are entitled to such inspection though their
only object is to ascertain whether their affairs have been
-properly conducted by the directors or managers. Sucha
‘right is necessary to their protection.”* In an English
case, on a petition of a shareholder stating that the com-
pany’s mine was being worked at a loss, an inspection of
the corporate books was ordered and winding-up proceed-
ings adjourned meanwhile. In Phoenix Iron Company v.
Commonwealth, a border and much-cited case, the court
say : ‘‘ When this cause was here before,® we held that in the
absence of any. restriction in the charter, the right of a stock-
holder, in a trading corporation, to an inspection of the
books, papers, and accounts was, in certain cases, and under
certain limitations, incident to the relation of a stockholder
to the company. Of course a stockholder is bound. by the
corporate articles ; where the right of inspection of the cor-
porate books and papers is qualified by express stipulation,
those who become members are subject to the qualification.
But the doctrine of the law, as we then said, is that the
books and papers of the corporation, though of necessity
left in some one hand, are the common property of the
stockholders, and ‘unless the charter provides otherwise, a
shareholder has the right to inspect them and to take minutes
from them for a definite and proper purpose, at reasonable

 

‘State of Louisiana v. Bienville Oil 2 In re West Devon Great Consols

Works Co., 28 La. Ann. 204. Mine, L. R. 27 Ch. Div. 106,
*Huylar v. Cragin Cattle Co, 4oN. = 4.113, Pa. St. 570.
J. Eq. 392, 398, Sas 5 See Commonwealth v. Phoenix Tron

Co., 105 Pa, St. 16,
§ 505 CORPORATE BOOKS—INSPECTION—EVIDENCE. 447

”

times.” It will be apparent from an examination of these
‘authorities that the rule in favor of a stockholder’s right of
‘inspection and investigation of corporate books and papers
is becoming very-broad and general. While this right may,
with certain limitations, be restricted by charter recitals or
carefully framed by-laws, yet, in a numerous.class of cases,’
these safeguards do not exist, or prove ineffectual against
spiteful dissenting stockholders or malicious competitors.
.The danger incident to the enforcement.of the right of a
stockholder to inspection was recognized in England, and
the principle established to which we have already adverted,
that the court would restrain: a stockholder who had
been accorded an inspection from divulging the informa-
tion so obtained, to the, disadvantage of the corporation,
and would punish him for. making disclosures." But we can-
not discover that any substantial safety is afforded by these
protective remedies. The hostile stockholder may act to
‘the i injury of the corporation, upon the information gained
by an inspection, without making any disclosure whatever;
or the information may be imparted to others under pledges
‘and safeguards of secrecy which can rarely be broken down
in a contempt proceeding.

§ sos. Right of directors to examine. books.— Passing: —
‘a moment from the discussion of a stockholder’s rights as
affecting the inspection of corporate records, let. us glance
at the question of’ the director's authority to examine the
‘books of the corporation. Directors cannot exclude a fel-
low-director from inspecting the books. of. a corporation
because they believe he is acting in hostility to its interests.
‘Every director has “a right to know the: transactions of his
‘CO- ditestors: in- relation to the management of.the institu-
tion.” A resolution or by-law excluding a director ftom
the enjoyment of ne she) in the corporation is anelicee

 

‘Inve Birmingham Banking Cs 36 of Wales Life, ie Co. 23 Beav.
L. Je Eq. 150; Williams’v. The Prince 340. ;
448 CORPORATE BOOKS—INSPECTION—EVIDENCE. §§ 506, 507

ual, and a mandamus will be awarded where the cashier
has refused to permit the excluded director to inspect the
discount book.! In People v. Mott,? Beardsley, J., de-
cided ‘‘that a director or a corporator had a right at all rea-
sonable times to examine the books, records, and papers of
the company.” How so plain a proposition could become
the subject of controversy in the courts, it is difficult to
conceive.

§ 506. Solicitor or plaintiff—A solicitor for a party has
been allowed to participate in an inspection,’ though his
privilege to do so has been questioned.* As we shall see,
the right of a plaintiff in an action against a corporation to
have an inspection of the minutes and entries in the books
of the company relating to the subject-matter of the liti-

gation, has been often recognized.®

§ 507. No inspection by strangers.—Manifestly, strangers

have no right of inspection.®

‘Parties are not allowed to

jesh for evidence in the private books of account of others
who are parties to an action, upon a simple guess that there

may be some entry that will help their case.”’”

This does

 

1 People v. Throop, 12 Wend. (N.
Y.) 183; S.P. Hatch v. City Bank of
N. O., 1 Rob. (La.) 470.

2 1 How. Pr. (N. Y.) 247.

8 Williams v. Prince of Wales Life,
etc. Co., 23 Beav. 338. See Deaderick
vy. Wilson, 8 Baxter (Tenn.) 136.

4 In re West Devon Great Consols
Mine, L. R. 27 Ch. Div. 106,

5 See Hill v. Great Western Ry.
Co., 10 C. B. N.S. 148; Jz re Burton
and the Saddlers’ Co., 31 L. J. Q. B. 62;
Harrison v. Williams, 3 B. & C. 162,

* Mayor, etc. of Southampton v.
Graves, 8 T. R. 590; Bolton v. Liv-
erpool, 3 Sim. 467; Morgan v. Morgan,
16 Abb. Pr. N.S. (N. Y.) 291.

1 Opdyke v. Marble, 44 Barb. (N. Y.)
67, a litigation between individuals,

Bonnardet v, Taylor, 1 J. & H. 386.
Professor Greenleaf says that “the
books of a corporation are public with
respect to its members, but private
with respect to strangers” (1 Green-
leaf on Ev. § 474, citing Gresley on Ev,
116). The learned author continues:
“In regard to its members, a rule for
inspection of the writings of the corpo-
ration will be granted, of course, on
their application, where such inspec-
tion is shown to be necessary in regard
to some particular matter in dispute, or
where the granting of it is necessary,
to prevent the applicant from suffering
injury, or to enable him to perform his
duties ;’and the inspection will then be
granted, only so far as is shown to be
essential to that end.” 1 Greenl, Ey,
§$§ 508, 509 CORPORATE BOOKS—INSPECTION—EVIDENCE. 449

not, however, exclude the making of an order “ for the in-
spection of documents by a professional accountant” in the
interest of a party entitled to an inspection.!

$ 508. What books may be examined.—If the corporation
does not keep the books which the statutes prescribe, it is
its duty to permit an inspection of such books as it does
keep for the purpose of recording the transactions which
the statutes give the stockholders the right to know. A
corporation may be compelled to show its stock ledger.’
A stockholder, as we have said, has a right to an inspection
of a “discount book” of a bank.’ A superintendent, in an
action alleging an improper dismissal, may have an inspec-
tion of the minutes and entries in the company’s books
having reference to his employment.* An inspection of a
by-law in the books of a corporation may be enforced in
an action for the breach of such by-law.® A claimant of a
corporate office may have an inspection of the corporate
minutes of former elections to assist him in establishing his
case.®

$ 509. Inspection of stock-transfer books——In New York
it is held that the necessity for an inspection of stock-trans-
fer books “should be clear and cogent.” The court said
that to hold every person who shows himself to be a stock-
holder, entitled to demand examination of the transfer
books when and as often as he pleases, and, if refused, to
apply for a writ of mandamus to enforce an absolute right,
would be to promulgate a rule highly prejudicial to the in-

 

§ 474, citing The King v. Merchant
Tailors’ Co., 2 B. & Ad. 115; Hatch
v, City Bank of New Orleans, 1 Rob.
(La.) 470; People v. Throop, 12 Wend.
(N. Y.) 183. ~

1 Bonnardet v. Taylor, 1 J. & H.
387. See Jn re Birmingham Banking
Co., 36 L. J. Eq. 150.

® People v. Pacific Mail Steamship
Co., 50 Barb. (N. Y.) 284.

29

3 Cockburn v. Union Bank, 13 La.
Ann. 289; People v. Throop, 12 Wend.
(N. Y.) 183.

- 4 Hill v. Great Western Ry. Co., 10
C. B. (N. S.) 148.

5 Harrison v. Williams, 3B. & C.
162.

6 Jz re Burton and the Saddlers’ Co.,,

31 L. J. (Q. B.) 62.
450 CORPORATE BOOKS—INSPECTION—EVIDENCE, §§ 510, 511

terests of all corporations and their stockholders. A few
inimical holders of stock could thereby produce great em-
barrassment and injury, and substantially prevent any large
dealings in the stock by others.’

§ 510. Sealing up irrelevant portions.— A stockholder’s
right to an inspection cannot be defeated by reason of the
fact that the books are kept in such a particular way that
they contain, along with the information to which he is en-
titled, other information which he has no right to demand.’
Irrelevant parts of books or papers, an inspection of which
is ordered, may be sealed up.* Harris, J., said: “It is the
right of a party, when required to produce books for inspec-
tion, if such books contain accounts and transactions which
in no way relate to the subject of examination, to seal up
such parts of the books, so that they shall not be exposed
to the observation of those who have no right to examine
them.”* And it is a contempt of court for the opposing
party to break the seals where the books have been de-
posited for his inspection with a master under an order of
the court.> If the matter which the party making the ap-
plication is entitled to inspect cannot be separated or sealed,
then the whole must be produced.®

§ 511. Effect of false entries It is no answer to the ap-
plication that the books contain entries falsely and de-
ceptively made by a cashier who has absconded, which en-
tries, if unexplained by some officer, would exonerate the
applicant for discovery from liability, or that the discovery

 

1 People v. Lake Shore & M.S.R.R. Swanst. 533; Napier v. Staples, 2
Co., 11 Hun (N. Y.) 7; appeal dis- Moll. 270; Pynchon v. Day, 22 Rep.
missed, 70 N, Y. 220, 234; S. C. 18 Brad. (IIll.) 147.

_ "People v, Pacific Mail S.S.Co. 50 4 Titus v. Cortelyou, 1 Barb. (N. Y.)
Barb. (N. Y.) 280. 444.

* See Earp v. Lloyd, 3 K.& J. 549; *See Dias v. Merle, 2 Paige (N. Y,)
Hill v. The Great Western Ry. Co., 10 494.

C. B.(N. S.) 148; Clifford v. Taylor, 1 ® Carew v, White, 5 Beav. 172,
Taunt. 167; Gerard vy. Penswick, 1
$§ 512-514 CORPORATE BOOKS—INSPECTION—EVIDENCE. 451

was sought of such false and fraudulent entries, when it
appears that the applicant had the right to assume that
such officer was acting under the authority of the corpo-
ration in making the same.*

§ 512. Making memorandum from books.—In New York
the statute confers on each stockholder the right to ex-
amine the stock register. It was held that this did not
authorize the custodian to close the books because the stock-
holder, in the progress of his examination, made a memo-
randum to aid his memory, either with a view to secure his
own rights, or to facilitate the proper execution of his duty
at an approaching election of officers.? It is said in an Irish
Chancery case, “When a party establishes his right to
inspect books in the other party’s possession, it is of
course to grant the order for inspection with liberty to take
copies.” ®

§ 513. Manner of making inspection.—An inspection must
be made in a peaceable, decorous, and gentlemanly man- -
ner. And, generally speaking, the court has power to
regulate and control the details of the manner of making
the examination.

§ 514. Motive for inspection.—It has been argued in some
of the authorities that an inspection will not be granted
to facilitate speculative schemes, or to gratify idle curi-
osity.” In other cases it is declared that the motive can-
not be judged of by the officer having the custody of the
books. We apprehend, however, that the court may
judge of the true motive. “The court should guard against
all attempts by combinations hostile to the corporation or

pos

1 Central Nat. Bank v. White, 37 N, = * People v. Walker, 9 Mich. 328,

Y. Superior 297. °See Cotheal v. Brouwer, 5 N. Y.
® Cotheal v. Brouwer, 5 N.Y. 566. 566; People v. Throop, 12 Wend. (N.
. 3 Hide v. Holmes, 2 Molloy 372. Y.) 183.

4 Williams v. The Prince of Wales
Life, etc. Co., 23 Beav. 338.
452 CORPORATE BOOKS—~INSPECTION—EVIDENCE. § 515

its existing officers, to use its writ of mandamus to accom-
plish their personal or speculative ends.”' In an English
case this language occurs: “ Where the applications to in-
spect these documents may occasion inconvenience, it is
reasonable that the parties upon whom such demands are
made should be informed, dona fide, of the object of the
request.”* It is also said that the power to order an in-
spection should not be employed to gratify suspicious peo-
ple,’ nor to further an evil design.‘ In a Connecticut case
an application for a mandamus to compel a corporation
to keep all its books within the State was refused.’ It
was said in the opinion, that so long as the petitioner could
not lose anything by reason of the fact that some of the
books were kept for convenience in other States, a man-
damus would not issue. The court, in the course of the
opinion, approve an English case,° where it was held that
the members of a corporation have no right on speculative
grounds to call for an examination of the books in order to
see if, by any possibility, the administration of the affairs of
the company cannot be improved. To those familiar with
litigations affecting corporations, the difficulty will at once
suggest itself that the evil intention and hostile motive in
applying for inspection will be carefully concealed. It is
common experience among lawyers to discover that appli-
cations for inspections, though made for apparently honest
purposes, are in reality inspired by sinister motives.

§ 515. Inspection denied.—Inspection will be denied where
the particular books are not specified, and the papers do

 

1 People v. Lake Shore & M.S.R.R.  4See Jz re West Devon Great Con-
Co., 11 Hun (N. Y.) 7; 8. P. People v, sols Mine, L. R. 27 Ch. D. 106, per
Northern Pacific R.R. Co. 50 N. Y. Cotton, L. J.; Rosenfeld v. Einstein,

Superior 459. 46 N. J. Law 479.
*The King v. The Wilts and Berks * Pratt v. Meriden Cutlery Co., 35
Canal Co., 3 Adol. & El. 482. Conn, 41,

®People v. Walker, 9 Mich. 328; ‘The King. v. Merchant ilors’
Commonwealth v. Phoenix Iron Co., Co., 2 Bae Adol. 115. De pier
105 Pa, St. 111.
§ 516 CORPORATE BOOKS—INSPECTION—EVIDENCE, 453

not disclose the objects of the application! As we have
said, conjecture and suspicion as to the necessity for the
inspection will not suffice to secure it.? So it will be re-
fused where the chief object sought is to procure materials
to enable an opponent to obtain a new trial? Inspection
cannot be had merely because the applicant is dissatisfied
with the management of the company,‘ or to enable a
party to “fish out a defense.”> And it will not be given
to facilitate a shareholder in ascertaining whether it is
more expedient to accept an offer for an interest than to
proceed with an arbitration.®

$ 516. Remedy by mandamus.—Mandamus is the most
complete and effective form of redress available to a stock-
holder or party in case of a denial of the right of inspec-
tion.” Proceeding for damages is apt to be dilatory and
unsatisfactory. It is frequently impossible to recover any-
thing more than nominal damages, though remote damages
of a serious nature may have been sustained. An applica-
tion for a mandamus for the inspection of books must, of
course, be preceded by a proper demand and refusal to al-
low such inspection. Thus, where a demand was made
upon a committee having charge of the books, who an-
swered that such an application had never before been
made, and expressed a desire for time to consider it, and
ten days afterward a clerk, without any apparent authority,

 

° In re Glamorganshire Banking Co.,

1 Queen v. London & St. Katharine
Docks Co., 44 L. J. Q. B. 4; New Eng-
land Iron Co. v. N. Y. Loan & Im-
provement Co., 55 How. Pr. (N. Y.)
351.

2 Central Cross-town R.R. Co. v.
Twenty-third Street Ry. Co., 53 How,
Pr. (N. Y.) 45.

’ 8 Pratt v. Goswell, 9 C. B. N. S. 706.

4The Queen v. Grand Canal Co., 1
Irish Law Rep. 337.

5 Birmingham, B. & T. J. Ry. Co, v.
White, 1 Q. B. 282.

L. R. 28 Ch. Div. 620.

7 See Rosenfeld v. Einstein, 46 N. J.
Law 481; Matter of Sage, 7o N.Y.
220; People v. Pacific Mail S.S. Co.,
50 Barb. (N. Y.) 280; American Rail-
way Frog Co.v. Haven, 101 Mass, 398.
See § 60.

® See Cockburn v, Union Bank, 13
La. Ann. 289. But compare The King
v. London Assurance Co., 5 B. & Ald.
899; The King v. Bank of England,
2B. & Ald. 620,
CORPORATE BOOKS—INSPECTION—EVIDENCE. § 516

454

refused an inspection, this was not considered such a re-
fusal as would justify a mandamus. On the hearing of an
application for a mandamus in New York, the court has
the power to order a reference to obtain fuller information,
and may direct the parties to appear before the referee.’
In New Jersey the writ of mandamus may be refused
where the prayer of the petitioner seeks greater relief than
the party shows himself entitled to.? But the tendency in
our modern procedure is to extend such relief as a party
proves himself entitled to without reference to mistakes in
the prayer. A private corporation may itself have a man-
damus to compel the surrender to its lawful officers of
books and papers pertaining to their offices, and held by
persons who have usurped and are attempting to exercise
the functions of those offices.*

 

1 The King v. Wilts & Berks Canal
Nav. Co., 3 Adol, & El. 477.

? People v. St. Louis & S. F. Ry. Co.,
44 Hun (N. Y.) 552. Compare Dwight
v. St. John, 25 N.Y. 205.

® Rosenfeld v. Einstein, 46 N. J.
Law 479.

4 American Railway Frog Co. v.
Haven, 101 Mass. 398. In the course
of the opinion, Ames, J., said: “We
then come to the second question,
namely, Whether this is one of the
cases in which the court has the power
to issue the writ of peremptory man-
damus, We must consider this peti-
tion as the petition of the corporation.
The respondents are not its officers,
but are mere intruders and wrong-do-
ers, their term of office having expired.
In the case of a public office or corpo-
ration, it is not denied that this writ
might issue if the petitioner’s title
were first made out. It is well settled
that it can be granted, for instance, to
compel a town clerk, or a clerk of a
public corporation, whose office has
expired, to deliver over to his succes-

sor the common seal, books, papers,
and records of the corporation which
had belonged to his custody. Some of
the cases go so far as to say that ‘in-
deed it lies to any person who happens
to have the books of a corporation in
his possession and refuses to deliver
them up. In fact, it is the peculiar
and appropriate remedy in such a case.’
Rex v. Wildman, 2 Stra. 879; 2 Kyd
on Corporations, 301; Angell & Ames
on Corporations (6th ed.), §707, and
cases cited ; St. Luke’s Church v. Slack,
7 Cush, (Mass.) 226, It is described by
Lord Mansfield as a very beneficial
writ, which may be issued by the court
where there is no other specific rem-
edy. The King v. Commissioners of
Land Tax, 1 T.R. 148. It will not be
granted where the applicant has an-
other adequate, specific, legal remedy,
Rex v. Barker, 3 Burr. 1267; The
King v. Bishop of Chester, 1 T. R,
404; 2 Kyd on Corporations, 297; In
re White River Bank, 23 Vt. 478, But
the remedy, in order to be a bar to the
issuing of the writ, must not only be
§$§ 517, 518 CORPORATE BOOKS—INSPECTION—EVIDENCE. 455

An appeal may be prosecuted where the corporation is
dissatisfied with the granting of the writ or feels aggrieved
at the making of an order for inspection.’

§ 517. Granting mandamus discretionary. — By statute in
New York State the transfer book and book containing
names of stockholders of any incorporated company are re-
quired to be open for inspection for thirty days previous to
the election of directors.? But this law does not deprive a
stockholder of the right to examine the transfer books for
proper purposes and on proper occasions at other times.
The right so to do may be enforced by mandamus. The
granting of this writ, however, rests in the discretion of the
court, and the exercise of this discretion will not be re-
viewed in the court of last resort of that State? In an
English case,‘ Archibald, J., said: “I think our discretion
in these matters should be exercised in a reasonable man-
ner and subject to precedent.”

§ 518. Inspection by discovery in equity.—That, in a proper
case, an order for discovery may be made in equity, is un-
doubted,® and a motion for the production of documents
relevant to a controversy will usually be granted.® A bill
in equity for a simple discovery, notwithstanding modern
statutory provisions as to inspection, competency of wit-
nesses, etc., is still maintainable in Massachusetts, in the

interest of a foreign corporation.”

Field, J., said: ‘“‘The

 

adequate, but also specific; and dam-
ages recoverable for the violation of
the right are not such specific remedy,
In the case at bar, it is difficult to see
in what way the petitioners can obtain
such adequate and specific relief, if
their petition should be refused.”

1See Clyde v. Rogers, 24 Hun (N.
Y.) 145; McCargo v. Crutcher, 27
Ala. 171; Cummerv. Judge of Kent, 38
Mich. 351; Thompson v. Erie Ry. Co.,
9 Abb. Pr. (N. S.) 212; Matter of Sage,
70 N. Y. 221.

27 R.S, 601, §1.

3 Matter of Sage, 70 N. Y. 220. Com-
pare People v. Northern Pacific R.R.
Co., 18 Fed. Rep. 471.

4 Reg. v. Wilts & Berks Canal Nav-
igation, 29 Law Times [N. S.] 924.

5 See Kynaston v. The East India
Co., 3 Swanst. 248; Deaderick v. Wil-
son, 8 Bax. (Tenn.) 136.

® Bolton v. Corporation of Liverpool,
3 Sim. 467.

7Post v. Toledo, C. & St. L. R.R.
Co., 4 New Eng. Rep. 221; S.C. 144
Mass. 341.
CORPORATE BOOKS—INSPECTION—EVIDENCE, § 518

456
statutory provisions whereby parties are made competent
witnesses, and are permitted in suits at law or in equity to
obtain from each other the discovery of facts and docu-
ments by filing interrogatories, have not taken away the
jurisdiction of the court to entertain bills of discovery,
although they may affect the exercise of this jurisdiction in
reference to suits brought in our own courts. These pro-
visions are not inconsistent with the statutes relating to
bills of discovery, nor with the general equity jurisdiction
of the court over such bills; and the remedies afforded by
interrogatories, or by calling the parties as witnesses, are
manifestly inapplicable to the present suit, as no relief is
sought in it.”? While, generally speaking, only parties to
the proceeding in aid of which a bill of discovery is sought
are proper parties to the bill,* yet, where one of the parties
against whom a discovery is asked is a corporation, an officer
of it may be joined as a defendant. A stockholder who
has been refused permission to examine the books of a cor-
poration with expert assistance, and who does not charge
fraud, but merely alleges that the reason for his examina-
tion is to discover whether or not he has been defrauded in
the distribution of assets, presents no case for equitable

 

1 Post v. Toledo, C. & St. L. R.R.
Co., 4 New Eng. Rep. 221; S.C. 144
Mass. 341.

* See Fenton v. Hughes, 7 Ves. 287;
Cookson yv. Ellison, 2 Bro, Ch, Cas. 252.

3 See Glasscott v. Copper-miners’ Co.,
11 Sim. 305, 314; Post v. Toledo, C. &
St. L. R.R. Co., 144 Mass. 341. See §108,
In Post v. Toledo, etc. R.R. Co., 144
Mass, 346, the court said: “ The pres-
ent case must be determined by the
principles declared in the few cases
where the plaintiff does not know the
names of the persons against whom he
intends to bring a suit, and brings a
bill against persons who stand in some
relation to them or to their property, in

order to discover who the persons are
against whom he may proceed for re-
lief. It seems to be settled that a bill
will lie against a corporation and its
officers, to compel a discovery from the
Officers, to aid a plaintiff or a defendant
in maintaining or defending a suit
brought against or by the corporation
alone. McComb v. Chicago, St. L. &
N. O. R.R. Co., 19 Blatchf. 69; Costa
Rica v, Erlanger, 1 Ch. D. 171; Glass-
cott v. Copper-miners’ Co., 11 Sim. 305 ;
Moodalay v. Morton, 1 Bro. C. C. 469;
MacGregor v. East India Co., 2 Sim.
452; Bolton v. Liverpool, 1 Myl. & K.
88. See Colgate v. Compagnie Fran-
caise du Telegraphe, 23 Fed. Rep, 82.” _
§ 519 CORPORATE BOOKS—INSPECTION—EVIDENCE. 457

jurisdiction ; his remedy is at law by mandamus.’ But the
practical method of procuring a discovery or inspection by
aid of the courts has been so much affected by legislation
and the revolution in procedure that it would be a futile
task to discuss all its present aspects.

§ 519. Notice to produce.—Any general consideration of
the necessity and effect of service of notice to produce
even in corporation litigations cannot be entered upon here.?
The rule requiring the service of this notice upon the party
holding the custody of documents is rigidly enforced, first
because the notice leads to a search for the subject-matter
called for, and secondly because it indicates a purpose on
the part of an adversary to prove the contents of the docu-
ment in the event of the non-production of the original.*
It seems no notice to produce is necessary where the docu-
ment is lost or destroyed,* though the Supreme Court of
Iowa seemed disinclined to adopt this view.’ If a book is
produced which conforms to the notice served, the purpose
of the notice is accomplished, even though it may appear
that another book might have been procured also answer-
ing the description in the notice.6 Where notice to pro-
duce is served and not complied with, this raises unfavora-
ble inferences against the party in default.” Chief Justice
Shaw said :8 “The rule that upon a trial of controverted
facts the party having the custody and control of books,
documents, and papers shall on notice produce them, and
that on refusal to do so, the adverse party may give evi-
dence of their contents, and that all inferences from such
secondary evidence shall be taken most strongly against the °

 

1 Stettauer v. New York & Scranton  ‘* Burlington Lumber Co. v. White-
Const. Co., 42 N. J. Eq. 46. See High breast Coal & M. Co., 66 Iowa 294.
Ex, Rem. § 368. 6 Moore v. Leonard, 52 N. Y. Su-

? See § 500. perior 8.

3 Burlington Lumber Co. v. White- 7 See Wylde v. Northern R.R. Co., 53
breast Coal & M. Co., 66 Iowa 294. N. Y. 156.

4Rex v. Haworth, 4 Car. & P. ® Thayer v. Middlesex Mut. Fire Ins.
254. Co., 10 Pick. (Mass.) 329.
458 CORPORATE BOOKS—INSPECTION—EVIDENCE. §§ 520, 521

party refusing to produce them, is a highly reasonable and
beneficial rule, tending to the discovery of the truth and to
the promotion of honesty, frankness, and fair dealing, and
ought not to be shackled or obstructed by strict construc-
tions or technical niceties.” A party who fails to produce
books and papers in his possession on the notice of his ad-
versary, will not be allowed to introduce them himself.’

§ 520. Disobedience of statute punishable by fine.—In Ver-
mont a fine is imposed by statute upon a clerk or record-
ing officer of a corporation who wilfully refuses to exhibit
the records to a stockholder.? The penalty imposed in
New York® for failure to keep the record of stockholders
open for. inspection during business hours, is not incurred
where, upon demand by a stockholder to see the record,
the officer in charge requests him to wait till the next day,
stating that the book is locked up in the safe and that the
clerk who has the combination is absent.‘

§ 521. Controversy as basis of application.—According to
some of the cases, to authorize an inspection there must be
some particular matter in dispute between the members,
or between the corporation and individuals in it; some
controversy,; some specific purpose in respect of which the
examination becomes necessary.’ It may be granted to a
stockholder who has a controversy with a stranger.® It is
considered in Pennsylvania that “the necessary limitations
practically prevent exercise of the right for speculative pur-
poses, or gratification of curiosity; if every shareholder
could inspect for such purposes, at his own will, the busi-
ness of most corporations would be greatly impeded.” This

 

? Tyng v. U. S, Submarine & T. B, — * The Kingv. Merchant Tailors’ Co., 2
Co,, 1 Hun (N. Y.) 161, affi'd 60 N.Y. Barn. & Ad. 115, See Commonwealth

644. v. Phoenix Iron Co., 105 Pa. St. 116.
? Lewis v. Brainerd, 53 Vt. 510. ° Rex v. Newcastle, 2 Strange 1223,
3L, 1848, c. 40, § 38. "Commonwealth v, Phoenix Iron

. ‘Kelsey v. Pfaudler Process Ferm. Co., 105 Pa, St. 116.
Co., 41 Hun (N. Y.) 20,
§§ 522-524 CORPORATE BOOKS—INSPECTION—EVIDENCE. 459

‘language is used in an English case: ‘I take the result of
the cases to be that a mandamus may go against a corpo-
ration at the instance of a member of the corporation to
inspect and see whether he can raise a particular case in
his favor by examining the books. It must, in my view,
be a case with reference to some defined, distinct dispute,
as to which it appears that it might be to his advantage to
see the minutes of the corporation.”* Occasional authority
for inspection may be found where no litigation was pend-
ing.” We fail to discover the merit of the rule which
makes a controversy a necessary basis of an application for
inspection,

'§ 522. Books in custody of succeeding corporation—The
right of a shareholder in a corporation that is closing up
business to inspect its books after they have been handed
over to the new corporation formed by way of succession,
on the winding up of the original company, was denied in
Morgan’s Case.®

§ 523. Examination before trial—_In New York State, in
an action against a corporation, an examination of its offi-
cers before trial may be ordered, and the production of its
books and papers on the examination required. As the
corporation can only be examined through its officers, an
objection that the order directed an examination of the
officers and not of the corporation, and that therefore the
production of the books and papers could not be com-
pelled, was considered to be entirely technical and without
merit.*

§ 524. Moving papers—In New York the moving affi-
davit upon an application for the examination of an officer

 

1 Jy ve Burton and the Saddlers’ Co., 3L. R. 28 Chan. Div. 620; S.C. 33
31 L. J. (Q. B.) 64. Weekly Rep. 209.

® See The King v. Lucas, 10 East 235;  ‘Frothingham v. Broadway & 7th
The King v. Tower, 4 Maule & S. 162. Ave, R.R. Co., 9 Civ. Pro. (N. Y.)
But compare Morgan v. Morgan, 16 304.
Abb. Pr. (N. Y.) N.S. 291.
460 CORPORATE BOOKS—INSPECTION—EVIDENCE. § 525

of a corporation defendant, as a party before trial, must ’
state the name of the officer or director whose testimony
is necessary and material. And in that State an affidavit
and order for the production of the papers, etc., of a cor-
poration must give the names of the papers to be pro-
duced.2. And on a motion made to discover books, papers
and documents, where the moving papers establish the ex-
istence and materiality of the evidence, the necessity for a
discovery and the good faith of the application, it is not
essential to show that the evidence sought to be discovered
is indispensably necessary, and that the applicant has no
other available proof.®

§ 525. Minute books.—Our attention will presently be
further directed to the subject of the introduction of cor-
porate books in evidence.* The books of a corporation,
we may here state, are the regular evidence of its corporate
acts.» And when it is sought to establish facts properly
recorded therein, the books must be produced, or, as we have
seen, secondary evidence of their contents given, after
notice to produce.® Probably the book most frequently
called for in corporate litigation is the minute book.” It
may be stated that rough minutes or notes taken by the
recording officer of a corporation, with a view to extending
the same, may be received in evidence in place of the formal
record.® And if the draft is lost before the minutes are
written up, parol evidence of the transactions of the meet-

 

1 Williams v. Western Union Tel. gomery R.R. Co. v. Hurst, 9 Ala, 513;
Co., 47 N. Y. Super. Ct. (N. Y.) 380. | Owings v. Speed, 5 Wheat. 420; Hud-

? Williams v. Western Union Tel, son v. Carman, 41 Me. 84; Denning v.
Co., 1 Civ. Pro, (N. Y.) 84, aff'd 47 N. Roome, 6 Wend. (N. Y.) 656; Grant v.
Y. Super. Ct. (N. Y.) 380. Compare Henry Clay Coal Co., 80 Pa. St. 216.
Jn re Glamorganshire Banking Co., ° Montgomery R.R. Co. v. Hurst, 9
Morgan’s Case, L. R. 28 Ch, D, 620, Ala, 513.

8 Whitworth v. Erie R.R. Co., 37 N. "Denning v. Roome, 6 Wend. (N.
Y. Superior 437. Y.) 656; Owings v. Speed, 5 Wheat. 420.

4 See § 527. * Waters v. Gilbert, 2 Cush. (Mass.)

5 Coffin v. Collins, 17 Me. 440; Mont- 27,
§ 526 CORPORATE BOOKS—INSPECTION—EVIDENCE, 461
‘ing is competent.!| The book of minutes itself is said to be
only przma _facze evidence of the correctness of the entries
made in it, and the appearance of the entries may raise so
strong a suspicion against the regularity of the proceedings
that little weight will be given to them.? The minutes of a
quarterly conference of the Methodist Church are admis-
sible to prove who are the trustees of a church within the
circuit of the conference.2 The books of a corporation are
not the sole evidence as to an election; the question as to
who were directors may also be proved by testimony of'
witnesses as to who acted as such. And the minutes are
not evidence unless it appears that they have been kept by
the proper officer of the corporation.®

§ 526. What can be proved from books.—Some iillustra-
tions of the uses which may be made of corporate books in
litigations will probably prove serviceable. As we have seen,
in an action against a city for negligence, its ordinances can
be given in evidence to prove its own precautions as to
requiring an inspection of a bridge where an accident
occurred, and thus endeavoring to render it safe.6 And,
as a general rule, the books of a municipal corporation are

 

1 Wallace v. First Parish in Town-
send, 109 Mass. 264; Prothro v. Min-
den Seminary, 2 La. Ann. 939. Com-
pare Pease v. Smith,24 Pick.(Mass.)122.

*Van Hook v. Somerville Manuf.
Co., 5 N. J. Eq. 137. The books of a
public body are the best evidence of its
corporate acts, and ought to be admit-
ted whenever those acts are to be
proved. Denning v. Roome, 6 Wend.
(N. Y.) 656. In Owings v. Speed, 5
Wheat. 423, Chief Justice Marshall ob-
served: “ There was also an exception
taken to the opinion of.the court in al-
lowing the book of the board of trustees,
in which their proceedings. were re-

corded, and other records belonging to.

the corporation, to be given in evidence,

The book was proved by the present
clerk, who also proved the handwriting
of the first clerk, and of the President,
who were dead. The trustees were
established by the legislature for public
purposes. The books of such a body
are the best evidence of their acts, and
ought to be admitted whenever those
acts are to be proved. There was no
error in the opinion admitting them.”

® Rayburn v. Elrod, 43 Ala. 700.

4 Partridge v. Badger, 25 Barb. (N.
Y.) 172.
_ 5 Haynes v. Brown, 36 N. H. 545;
Highland Turnpike Co. v. M’Kean, ro
Johns. (N. Y.) 154.

§ Weightman v. Corporation of Wash-
ington, 1 Black 46, 47.
462 CORPORATE BOOKS—INSPECTION—EVIDENCE. § 527
evidence of all corporate acts therein recorded.’ These
public records cannot be varied or controlled by parol evi-
dence.*? We may also observe that the record kept by a
person employed in the Signal Service is evidence of such
facts as it was his duty to record.’ In an action to recover
a subscription to corporate stock, the subscription books
are not only competent, but are generally the only evi-
dence by which the liability can be established. Corporate
books are also admissible to show an acceptance of the
charter,> to prove the amount of a call,° and to establish
who are members.” College books may be used to estab-
lish the granting of a degree.®

$ 527. Corporate books as evidence—General rule.—Such
books of a corporation as set forth the record of its
votes, organization, etc., are, as we have seen, competent
evidence of its proceedings.’ This is especially the rule as
between it and its stockholders,” corporators, or members,
where the claim of the latter is not made adversely to the
corporation.” In Holden v. Hoyt” the court said: “We

 

? Rex v. Martin, 2 Campb. roo,

? Halleck v. Boylston, 117 Mass, 469.

‘Evanston v. Gunn, 99 U. S. 660,
See The Maria Das Dorias, 32 L. J.
Adm. 163.

4 Partridge v. Badger, 25 Barb. (N.
Y.) 146; Peake v. Wabash R.R. Co.,,
18 Ill. 88.

5 Coffin v. Collins, 17 Me. 440.

§ White Mountains R.R. Co. v. East-
man, 34 N. H. 124,

7 See Company of Carpenters v. Hay-
ward, 1 Doug. 373; Collins v. Maule,
8C. & P. 502.

® Moises v. Thornton, 8 T. R. 303.

° Compare Owings v. Speed, 5 Wheat.
420; Hager v. Cleveland, 36 Md. 476;
Wheeler v. Walker, 45 N. H. 358;
North River Meadow Co. v. Shrews-
bury Church, 22 N. J. Law 424; White
Mountains R.R. Co, v. Eastman, 34

N, H.124; Hudson vy, Carman, qr

Me. 84; Bavington v. Pittsburgh &
S. R.R. Co., 34 Pa. St. 358; Grant
v. Henry Clay Coal Co., 80 Pa. St.
216; Penobscot & K. R.R. Co. y.
Dunn, 39 Me. 596; Haynes v. Brown,
36 N. H. 545; McHose v. Wheeler, 45
Pa. St. 32; Hamilton & D, Plank Road
Co. v. Rice, 7 Barb. (N. Y.) 157; City
of Norwich v. Breed, 30 Conn. 535;
Methodist Chapel Corp. v. Herrick, 25
Me. 354; North Am. Bldg. Ass'n v.
Sutton, 35 Pa. St. 463.

” Graff v, Pittsburgh & S, R.R.Co.,
31 Pa. St. 489; New England Mfg.
Co. v. Vandyke, 9 N. J. Eq. 498;
Wheeler v. Walker, 45 N. H. 3553
Bavington v. Pittsburgh & S. R.R.Co.,
34 Pa. St. 358; Hamilton & D. Plank
Road Co. v. Rice, 7 Barb. (N. Y.) 157.

See Wheeler v, Walker, 45 N.H.

358.
1? 134 Mass, 184,
§ 528 CORPORATE BOOKS—INSPECTION—EVIDENCE. 463

have no doubt that the books and records of a corpora-
tion are przma facze evidence against it, as admissions; and
under some circumstances, may be conclusive evidence.”
But, as we have said, to entitle books of a corporation to
be received in evidence, it is essential that it should appear
that the books were kept by the proper officer, or some per-
son authorized to make the entries.1_ And in an action be-
tween stockholders, the books of the corporation, or sworn
copies of them, are competent evidence to show the acts
of the corporation.* Entries in the books of a corpora-
tion, relating to private agreements of the stockholders,’ or
other matters of fact than the proceedings of the corpora-
tion, are not evidence in their favor, in a controversy be-
tween them, nor between them and a member of the cor-
poration holding or claiming adversely to them.* Neither
are they evidence, against a member of the corporation, of
his contracts or private dealings with the company. In that
respect he is to be regarded as a stranger.” Agnew, J.,
said, in a Pennsylvania case: “Corporation books do not
prove themselves.” °

$ 528. Not evidence against strangers.—A general rule
will be found running through the cases, that the books of a
corporation are not evidence against strangers.”. Mr. Abbott
considers that this traditional statement that “corporate

 

1 Highland Turnpike Co. v. M’Kean,
10 Johns. (N. Y.) 154; Penobscot & K.
R.R. Co. v. Dunn, 39 Me. 596.

2 Hubbell v. Meigs, 50 N. Y. 492.
See Gery v. Hopkins, 7 Mod. 129;
Motteram v. Eastern Counties Rail-
way Co., 7 C. B. [N.S.] 58.

* See Black v. Shreve, 13N. J. Eq. 455.

4 Haynes v. Brown, 36 N. H. 545,
and cases cited.

5 Haynes v. Brown, 36 N. H. 568,

* Pittsburg Coal Co. v. Foster, 59
Pa. St. 365, 371. Compare Haynes v.
Brown, 36 N. H. 545.

‘Hager v. Cleveland, 36 Md. 476;
Conn. Mut. Life Ins. Co. v. Schwenk,
94 U.S. 593; Jones v. Trustees Flor-
ence Wesleyan Univ., 46 Ala. 626;
Chase v. Sycamore & C. R.R. Co., 38
Ill. 215; Wheeler v. Walker, 45 N. H.
358; London v. Lynn, 1 H. Bla. 214,
n.; Commonwealth v. Woelper, 3 S. &
R. (Pa.) 29; Phila. & W. C. R.R. Co.
v. Hickman, 28 Pa. St. 318; Graff v,
Pittsburgh & S. Railroad Co., 31 Pa,
St. 489; Ritchie v. Kinney, 46 Mo. 298 ;
Union Bank v. Call, 5 Fla. 409; Haynes
v. Brown, 36 N. H. 567.
464 CORPORATE BOOKS—INSPECTION—EVIDENCE. § 528

books are not evidence against strangers, was not originally
a sound generalization, and is no longer a safe guide in
practice.”' | The learned author continues: ‘‘ Whenever
the action of a deliberative body—whether that of the
corporation at large, its board, or a committee—is com-
petent to be proved, either in favor of or against the cor-
poration, its officers, members, or strangers, the contem-
poraneous corporate record of their action is competent,
though not always alone sufficient.”* He considers that,
while the rule as to corporate books not being evidence
against strangers may hold good as regards such matters as
corporate accounts, on the theory that neither a corpora-
tion nor an individual can make a record or declaration in
his or its own favor, yet, as regards the deliberative pro-
ceedings of a corporate body, which it is necessary or com-
petent to prove against third parties, the record made
should be available. He adds: “The vote of a corpora-
tion is an act.” Speaking of the admission of corporate
books in evidence, the Maryland Court of Appeals say:
“In some instances, it is true, they may be offered in evi-
dence, either for or against the corporation, where the acts
recorded are of a public nature, and when the entries have
been made by a proper officer. But when they relate to
the private transactions of the company, they are, as a gen-
eral rule, inadmissible, except perhaps in actions between
the members.”* This language occurs ina New Hampshire
case: ‘“‘In some cases, then, the test to be applied to the
question whether the corporate records are admissible upon
these authorities, would seem to be whether the party
against whom they are offered stands in such relation to
the corporation that he is chargeable with knowledge of the
records ; whether, as to him, the books are in the nature
of public books—he being connected with them in interest,

 

oe Trial Ev., p. 46. * Hager v. Cleveland, 36 Md. 494.
1d, 3
$§ 529, 530 CORPORATE BOOKS—INSPECTION—EVIDENCE. 465

and of which he could demand and have inspection as of
right, or whether he is a mere stranger, unconnected in
interest ; they being as to him private books, the inspection
of which could not be compelled in his favor. In other
cases, the test to be applied would seem to be one not
having reference to the character of the party, but to the
nature of the matter which is the subject of record. In
this view the test is, whether the matter recorded consists
of corporate acts, involving the organization or existence
of the corporation, or whether it is merely matter per-
taining to some contract, property or right, not essentially
involving the exercise of power under the corporate
franchise.”

§ 529. Proving corporate proceedings by parol.—In prov-
ing corporate matters, where there is no presumption that
a record would be kept, parol evidence may be received.’
So, where it is shown that the matters, though the proper
subject of a record, were never entered of record, parol
evidence is competent.’ And, as already shown, secondary
evidence of the contents of corporate books may be re-
ceived where the corporation refuses to produce the orig-
inal books.‘

§ 530. Books in foreign State——In Topping v. Bickford,®
it was held that where the books of a corporation are in
another State, a party is not bound to produce them, and
that depositions of its late officers were admissible, al-
though in reply to cross-interrogatories requesting them to
do so, they did not annex the records of the company or
copies of them if they were not in their custody.® :

 

1 White Mountains Railroad Co. v.
Eastman, 34 N. H. 137.

2 Commercial Bank v. Kortright, 22
Wend. (N. Y.) 348; Partridge v. Badg-
er, 25 Barb. (N. Y.) 146; Bank of U.
S. v. Dandridge, 12 Wheat. 64,

3 Reynolds v. Schweinefus, 27 Ohio
St. 311; Prothro v. Minden Seminary,

30

2 La. Ann. 939; Taymouth v. Koehler,
35 Mich. 22; Ratcliff v. Teters, 27 Ohio
St. 66,

4 Thayer v. Middlesex Mut. Fire Ins.
Co., 10 Pick. (Mass.) 326.

54 Allen (Mass.) 120.

6 Compare Binney v. Russell, 109
Mass. 55. In Amherst Bank v. Con-
466 CORPORATE BOOKS—INSPECTION—EVIDENCE, $$ 531, 532

§ 531. Entries in bank books.—Entries in the books of a
bank by a person since deceased, made in the usual course
of business and by one whose duty it was to make them,
and who had no interest in misrepresenting the facts, are
admissible in evidence.* A banker’s book may be used
against a despositor when supported by the oath of the
book-keeper,’ but the entries do not prove themselves, but
must be verified,® unless the persons who made the entries
are dead or cannot be produced.* A book of deposit is ad-
missible in an action against a savings bank to show the
amount of the plaintiff's money received.®

§ 532. Books not conclusive.—In order to make books
evidence, it is necessary to prove that they are authentic
and genuine, and, as a rule, it is competent for the party
against whom the books are offered to rebut such proof by

any testimony proper for that purpose.

In other words,

the entries in the books are not conclusive.®

 

key, 4 Met. (Mass.) 463, the court said:
“We are not aware of any rule making

‘it the duty of witnesses living abroad
to send the original letters addressed
to them by a correspondent, though
the writer may be one of the parties to
a suit in which the testimony of the
witness is required. The letters
may relate to other and important
matters, and the possession of them
may be material for the witness in re-
gard to his own business,”

' Wheeler v. Walker, 45 N. H. 355,
and cases cited. Compare Union
Bank v. Knapp, 3 Pick. (Mass.) 96.

? Jordan v, Osgood, 109 Mass. 457.

8 Ogean Nat. Bank v. Carll, 55 N.Y.
441; White v. Ambler, § N. Y. 170;
Mudgett v. Horrell, 33 Cal. 25.

4 Compare Shove v. Wiley, 18 Pick.
(Mass.) 561; Bunker v. Shed, 8 Met.
(Mass.) 150.

* Brown v. Abington Savings Bank,
119 Mass, 69.

6 Goodwin v. U. S. Annuity & L. Ins.
Co., 24 Conn. 599. In the course of
the opinion, Storrs, J., said: “The de-
fendants claimed that this was nota
genuine or authentic record book of
the proceedings of their directors, but
that it was spurious and unauthorized,
and that no such vote was passed at
that meeting; and on this point intro-
duced two other books purporting to
contain, among others, the proceedings
of the directors, at their meeting on
said 16th of January, and in which
said vote did not appear, accompanied
with evidence that they were the true
and genuine record books of the di-
rectors and contained the minutes of
their proceedings, and were treated as
such by the defendants. The plaintiffs
objected to this evidence on the ground
that it did not conduce to show that
the book which they had produced was
not genuine, and that the books offered
by the defendants did not conduce to
CHAPTER XXV.

DEFENSES,

Concerning defenses.

When corporate non-existence
may be shown.

Insolvency of corporation no de-
fense to subscription.

Bankruptcy discharge of sub-
scriber.

Opposing insolvency proceed-
ings.

Insufficient defense to winding-
up proceedings.

Defense of payment to claim
for personal liability.

Defeating subscription.

Fraud on subscriber.

Release by corporation,

Effect of proving debt in bank-
ruptcy.

Threatened forfeiture, when no
defense.

§ 533.
534.

535.
536.
537-
538.
539-
540.
541.

542.
543.

544.

 

Effect of foreclosure sale—De-
fenses.

Wrongful acts of officers.

Reimbursement on avoidance of
ultra vires act.

Vendor’s lien.

Set-off.

Counter-claim against receiver.

Acquiescence in transfer of cor-
porate assets,

Laches in raising objection.

Acquiescence in prohibited acts.

Receivership no defense.

Usury.

Sztus of notes.

Defenses in guo warranto pro-
ceedings.

Defense of action for dividend.

Effect of sequestration.

§ 545.

546.
547.

548.
549.
550.
551.

552.
553-
554.
555-
556.
557-

558.
559.

§ 533. Concerning defenses,—Certain defenses that com-
monly arise in litigations growing out of the insolvency,
forfeiture, or dissolution of corporations, or which are in-
cidental to the liquidation or winding up of these fictitious

 

show that the directors did not pass
said vote. In order to render the book
offered by the plaintiffs evidence
against the defendants, it was neces-
sary for the former to prove that it
was authentic and genuine, and it was
competent for the defendants to rebut
that proof by any testimony proper for
that purpose. We are of opinion that
the evidence so offered by the defend-
ants conduced to show that the book
introduced by the plaintiffs, and which
contained entries of a character differ-
ent from or inconsistent with those in

the books introduced by the defend:.
ants, was spurious, and that the latter.
books, if found to be genuine, inasmuch.
as they did not mention any such vote
as that relied on by the plaintiffs, cone
duced to prove that it was not passed.
The evidence, therefore, was properly
received.” An alteration or erasure;
apparently made by the same person
who wrote the body of the instrument,
does not raise a presumption against
the validity of a public document. Peo--
ple v. Minck, 21 N. Y.. 539:.
468 DEFENSES. Ԥ$ 534

entities, may be briefly adverted to in this connection,
though already somewhat touched upon in other portions
of our discussion. Necessarily we will be forced to avoid
entering the wide, general field of defenses available in
actions at law or suits in equity. Where a corporation is
a party to a judicial proceeding there is often little to dis-
tinguish the defenses which it may interpose from those
appertaining to natural persons. We have seen that the
same principles of procedure and rules of evidence apper-
tain in corporation cases which prevail in controversies be-
tween persons. There are, however, certain special de-
fenses, both in corporate litigations and in suits prosecuted
by and against individuals, springing out of corporate con-
nections, which we may briefly notice, though necessarily
in a disconnected and fragmentary way.’

$ 534. When corporate non-existence may be shown.—If a
party has done nothing to create an estoppel, he will be
permitted to prove that the corporation attempted to be
formed was so defectively organized that it never had any
valid legal existence, Thus it appeared indisputably in De
Witt v. Hastings,” that the company was never regularly
incorporated ; the articles of association were signed, but
not filed, as required by law; certificates of stock were is-
sued, but nothing further was done; no capital was paid in,
no by-laws adopted, no officers elected, but, on the contrary,
the enterprise was abandoned in its incipient stages, because
the patent which the company was to own had been sold
to others. The defendant was sued for failing to file an
annual report, as required by statute,* and proof of the ab-
sence of incorporation was permitted as a defense to the
action.* But the rule elsewhere set forth® must not be
overlooked, to the effect that a party having contracted with

 

1 See Chaps. III, IV., V., VI. * See Chap. XXII.

269 N. Y. 518. ® See §§ 476, 484.
3 Laws of 1848, chap. 4o.
$$ §35, 536 DEFENSES. 469

a de facto corporation, cannot impeach the legality of its
organization when sued upon his contract.1 Thus in
Phoenix Warehousing Co. v. Badger,® which was an action
for an unpaid subscription, Rapallo, J., said : ‘‘ The defend-
ant is not in a position to dispute the validity of the incor-
poration. He had become a stockholder, acted for several
years as a trustee, taken part in its management, and con-
tracted with it as a corporation.” ®

§ 535. Insolvency of corporation no defense to subscription.
—Much litigation arises concerning subscriptions for stock.
We may observe that insolvency is no defense to a suit
brought by a corporation to collect a subscription ;* nor is
it a valid defense to a suit instituted by a corporation that
the State has seized its railroad

$ 536. Bankruptcy discharge of subscriber.— Bankruptcy
will not necessarily clear a subscriber from liability on a
subscription. Where the subscription price of stock of a
corporation was to be paid in as called for, and a subscriber
secured a discharge in bankruptcy before the call was made,
it was held that the unpaid subscription did not constitute
a debt or liability provable under the provisions of the late
bankrupt act, and, theréfore, the discharge was no bar in an
action brought to collect a subscription which was subse-
quently called.®

We may observe that an assignment in bankruptcy di-
vests the bankrupt of the title to his shares the same as

 

1 Butchers’ & Drovers’ Bank v, Mc-
Donald, 130 Mass. 264; Appleton Mut.
Fire Ins. Co. v. Jesser, 5 Allen (Mass.)
446 ; Commissioners of Douglas County
v. Bolles, 94 U. S. 104.

°67 N. Y. 298.

’ Citing Eaton v. Aspinwall, 19 N.
Y. 119; Buffalo, etc. R.R. Co. v. Cary,
26 N. Y. 75; Aspinwall v. Sacchi, 57
N. Y. 331; White v. Ross, 15 Abb. Pr.
(N. Y.) 66.

4 Dill v. Wabash Valley R.R. Co., 21
Til. gr.

* Mullins v. North & S. R.R. Co., 54
Ga. 580. Jackson, J., said: ‘It does
not lie in defendant’s mouth to com-
plain of the seizure, especially as it oc-
curred after his refusal to pay and suit
brought against him. The corpora-
tion is not extinguished by the seizure ;
it is still a living entity, and capable of
collecting the stock subscribed.”

® Glenn v. Howard, 65 Md. 4o, 59.
But compare Hastie’s Case, L. R. 4
Ch, 274.
470 DEFENSES. $§ 537-539

though he had effected a dona fide transfer for valuable
consideration to a person sad jurzs, and future liability is
avoided.!

§ 537. Opposing insolvency proceedings.—Manifestly, cor-
porate managers may, in good faith, resist liquidation pro-
ceedings. It is intimated in New York that it is the duty
of officers of a company who believe, upon reasonable
grounds, that the association is solvent, to oppose an ap-
plication for a receiver, and the expenses incurred in so
doing, and even in prosecuting an appeal from the receiver-
ship order, may be allowed by the court in administering
the fund.2 This would seem, however, to be a rule of
doubtful utility, and one likely to engender the introduc-
tion of captious objections to insolvency proceedings on
the part of delinquent officials. The policy of awarding a
defeated litigant compensation, payable from the fund in
dispute, is not one to be encouraged or commended.

§ 538. Insufficient defense to winding-up proceedings.—
Where a statute provides for legal proceedings for dissolv-
ing and winding up the affairs of a corporation, by reason
of an abandonment of business, it is no defense that the
abandonment was involuntary, or that the corporation had
been put into bankruptcy, or that similar charters had been
granted to it by other States, as the winding-up proceed-
ing only affects the franchise within the State.®

§ 539. Defense of payment to claim for personal liability —
A stockholder will be protected from being forced to pay
an individual liability a second time. But in a suit brought
to enforce personal liability of a stockholder, where it ap-
. peared that he had set up as a defense the recovery of judg-
ments against him in favor of creditors of the bank to an

 

1 See Chapple’s Case,5 De G.&Sm. * Hart v. Boston, Hartford & E.
400; Runnett v. Vinayak Pandurang,g R.R. Co. 4o Conn, 524. Compare
Bombay H. C. Rep. 27, 31; Parbury’s Commonwealth v. Pittsburg & C. R.R.
Case, 3 De G. F. & J. 80. Co., §8 Pa. St. 43.

2 Barnes v. Newcomb, 89 N, Y, 108.
§ 540 DEFENSES. 471

amount equal to his whole liability as a stockholder, and
that the judgments had been discharged for a less sum than
the amount due, only the sum actually paid was regarded.’

§ 540. Defeating subscription—An endless number of cases
might be instanced in which a great variety of defenses
‘have been interposed to defeat proceedings instituted to
enforce unpaid subscriptions to stock in a corporate under-
taking, whether the actor be the corporation, a receiver, a
liquidator, or a creditor with an execution returned unsatis-
fied against the corporate body. The suit to enforce the sub-
scription usually follows in the wake of bankruptcy, or dis-
aster in some form to the corporate undertaking. Indeed
the mass of this litigation may be laid at the door of in-
solvency. The unfortunate subscriber too often experiences
the not unnatural aversion to completing a compact which
it is already manifest will prove a financial failure. Usually
a subscription assessment cannot be enforced unless the en-
tire capital stock has been subscribed.? In Bray v. Farwell,*
Earl, J., said: “‘ Where did the directors get the authority
to commence the business of the company before all the
shares were taken? I can find no basis for such authority.
It is not implied from the nature of the company or of the
business to be prosecuted, and it cannot be inferred from
the circumstances. They were chosen as the agents of all
the shareholders, not as the agents of a portion of them.
They had no authority to go on with insufficient means and
thus wreck the company. The obligations which they in-
curred bound them, but not the non-assenting stockholders ;
and a valid assessment could not be made upon stockhold-

 

‘ Kunkelman v. Rentchler, 15 Bradw. sey v. Omaha Hotel Co., 5 Neb. 50;
ill.) 271. Central Turnpike Co. v. Valentine, 10

? Bray v. Farwell, 81 N. Y. 600, 608; Pick. (Mass.) 142; Santa Cruz R.R. Co.
Topeka Bridge Co. v. Cummings, 3 v. Schwartz, 53 Cal. 106; New York,
Kans. 55; Temple v. Lemon, 112 Ill. H. & N. R.R. Co. v. Hunt, 39 Conn.
51; Contoocook Valley R.R. Co. v. 75; Peoria& R.I. R.R. Co. v. Preston,
Barker, 32 N. H. 363; Belfast & M.L. 35 Iowa 118.
R.R. Co., v. Cottrell, 66 Me. 185; Live- 3 81 N. Y. 608.
DEFENSES. § 540

472
ers to pay obligations which did not bind them.” This
rule is sometimes varied by special statutory provision or is
obviated by the peculiar form of the subscription paper.’ In
Sedalia, Warsaw & Southern Railway Company v. Abell,”
the court say that the rule must not be forgotten, “ that
when by the articles of association, or by the provisions of
the statutes, which, as in this case, form a part of the agree-
ment of the parties who signed the articles of association, it
is expressly or impliedly provided that, upon the subscrip-
tion to the capital stock of any certain amount less than
the whole amount fixed by the articles of association, the
corporation shall have power to enter upon the business for
which it is organized, that then a valid assessment may be
made after that amount has been subscribed.” The unpaid
subscriptions of infants, married women, and insolvents are
not usually to be counted in determining whether or not
the entire stock has been subscribed for.2 In Lewey’s
Island Railroad Company v. Bolton,‘ Kent, J., said: “It is
also settled that the subscription must be made in good
faith, by men apparently able to pay.”® The general rule

 

1See Sedalia, W. & S. Ry. Co. v.
Abell, 17 Mo. App. 645; Schenectady
& S, P. R. Co. v. Thatcher, 11 N. Y.
1o2; Hunt v. Kansas & M. Bridge Co.,
1r Kans. 412; Boston, B. & G. R.R.
Co. v. Wellington, 113 Mass. 79; Wil-
lamette F. Co. v. Stannus, 4 Ore. 261.

2 17 Mo. App. 645, 650.

3 Phillips v. Covington & Cin. Bridge
Co., 2 Metc. (Ky.) 219.

448 Me. 455.

5 The enlargement of the rights of
married women by which they are en-
abled to contract and hold property,
naturally tends, in certain instances, to
impose the same liabilities upon them
that could be enforced if they were
single. In a recent case in Rhode
Island stockholders were sued for con-
tribution toward a statutory liability

which certain of the stockholders had
been compelled to liquidate. Durfee,
C.J., said: “ One of the defendants is a
married woman, and was such when
she became a stockholder. She demurs,
denying her liability on the ground that
the liability is predicated on contract,
and, being a married woman, she was
incapable of contracting. We do not
think this view is tenable. The liabil-
ity is a statutory liability, and as such is
incident to the ownership of the stock.
If a married woman is capable‘of be-
coming a stockholder, which is not
questioned, she becomes subject to the
liability by force of the statute, not by
contract, when she becomes a stock-
holder.” Sayles v. Bates, 15 R. I. 342,
345. See Matter of Reciprocity Bank,
22N.Y.9.
§§ 541, 542 DEFENSES. 473

is, that fraud or mismanagement of the directors as regards
corporate affairs will not constitute a defense to an action
founded upon a subscription.’ The reason underlying this
rule is, that other suitable remedies are available to the sub-
scriber. Any wdtra vires act of the directors may be over-
turned by the courts. A subscriber cannot successfully de-
fend upon the theory that he was ignorant of the condition
of the corporation,’ nor is an allegation of bad faith in ob-
taining the charter a sufficient defense.?

$ 541. Fraud on subscriber—Though a subscription to
the stock of an insurance company may have been induced
by fraudulent representations, yet the subscriber cannot
recover the amount paid if there are creditors to an equal
or larger amount on debts contracted after his subscription.
As to such debts the funds of the corporation, including
his subscription, are held in trust for their payment.

$ 542. Release by corporation.—In Mississippi, the liabil-
ity of a stockholder to creditors® to the extent of his un-
paid subscription, where the debt was contracted during
the ownership of the stock, is not discharged by a release
given by the corporation when solvent, in consideration of
receiving payment in excess of the calls and a surrender of
half the stock. But a release, given by a corporation to
one of its directors, of all claims, equitable or otherwise,
arising out of the transactions under a contract between
the corporation and the director, made in excess of its cor-
porate powers, is valid, if made in good faith and without
fraud or concealment.” Generally speaking, directors can-

 

1 See Chetlain v. Republic Life Ins. 3 Smith v. Heidecker, 39 Mo. 157.
Co., 86 Ill. 220; Hornaday v. Ind. & 4Turner v. The Grangers’ Life &
Ill. Central Ry. Co., 9 Ind. 263; Merrill Health Ins. Co., 65 Ga. 649; Hamilton
vy. Reaver, 50 Iowa 404; Dorris v. v. The Grangers’ Life & Health Ins.
French, 4 Hun (N. Y.) 292; People v. Co., 67 Ga.150. See Chap. VH.
Logan County, 63 Ill. 374. 5 Code 1871, § 2413.

2 Payson v. Withers, 5 Biss. 269. 6 Vick v. La Rochelle, 57 Miss. 602.
Compare New Albany & Salem R.R. ‘Pneumatic Gas Co. v. Berry, 113
Co. v. Fields, 10 Ind. 187. U.S. 322.
DEFENSES. $$ 543, 544

474

not release subscribers In Burke v. Smith® the court
said: “It has been settled by very numerous decisions,
that the directors of a company are incompetent to release
an original subscriber to its capital stock, or to make any
arrangement with him by which the company, its creditors,
or the State shall lose any of the benefit of his subscription.
Every such arrangement is regarded in equity, not merely
as ultra vires, but as a fraud upon the other stockholders,
upon the public, and upon the creditors of the company.”®

§ 543. Effect of proving debt in bankruptcy.—A creditor
who proved his debt in bankruptcy proceedings, instituted
against a corporation under the United States law, does
not thereby discharge the bankrupt, and the debt may be
subsequently prosecuted in a State court against the corpo-
ration.*

$ 544. Threatened forfeiture, when no defense—The sub-
ject of forfeiture of chartered rights has already been no-
ticed.> The objection that a discovery in equity may sub-
ject the corporation defendant to a loss of its charter is not
sufficient to support a general demurrer to a bill filed for
that purpose.® And the sale of a franchise of a turnpike

 

1 Bedford R.R. Co. v. Bowser, 48 Pa. ‘Ansonia Brass & Copper Co. v.

St. 29; Hughes v. Antietam Mfg. Co.,
34 Md. 316; Zz ve Esparto Trading
Co., L. R. 12 Ch. D. 191; Hall’s Case,
L. R.5 Ch. 707; Rider v. Morrison,
54 Md. 429.

216 Wall. 395.

®In Bedford Railroad Company v.
Bowser, 48 Pa. St. 29, 37, Strong, J.,
said: “Directors of a railroad com-
pany are trustees for all the stockhold-
ers, and, in a very just sense, for the
Commonwealth. It is an abuse of their
trust, wholly unauthorized, and at war
with the design of the charter, to single
out some of the stock subscribers and
release them from their liability. No
such authority in them has ever been
recognized.”

New Lamp Chimney Co., 53 N. Y. 123;
s.c. 13 Am. Rep. 476. The holder of
a promissory note made by a corpora-
tion is not debarred from taking judg-
ment against the corporation either by
proceedings in bankruptcy against the
corporation, or by his having proved
the note in bankruptcy against the en-
dorsers. Athol Nat. Bank v. Hingham
Manuf. Co., 121 Mass. 399; Munson
v. Boston, Hartford & Erie R.R.Co.,
120 Mass, 81; Sohier v. Loring, 6 Cush.
(Mass.) 537.

® See Chap. XIX.

‘Robinson v. Smith, 3 Paige Ch.
(N. Y.) 222; S.C. 3 Morrison’s Mining
Rep. 443.
$§ 545, 546 DEFENSES. 475

company, on execution under a statute, will not bar forfeit-
ure proceedings against the corporation, nor is it essential
that the purchaser of the franchise should be a party to the
forfeiture suit.

§ 545. Effect of foreclosure sale—Defenses.—A foreclosure
sale of the property and franchises of a corporation will,
as we have seen, exclude the interest of the stockholders.?
Nothing is left to general creditors and shareholders after
such a sale, except their interest in the surplus after satis-
fying the mortgage. Though the property be purchased
by a reorganization committee, such a sale is absolute
against the corporation and creditors, and stockholders can
only get the benefits of the purchase by complying with
the terms and conditions of the reorganization scheme.*
The parties so purchasing may successfully defend under
the decree against persons claiming under the foreclosed
corporation.

When a bill is brought to foreclose a mortgage given to
secure negotiable bonds which are in the hands of dona fide
holders for value, no defense will be allowed other than
could have been urged in an action at law upon the bonds.*
Junior mortgagees will be estopped from disputing bonds
secured by a prior mortgage which they have expressly rec-
ognized.» And stockholders cannot set up as a defense in
foreclosure acts of the mortgagor done prior to the assump-
tion of possession by the mortgagee.®

§ 546. Wrongful acts of officers.—It is no sufficient an-
swer to a proceeding to close up an insurance company that

 

1Commonwealth v. Tenth Mass, *See Chap. XXI.
Turnpike Co., 5 Cush. (Mass.) 509.  ‘ Kenicott v. The Supervisors, 16
See Chap. XIX. and § 107. Wall. 452; Carpenter v. Longan, 16
2 Vatable v. New York, L. E.& W. Wall. 271.
R.R. Co., 96 N. Y. 49; Thornton v. 5 Bronson v. La Crosse & M. Rail-
Wabash Ry. Co., 81 N. Y. 467; Cookv, road Co., 2 Wall. 283.
Detroit G. H. & M. Ry. Co., 43 Mich, 6 Tbid.
349. See §§ 451,455.
§ 547

476 DEFENSES.
its disasters were solely due to the mismanagement of its sec-
retary. The public are entitled to be protected against the
hazards incident to insolvency in such a company, whether’
the unfortunate condition of the company’s assets is due to
the wrongful acts of one or more officers. As we have
shown, however,? a corporation does not necessarily incur
liability to forfeiture proceedings by reason of isolated, il-
legal acts of certain officials which did not receive the sanc-
tion of the corporate body.

$ 547. Reimbursement on avoidance of ultra vires act.—
Controversies involving the legality of issues of corporate
stock constantly command attention in the courts. The
principle may be here recalled, that, so long as the corpora-
tion retains property issued for stock, it or its stockholders
will not be allowed to deny the validity of the stock so is-
sued for the property.? And it seems that where a director
also owns bonds of the company, and procures a default
and purchases at foreclosure, an action cannot be main-
tained to impress upon the property a trust for the benefit
of stockholders based upon fraudulent conduct in securing

 

1 Chicago Life Ins. Co. v. Auditor,
Tor Ill. 82, 92. Sheldon, J., said:
“The point finally made is, that all
there was of wrong in the management
and condition of the company is to be
laid to the charge of the secretary
of the company alone, —that all the
other officers and agents of the com-
pany had acted in good faith and were
guiltless of any wrong-doing, and
hence it should be taken that there

was no willful default on the part of ©

the company, and it should not be sub-
jected to this proceeding. The com-
pany could act only through its officers
and agents, and should be held respon-
sible for the acts of, and mode of man-
agement by, its secretary, and the re-
sult therefrom. It is the management
and condition of the company, render-

ing its continuance in business hazard~-
ous to the public, which entitles to this
proceeding, without regard to what
one or how many of the company’s
officers participated in the misman-
agement or the bringing about of such
condition. The public should have the
protection which the law has provided
against the unsafe doing of business by
insurance companies. The hazard to
the public is the same whether one or
more of the company’s officers were
concerned in producing it, and whether
or not it resulted from the willful default
or misconduct of the company,”

4 See Chap. XIX,

® Buford v. Keokuk Northern Line
Packet Co., 69 Mo. 611. Compare
Harpending v. Munson, 91 N. Y. 650.
§$ 548, 549, DEFENSES.

477

the default, at least without offering to pay the purchaser
the amount of his bonds.’

$ 548. Vendor's lien.—So also, a corporation which buys
land and receives a deed in which an express lien is re-
served for the purchase price, cannot retain the land and
escape paying in money because of incapacity to contract,
or to pay in anything but warrants on its treasury.” We
have repeatedly stated that a rule of justice must govern
the dealings of corporate associations. The limitations and
restrictions imposed upon them for the protection of the
public cannot be used as swords to destroy either public or
private rights.

§ 549. Set-off—Questions concerning the right of set-off
frequently arise in litigations growing out of the insolvency
of corporations and the personal liability of officers or cor-
porators. The subject is too broad to admit of extended
treatment in this connection. We may observe that a de-
positor in a national bank which has failed and passed into
the hands of a receiver may set off the amount of his de-
posit against his note held by the bank.? Notes held by the
debtor of a bank when it stops payment are a set-off against
the debt, though it is otherwise if they are purchased after
insolvency.* It is said in a case in the New York Court of
Appeals,® that, under a proceeding for winding up a corpo-
ration, where an account of all the debts and of the effects,
including the aggregate liabilities of the stockholders, is re-
quired to be taken, there is no reason why a creditor should

 

1 Harpending v. Munson, 91 N. Y,
650.

2 Natchez v. Mallery, 54 Miss. 499.

3 Platt v. Bentley, 11 Am. L. Reg,
[N. S.j 171.

4 Matter of Receiver of Middle Dis-
trict Bank, 1 Paige (N. Y.) 585. A re-
ceiver of an insolvent bank has no
power to allow a set-off against a debt

owing to the bank, where the demand
sought to be set off was assigned to the
debtor for that purpose after the re-
ceiver’s appointment, and what the re-
ceiver cannot thus do directly cannot
be done by way of ratification or waiver.
Van Dyck v. McQuade, 85 N. Y. 616.

5 Matter of the Empire City Bank, 18
N. Y. 227.
DEFENSES. ; § 549

478
be in any better situation on account of being at the same
time a stockholder. In case of a deficiency in means to pay
all the debts, he must take his dividend Zro rata. But if
he could set off his claim as a creditor against his liability
as a stockholder, he might be paid in full, while the other
creditors would receive only a part of the amount due them.’
We quote from a case in New Jersey: ‘‘ The assignment
to the receivers,” says Green, C. J., ‘‘ being by operation of
law, passes the rights and property of the corporation pre-
cisely in the same plight and condition, and subject to the
same equities, as the corporation held them. The receivers
are not assignees for a valuable consideration, in the ordi-
nary sense of that term, but are regarded as voluntary as-
. signees and personal representatives of the corporation.
The statute, moreover, in cases of mutual dealing between
the corporation and any other person or persons, expressly
authorizes the receivers to allow just set-offs in favor of
such persons in all cases in which it shall appear to the re-
ceivers that the same ought to be allowed according to law
and equity. The claim of the defendants in this case does
not, as has been seen, from technical considerations, consti-
tute a set-off at law. But as the claim was a clear legal
and equitable set-off against the bank at the time of the in-
solvency, and as the receivers took the rights and property
of the corporation in the same plight and condition, and
subject to the same equities, that the bank held them, it is
clear that the claim of the defendants is an equitable set-off
against the demand of the receivers.”* A cash dividend

 

1 Compare as to the right of set-off
in New York against a receiver, Law-
rence v. Nelson, 21 N. Y. 158; Osgood
v. De Groot, 36 N. Y. 348. See Osgood
v. Ogden, 4 Keyes (N. Y.) 70. In Sco-
vill v. Thayer, 105 U.S. 143, 152, this
language is employed : “It isa general
rule that a holder of claims against an
insolvent corporation, cannot set them

off against his liability for an assess-
ment on his stock in the corporation, in
a suit by an assignee in bankruptcy.”
8. P, Thebus v. Smiley, 110 Ill. 316.
*?Van Wagoner v. Paterson Gas
Light Co., 23 N. J. Law 292. In pro-
ceedings under a statute against a
holder of unpaid shares by a creditor
of the corporation, the shareholder may
§§ 550, 551 DEFENSES.

479

Ld

may be set off against a debt due from the shareholder to
the corporation.*

§ 550. Counter-claim or set-off against receiver. Where a
receiver of a corporation sues for money loaned by the cor-
poration to the defendant, the latter is entitled to a return
of any collaterals deposited as security for the loan, or to
counter-claim the value thereof. The fact that the presi-
dent of the corporation fraudulently abstracted the collater-
als and appropriated them to his own use, will not deprive
the defendant of the counter-claim for the value.” In
Berry v. Brett,® the learned Woodruff, J., said: “In my
opinion the defendants’ right of set-off was precisely the
same as against the receiver of the company as it would

have been against the company itself.”

$ 551. Acquiescence in transfer of corporate assets — While
it is true that the directors of a corporation have no right

 

offset a matured indebtedness of the
corporation to him. Webber v. Leigh-
ton, 8 Mo. App. 502. Compare Briggs
v. Penniman, 8 Cow. (N. Y.) 397. See
Garrison v. Howe, 17 N. Y. 458.

? Hagar v. Union National Bank, 63
Me. 509; Sargent v. Franklin Ins. Co.,
8 Pick. (Mass.) 90; King v. Paterson
& H. R.R.R.Co., 29 N.J. Law 504, 506.

2 Cutting v. Marlor, 78 N.Y. 454, 460;
affi'g 17 Hun (N. Y.) 573. Chief Justice
Church said in this case: “‘ The corpo-
ration occupied at least the position of
bailee for hire, and was under obliga-
tion to exercise’ at least ordinary care.
The finding that such care was not ex-
ercised was justified by the evidence.
Bonner was a notorious dealer and
speculator in stocks. He had been en-
gaged for many months in abstracting
securities held by the bank for his
private purposes, and he had done this
not secretly, but openly and publicly.
The manager, who was also a trustee,
knew that these acts were being done,

and it is difficult to see why his knowl-
edge and neglect are not imputable to
the corporation itself. If all the trustees,
or a majority, had known of these trans-.
actions, and had not at once removed
Bonner, or prevented their recurrence,
they would have been guilty of culpable
dereliction of duty. A corporation is
represented by its trustees and man-
agers; their acts are its acts, and their
neglect its neglect. The employment
of agents of good character does not
discharge their whole duty. It is mis-
conduct not to do this, but in addition
they are required to exercise such
supervision and vigilance as a discreet
person would exercise over his own af-
fairs. The bank might not be liable
for a single act of fraud or crime on the
part of an officer or agent, while it
would be for a continuous course of
fraudulent practices, especially those so
openly committed and easily detected
as these are shown to have been.”
3 6 Bosw. (N. Y.) 637.
480 DEFENSES. § 552
to sell or dispose of its property, where such a trans-
action prevents the continuance of the corporate busi-
ness, and such a sale is voidable as against non-assenting
stockholders, yet, if the stockholders are silent, making no
objection whatever, their acquiescence will be taken as

assent.) ,

§ 552. Laches in raising objection.—Manifestly there must
be knowledge as well as delay to constitute a defense of
laches.» And where a stockholder desires to attack a void-
able transaction he must act within a reasonable time.®
“He has no right to lie idly by until new equities arise,
and speculate on the success or non-success of the invest-
ment or transaction of which he complains, and see others,
in good faith and without fraud, by a vast expenditure of
money, make that valuable which was before valueless, and
then come and ask the aid of the chancellor to enable him
to appropriate to himself such benefits and advantages.” ¢
In Kent v. Quicksilver Mining Company® the court said:
“Where third parties have dealt with the company, relying
in good faith upon the existence of corporate authority
to do an act, it is not needed that there be an express
assent thereto on the part of stockholders, to work an
equitable estoppel upon them. Their conduct may have
been such, though negative in character, as to be taken for
an acquiescence in the act ; and when harm would come to
such third parties if the act were held invalid, the stock-

holders are estopped from questioning it.

We suppose ac-

 

' Balliet v. Brown, 103 Pa. St. 554.
Compare Sheldon H. B, Co, v. Eicke-
meyer H. B. M. Co., 90 N. Y. 612;
Kent v. Quicksilver Mining Co., 78 N.
Y. 159.

* Evans v. Smallcombe, L. R. 3 H.
L. 249. See Hoffman Steam Coal Co,
v. Cumberland Coal & Iron Co., 16 Md.
456; Ashhurst’s Appeal, 60 Pa. St.
290; Twin Lick Oil Co. vy. Marbury, 91
U.S. 587,

* Twin Lick Oil Co. v. Marbury, 91
U. S. 587. See Taylor v. South &
North Ala. R.R. Co. 4 Woods
575.

‘ Kitchen v. St. Louis K. C. & N.
Ry. Co., 69 Mo, 224, 264. See Watts’
Appeal, 78 Pa. St. 370; Sheldon H. B.
Co. v. Eickemeyer H. B. M. Co., 90 N.
Y,. 607,

598 N.Y, 187,
§ 553 DEFENSES. 481

quiescence or tacit assent to mean the neglect to promptly
and actively condemn the unauthorized act, and to seek
judicial redress after knowledge of the committal of it,
whereby innocent third parties have been led to put them-
selves in a position from which they cannot be taken with-
out loss. It is the doctrine of equitable estoppel, which
applies to members of corporate or associated bodies as well
as to persons acting in a natural capacity.” A transaction
fairly and openly entéred into between a corporation and
one of its directors, sanctioned by all, and inuring to the
benefit of the corporation, will not be set aside at its in-

stance seven years: afterwards on the ground that it was
ultra vives.)

§ 553. Acquiescence in prohibited acts——Where corpora-
tions do acts which are mala prohibita or mala in se, and
which work injury to the public, no assent of stockholders
can legalize or validate them.’ Folger, J., said: “In the
application of the doctrine of «/tra vzres, it is to be borne
in mind that it has two phases: one where the public is con-
cerned ; one where the question is between the corporate
body and the stockholders in it, or between it and its stock-
holders, and third parties dealing with it and through it
with them. When the public is concerned to restrain a
corporation within the limit of the power given to it by its.
charter, an assent by the stockholders to the use of un-
authorized power by: the corporate body will be of no avail.
When it is a question of the right of a stockholder to re-
strain the corporate body within its express or incidental
powers, the stockholder may in many cases be denied relief
on the ground of his express assent or his intelligent though’
tacit consent to the corporate action. If there be a depart-
ure from statutory direction, which is to be considered
merely a breach of trust to be restrained by a stockholder,.

 

1 Pneumatic Gas Co. v. Berry, 113 U. * Kent v. Quicksilver Min. Co., 78-
S. 322. See § 542, N. Y. 159, 185.
31

?
482 DEFENSES. §§ 554-556

it is pertinent to consider what has been his conduct in re-
gard thereto. A corporation may do acts which affect the
public to its harm, inasmuch as they are Zer se illegal or are
sualum prohibitum. Then no assent of stockholders can
validate them, It may do acts not thus illegal, though there
is want of power to do them, which affect only the interest
of the stockholders. They may be made good by the as-
sent of the stockholders, so that strangers to the stockholders
dealing in good faith with the corporation will be protected
in a reliance upon those acts.” *

$ 554. Receivership no defense.—When a suit is brought
by a corporation on an unpaid subscription to the capital
stock, the fact that a receiver is subsequently appointed
constitutes no defense, especially when the receiver takes
no steps to reach the cause of action or to collect the sub-
scription from the defendant.?

$ 555. Usury.—Corporations litigating in New York State
cannot interpose the defense of usury. There is a statutory
prohibition against their so doing.* This act, however, only
prevents the avoidance of its own contracts by a corpora-
tion on the ground of usury; it does not apply to a case
where the corporation succeeds to the rights of a party who
might avail himself of the provisions of the usury law.4 A
corporation may, however, avail itself of the plea of usury
against a note made by it for the accommodation of an in-
dorser who indorsed and delivered it to the plaintiff for an
usurious consideration.®

§ 556. Situs of notes——Where receivers of a corporation
are appointed in New York, and receive, as a portion of

 

1 Kent v. Quicksilver Min. Co., 78 N. Bank v. Hoge, 35 N. Y. 65; Curtis v.

Y. 159, 185. Leavitt, 15 N. Y. 85.
* Glenville Woolen Co. v. Ripley, 43 * Merchants’ Exchange Nat. Bank v.
N. Y. 206. Commercial Warehouse Co., 49 N.Y.

3 Southern Life Ins. & Trust Co.v. 635.
Packer, 17 N. Y. 51; Belmont Branch * Strong v. N. Y. Laundry Mfg. Co.,
37 N. Y. Super, Ct, 279.
§ 556 DEFENSES. 483

the corporate assets, notes due from a resident of Massa-
chusetts, the latter cannot defend against the receiver by
showing that subsequent to the appointment the notes were
attached in Massachusetts. They were not subject to the
jurisdiction of the courts of another State.’ Earl, C., said :
“These notes were payable in this State, and passed into
the hands of the receivers; they were property the sztus
of which was in this State. By the law of this State this
property was put into the hands of the receivers for the
benefit of all the stockholders and creditors of the company.
The appointment of the receivers worked an involuntary
transfer of the property to them, and there was an attempt
to procure an involuntary transfer in Massachusetts for the
benefit of a creditor there. Under such circumstances the
first transfer must prevail; and there is no rule of comity
or of law by which we are required to give effect to the
legal proceedings in Massachusetts. The subsequent attach-
ment of the debt in this State could not have interfered
with the rights of the receivers; and it would be carrying
the rule of comity to an absurd length, for our courts to
give foreign creditors a better position in this respect than
they do domestic creditors. It is well settled that transfers
of property zz znxvztum, by operation of law, will generally
have effect only in the State where the law which works
the transfer has force. But such transfers have generally
no force upon property outside of the State where they are
made ; but such property will be administered for the bene-
fit of creditors and others interested by the courts of the
State where it is found.” But here is a case where the
property was not in Massachusetts in any proper sense of
the term. The notes were in this State, due and payable
here to a domestic corporation.? Hence they are properly

 

! Osgood v. Maguire, 61 N. Y. 524. 8 Citing Hoyt v. Comrs. of Taxes, 23
? Citing Embree v. Hanna, 5 Johns, N. Y.224; People v. Gardner, 51 Barb.
(N. Y.) 101; Holmes v. Remsen, 20 (N. Y.) 352; People v. Trustees of
Johns. (N. Y.) 229; Willitts v. Waite, Ogdensburgh, 48 N.Y. 390, 397.
25 N.Y. 577; Kelly v. Crapo, 45 N.Y.86,
484 DEFENSES. § 557

subject to the jurisdiction and administration of our
courts,” !

§ 557. Defenses in quo warranto proceedings—In New
York the rights of the defendant, the rules of evidence
and all the presumptions are the same in a guo warranto
proceeding, as in a proceeding by writ or information for
which the remedy in the nature of guo warranto in that
State was substituted.? The action will not lie before the
commencement of the term of office.? Thus, Gilbert, J.,
said: ‘The defendant McCullough cannot c/azm an office
until the time has arrived to assume its duties. This court
can only give a judgment of ouster, and that can only be
done when a usurpation of the office is proved. A mere
claim to exercise an office at some future time is not
sufficient. The action is premature.”* The court will not
generally assume jurisdiction of an information where the
official term will expire before the case can be reached for
trial.” Sewall, J., said in one of the cases cited :° ‘“‘ Before
judgment can be rendered, the mischief will be done. To
proceed further in the case would be futile.” Parker, J.,
observed, in the same case: ‘I should not be for granting
an information in any case where the judgment of the court
upon the information can have no effect.” In Pennsyl-
vania, however, Woodward, J., entertained no doubt that
guo warranto, brought within the term of an office, may
be well tried after the term has expired. The same princi-
ple is recognized in Missouri‘ and Michigan.§ But we fail
to see why the court should interest itself to decide abstract

 

1 Osgood v. Maguire, 61 N. Y. 529.
2 People v. Thacher, 55 N.Y. 525;
s. c. 14 Am. Rep. 312. See §§ 57,

v. Underwood, 19 Ga. 559; People v.
Sweeting, 2 Johns. (N. Y.) 184; Com-
monwealth v. Athearn, 3 Mass. 285.

58.
* People v. McCullough, 11 Abb. Pr.
(N. Y.) N.S. 129.

4 Ibid. 132.

5 State v. Jacobs, 17 Ohio 143; La-
coste v. Duffy, 49.Texas 767; Morris

But compare People v. Hartwell, 12
Mich. 508.

* Commonwealth v, Athearn, 3 Mass.
287,

* Hunter v. Chandler, 45 Mo. 455.

* People v. Hartwell, 12 Mich. 508,
DEFENSES.

$$ 558, 559 485

questions of law, or to determine the title to an office merely
to render a judgment for costs.

§ 558. Defense of action for dividend.—After a dividend
has been declared and paid to a part of the stockholders,
the corporation cannot defend an action by the other
shareholders for their share of the dividend upon the
ground that the dividend has not been earned and that its
payment would constitute a withdrawal of capital.? Allu-
sion is made to the subject of dividends in a later chapter.®

$ 559. Effect of sequestration.—The right of a corporation
to defend is not superseded by sequestration proceedings
and the appointment of a receiver.* Until judgment dis-
solving a corporation and ending its existence, any contract
may be enforced against it as well after as before the ap-

pointment of a receiver.®

 

1In People v. Thacher, 55 N.Y. 528;
s. Cc. 14 Am. Rep. 312, Andrews, J.,
said: “It is important, in dealing with
the questions presented in the case, to
determine whether the view stated by
the learned judge as to the burden of
proof is an accurate expression of the
law. The ancient writ of guo war-
vanto was a writ of right for the king
against one who usurps any office,
franchise, or liberty, to inquire by what
authority he supports his claim, in or-
der to determine the right. (3 Bl. 262.)
In theory the king was the fountain of
honor, of office, and of privilege. And,
whenever a subject undertook to exer-
cise a public office or franchise, he was,
when called upon by the crown, through
the writ of gzo warranto, compelled to
show his title, and, if he failed to do
so, judgment passed against him. The
foundation of the rule may have been
that, as all offices and franchises are
the gift of the king, they were deemed
to be possessed by him, and, until his
grant was shown, there could be no
presumption that he had parted with
them, or invested a subject with the

right to exercise, by delegation, any
part of the royal prerogative; but
whatever may have been the origin of
the rule, it was well established, and
was applied also in cases where pro-
ceedings by information in the nature
of a guo warranto were resorted to as
a substitute for the writ. (Rex v. Leigh,
4 Burr. 2143.) In this State, the rule
that, in proceedings by information to
try the title to an office, the burden is
upon the defendant to show his right,
and that failing to do it, judgment must
go against him, has been frequently
recognized.” Citing People v. Utica
Ins. Co., 15 Johns. (N. Y.) 358; People
v. Thompson, 21 Wend. (N. Y.) 252;
S. C. 23 Wend. (N. Y.) 567, 589; Peo-
ple v. Pease, 27 N. Y. 63.

® Stoddard v. Shetucket Foundry Co.,
34 Conn. 542.

3 See Chap. XXX,

4 Parry v. American Opera Co., 12
Civ. Pro. (N. Y.) 196.

5 Parry v. American Opera Co., 12
Civ. Pro. (N. Y.) 196. Citing Pringle
v. Woolworth, 90 N. Y. $02, 511. See
Chaps. XVII, XVIII.
CHAPTER XXVI.

PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS,
AND OFFICERS.

‘¢ The principle of personal liability of the shareholders attaches to a very large proportion
of the corporations of this country, and it is a principle which has warm advocates for its
universal application when the organization is for pecuniary gain.”—Mr. Justice MILLER in
Liverpool Ins. Co. v. Massachusetts, 10 Wall. 575.

§ 560.

561.
562.

563.
564.
565.
566.
567.

568,

569.
570.

571.
572.

573-
574-

575.
576.
577-
578.

579.

Personal liability of officers and
stockholders.

Nature of personal liability.

Who may enforce liability.

Partnership liability.

Promoters.

Certificate of payment of cap-
ital stock.

Construction of statutes iinpos-
ing liability.

Statutes declaratory of the com-
mon law.

Personal liability for certain
classes of debts.

Liability to creditors only.

Directors as trustees for stock-
holders and creditors.

Trustees cannot release stock-
holders.

Attempted condonation by cor-
poration.

Cancellation of subscription.

Transfer to irresponsible party
to avoid liability.

Transfer to fictitious person.

Release by alteration of charter.

Stock held’as collateral.

Taking pledge of stock in name
of third party,

Holding stock as trustee or
agent.

 

§ 580.
581.

582.
583.
584.
585.
586.
587.
588,
589.

590.
591.
592.

593-
594.
595-
596.
597.

598.
599.

600,
6o1.

Pro tanto discharge of liability.
Hold-over officers—Liability.
Stockholders’ liability for calls.
Stock issued for property.
Subscriber’s default no defense.
Excusing failure to file report.
Liability of directors for fraud.
Wrongful acts of directors,
Sacrificing property. ;
Liability of. members of frater-
nities.
Directors of national banks.
Religious corporations.
Nature of savings banks—Per-
sonal liability of officers for
errors of judgment.

The doctrine of Hun v. Cary—
Form of remedy.

The test in that case.

Certain illustrations.

Compensation of officers as af-
fecting liability for negligence.

Protesting against improper ac-
tion.

Liability of officers for theft.

Effect of judgment against cor-
poration.

Effect of repeal of penal stat-
utes.

Non-survival of cause of action.

§ 560. Personal liability of officers and stockholders.—In
the opening discussion * we adverted to the legal complica-

 

1 See § 3.
§ 560 PERSONAL LIABILITY. 487

tions arising out of the attempted enforcement of corporate
debts and liabilities against promoters, stockholders, or
officers individually. This class of litigation is engen-
dered chiefly by corporate insolvency, and, as we have said,
is within the general range of our discussion. Volumes
might be devoted to the consideration of the subject in all
its bearings and ramifications. Some of its phases have
already been a subject of comment.’ The reader must
keep in memory, in approaching the consideration of this
subject, the rule that the law exacts good faith on the
part of trustees in the management of corporate affairs.’
‘Directors are the primary agents of the corporation, and
this relation requires of them the highest and most scru-
pulous good faith in their transactions for the corporation,”
is the language of one case.* In another opinion it is said
that directors of a corporation ‘“‘are bound to administer
its affairs according to the terms of its charter, and in good
faith.”* In still a third case it is asserted that directors
‘occupy a fiduciary relation towards the stockholders, and
are bound to good faith and reasonable diligence in the
performance of their duties.”° The illustrations might be
indefinitely increased. The reader’s attention may also be
recalled at the outset to the familiar principle that personal
responsibility of officers and stockholders for a debt of a
corporation is inconsistent with the idea of a body corpo-
rate at common law.® The individuality of the members
is in theory of law merged in the associated body, so far as

 

1 See §§ 3, 27, and Chap. XXII. 6 Salt Lake City Nat. Bank v. Hen-

2 Ryan v. Leavenworth A. & N. W. drickson, 40 N.J. Law 54. See Sey-
Ry.Co., 21 Kan. 365; Vance v. Phoenix mour v. Sturgess, 26 N. Y. 134; Bird v.
Ins. Co., 4 Lea (Tenn.) 385; Bank of Hayden, 2 Abb. Pr. (N. Y.) N.S. 61;
St. Marys v. St. John, 25 Ala. 611. Oliver v. Liverpool & L. Life & F. Ins.

’ Ryan v. Leavenworth A. & N. W. Co., 100 Mass. 539; New England Com.
Ry. Co., 21 Kans. 398. Bank v. Stockholders of Newport Steam

4Bank of St. Marys v. St. John, 25 Factory, 6 R. I. 188; Spense v. Iowa
Ala. 611. Valley Const. Co., 36 Iowa 407; Smith

5 Vance v. Phoenix Ins. Co., 4B. J. v. Huckabee, 53 Ala. 193. See §>5.
Lea (Tenn.) 388.
488 PERSONAL LIABILITY. § 560
liability for debts is concerned; as to such debts the arti-
ficial body represents the members.’ The association is
the contracting party as regards persons who deal with it.
In other words, stockholders are not liable to pay the debts
of the association for the obvious reason that the contract
is not made with them, but with the body corporate?
Chief Justice Waite said, in Terry v. Little :* “ The indi-
vidual liability of stockholders in a corporation is always a
creature of statute. It does not exist at common law.” *
This is manifestly an important feature of the law gov-
erning this branch of our discussion. Individual liability
is even considered to be repugnant to the law of corpora-
tions,° and stockholders are liable according to the plain
meaning of the terms employed by the legislature, and not
otherwise. Personal liability will under no circumstances
be extended by implication. The legal presumption that
all statutory conditions essential to establish freedom from
liability have been complied with, obtains in such cases
until the contrary is shown." Speaking on this subject of
personal liability, Chief Justice Sherwood said in a Mis-
souri case: “Aside from statutory provisions, or one of
similar nature in the organic law, the directors or officers
of an incorporated bank would not be individually responsi-

 

‘Moyer v. Pennsylvania Slate Co., Shaw v. Boylan, 16 Ind, 384; Lowry

71 Pa. St. 297; Woods v. Wicks, 7 B. J.
Lea (Tenn.) 45.

*Woods v. Wicks, 7 B. J. Lea
(Tenn.) 45; Spear v. Grant, 16 Mass,
10, See Slee v. Bloom, 19 Johns. (N. Y.)
473; Liverpool Ins, Co. v. Massachu-
setts, 10 Wall. 575; Erickson v. Nes-
mith, 4 Allen (Mass.) 234.

stor U.S. 217.. See Union Bank v.
Wando Mining & Mfg. Co., 17S, C. 362.

4 See Green v. Beckman, 59 Cal. 547;
Brinham v. Wellersburg Coal Co., 47
Pa. St. 49; Smith v, Huckabee, 53 Ala.
193; Pollard v. Bailey, 20 Wall. 527;
Norton v. Hodges, 100 Mass, 241;

v. Inman, 46 N. Y. 119; Salt Lake City
Nat. Bank v. Hendrickson, 40 N. J. L.
52; Fourth Nat. Bankv, Francklyn, 120
U.S. 747.

* Swayne, J., in Carrol v. Green, 92
U.S. 512; Chase v. Lord, 77 N. Y. 1.

’Moyer v. Pennsylvania Slate Co.,
71 Pa. St. 297.

™Chase v. Lord, 77 N. Y. 6. See
Bruce v, Driggs, 25 How. Pr. (N. Y.) 71.
Persons dealing with a corporation
have the right to waive, by special con-
tract or otherwise, all claim upon the
personal liability of the stockholders.
Robinson v. Bidwell, 22 Cal. 388,
$ 560 PERSONAL LIABILITY. 489

ble in an action at law, for injury resulting to a creditor
or depositor, unless the injury were occasioned by the
malicious or fraudulent act of the party complained of.
Mere nonfeasance will not answer. Nothing short of act-
ive participancy in a positively wrongful act, intendedly
and directly operating injuriously to the prejudice of the
party complaining, will give origin to individual liability as
above indicated.”

There is a personal liability already adverted to,’ viz.,
that the individual property of members of such corpora-
tions as counties, towns, school districts, and the like, may
be subject to execution on a judgment against such a cor-
poration. Chief Justice Gray said, in Hill v. Boston :*
‘By the common law of Massachusetts, and of other New
England States, derived from immemorial usage, the estate
of any inhabitant of a county, town, territorial parish, or
school district, is liable to be taken on execution on a judg-

ment against the corporation.” ®

We do not, however,

 

1Fusz v. Spaunhorst, 67 Mo. 256,
264. Mr. Thompson, in commenting
upon the statutes imposing certain lia-
bilities upon directors or trustees, says
(Thomson’s Liability of Officers, etc.,
p- 431): “ We find that they make di-
rectors responsible: 1. For the debts
contracted on behalf of the corporation
before a certain prescribed amount of
the capital stock, as limited or fixed by
or under the governing statute, has
been actually paid in. 2. For debts
contracted on behalf of the corporation
during the period when they are in de-
fault in the making and filing or pub-
lishing of certain reports required by
statute, as to the condition of the com-
pany. 3. For debts of the corporation
contracted after making and filing or
publishing such reports, knowing them
to be false. 4. For debts contracted
on behalf of the company in excess of
certain prescribed limits. 5. For de-

claring and paying dividends while the
company is insolvent, or when there
is no surplus to divide. It is to be
observed that the liability created by
these statutes is 40 credztors ; the policy
of these statutes being to secure greater
safeguards to the public in dealing with
incorporated companies. But some-
times the legislatures have thought fit
to impose a statutory liability upon di-
rectors for the benefit of shareholders;
and this gives us a sixth class. 6. Li-
ability to shareholders for official mis-
management.”

?See § 112, Merchants’ Bank v.
Cook, 4 Pick. (Mass.) 414; Beardsley
v. Smith, 16 Conn, 368; Chase v. Mer-
rimack Bank, 19 Pick. (Mass.) 564.

3 Hill v. Boston, 122 Mass. 349.

4 122 Mass. 349.

5 Citing 5 Dane Ab. 158; Hawkes v.
Kennebeck, 7 Mass. 461, 463; Chase v.
Merrimack Bank, 19 Pick. (Mass.) 564,
PERSONAL LIABILITY. § 561

490
consider that it is a wise policy in the law to recognize such
a harsh and inequitable doctrine as this would certainly
seem to be in its practical workings. It is too strongly
tainted with a resemblance to a seizure of property without
according to the owner his day in court or an opportunity
to be heard. Certainly, it is carrying the doctrine of con-
structive service to an extreme limit.

§ 561. Nature of personal liability—Personal liability of
stockholders for corporate obligations not existing, as we
have seen, at common law,’ may, according to a recent case,
be said to arise in two ways. If the stockholders are made
liable by statute, the liability may be treated as growing out
of the contract by which they become stockholders, the
corporate capacity being qualified, or it may be treated as
created by statute, the corporate capacity being perfect.’
The liability is not regarded in some of the cases as in the
nature of a penalty. The statute is said to simply take
away from the corporators the protection which the incor-
poration would otherwise give them, and to make them
liable as partners, though the liability is several as well as
joint Other cases treat the liability as resting solely on

 

569; Gaskill v. Dudley, 6 Met. (Mass.)
546; Beardsley v. Smith, 16 Conn.
368.

‘Terry v. Little, ror U. S, 217;
Union Bank v. Wando Mining & Mfg.
Co., 17 S. C. 363; Chase v. Lord, 77
N. Y.1.

* Woods v. Wicks, 7 B. J. Lea
(Tenn.) 45. It is manifestly within the
power of the legislature to regulate the
liability and prescribe the rules by
which each stockholder’s proportion
shall be ascertained. Larrabee v.
Baldwin, 35 Cal. 166.

8 Examine Chase v. Lord, 77 N. Y.
33; Corning v. McCullough, 1 N. Y.
47; Harger v. McCullough, 2 Denio
(N. Y.) 119; Wheeler v. Millar, 90 N.
Y. 353; Story v. Furman, 25 N. Y,

214, and dissenting opinion in Chase v.
Lord, 77 N. Y. 33; Southmayd v.
Russ, 3 Conn. 52. See Chap. XXII.
In a case before the New York Court of
Appeals, Allen, J., said: “A personal
liability of stockholders for the debts of
a corporation, in virtue of the charter,
is not in the nature of a penalty or for-
feiture, and does not exist solely as a
liability imposed by statute. It is not
enforced simply as a statutory obliga-
tion, but is regarded as voluntarily as-
sumed, by the act of becoming a stock-
holder. By such act he assents to be
bound, or that his property shall be
charged with debts of the corporation,
to the extent and in the manner pre-
scribed by the act of incorporation,”
Lowry v. Inman, 46 N. Y. 125.
$ 561

the statute". In Hanson v. Donkersley,’ a much criticised
case, Campbell, J., said: ‘“The liability of the individual
members of corporations for their debts, under the statute
upon which this suit was brought, cannot in any just sense
be called a primary liability. The debts which they are
called on to pay are in fact—as they are expressly regarded
in the constitution—debts of the corporation. The statute is
clear that the private parties shall not be called upon unless
the corporation has failed to pay, and legal remedies are
exhausted, either by unsatisfied execution or by bankruptcy
legally adjudged. . . . . The corporation is in law a differ-
ent person from any of its members. A promise by astock-
holder to pay a corporation debt is in every sense a promise
to pay the debt of another. The case cannot be different
merely because the obligation is statutory. It may be that
the statute could be so framed as to create a joint ora joint
and several responsibility which could be legislated into a
primary obligation. But where the corporation is not put
into such relations, and the stockholder cannot be called
on until the remedy against the corporation has been tried
and exhausted, it is entirely plain that they are not both
original debtors.”* The statutes imposing individual or
personal liabilities for corporate undertakings are in many
cases considered as penal.* Clearly, a statute is penal in its

PERSONAL LIABILITY. 491

 

1 Erickson v. Nesmith, 4 Allen
(Mass.) 234; Erickson v. Nesmith, 15
Gray (Mass.) 221; Hanson v. Donkers-
ley, 37 Mich. 184; Patterson v. Wyo-
missing Mfg. Co., 40 Pa, St. 117. See
Booth v. Campbell, 37 Md. 522.

237 Mich. 186.

3 In Patterson v. Wyomissing Mfg.
Co., 40 Pa. St. 122, speaking of stock-
holders’ liability, the court said : “What
is the character of their liability? We
think it is secondary, not primary;
collateral, not principal; analogous to
a case of guarantee, to be enforced if
the regular process in the principal

contract proves fruitless, or if the cor-
poration becomes insolvent.” In Cali-
fornia the stockholders of a commer-
cial banking corporation are primary
debtors to the depositors, and are re-
sponsible co-ordinately with the corpo-
ration. Mitchell v. Beckman, 64 Cal.
117,

4See Garrison v. Howe, 17 N. Y.
458; Adams v, Mills, 60 N. Y. 533;
Bird v. Hayden, 1 Robt. (N. Y.) 383;
Merchants’ Bank v. Bliss, 35 N. Y.
412; Price v. Wilson, 67 Barb. (N.Y.)
9; Kritzer v. Woodson, 19 Mo. 327;
Esmond y. Bullard, 16 Hun (N. Y.) 65;
§ 561

nature which imposes a personal liability upon corporate
officers by reason of a neglect or failure to file a report.’
Depue, J., said, in a case in New Jersey: ‘The liability of
trustees to pay the debts of the company, on their neglect
to publish a report of the condition of its affairs, was in the
nature of a penalty for official neglect of duty, which could
not be enforced out of the jurisdiction of the State which
imposed it.”* Chief Justice Church, in referring to the
construction of an act imposing a personal liability for cor-
porate undertakings, said: “Although the statute is highly
penal, and a clear case must be established, yet the sub-
stance of the act, and not the mere form, must be the test
of liability.”* In Pennsylvania, it is said that the rule of
strict construction does not apply to those statutes “‘ where
the intent is manifest from the words of the law.” * This,
we take it, merely implies that, in the effort to adopt a
strict construction, violence is not to be done to the language
or plain intent of the enactment. We shall allude hereafter
to the subject of the correct construction of these statutes.®
Some authorities treat the personal liabilities of stockhold-
ers as primary and original,® others, as secondary and col-
lateral.’ The conflict in these authorities is in great measure

492 PERSONAL LIABILITY.

 

Nassau Bank v. Brown, 30 N. J.
Eq. 478; Hall v. Siegel, 7 Lans. (N.
Y.) 206; Irvine v. McKeon, 23 Cal.
472; Rorke v. Thomas, 56 N. Y. 559;
Salt Lake City National Bank v. Hen-
drickson, 40 N. J. L. 52; O'Reilly v.
Bard, 105 Pa. St. 569; Appeal of
Means, 85 Pa. St. 78; Bassett v. St.
Albans Hotel Co., 47 Vt. 313.

1 Price v. Wilson, 67 Barb. (N. Y.)
12; Bird v. Hayden, 2 Abb. Pr. N. S.
(N. Y.) 61.

2 Salt Lake City Nat. Bank v. Hen-
drickson, 40 N. J. Law 52, 54. See
Derrickson v. Smith, 27 N. J. Law
166, and cases cited.

3 Rorke v. Thomas, 56 N. Y. 564.

* Moyer v. Penn. Slate Co., 71 Pa.
St. 293, 297.

5 See § 566.

§ See Mokelumne Hill C. & M. Co. v.
Woodbury,14Cal. 265; Young v. Rosen-
baum, 39 Cal.646; Perkins v. Sanders,
56 Miss. 733; Flash v. Conn, 16 Fla.
428 ; Morrow v. Superior Court, 64 Cal.
383; Moss v. Averell, ro N. Y. 449;
Faymonville v. McCollough, 59 Cal.
285, 286; Conklin v. Furman, 57 Barb.
(N. Y.) 484, affi’d 48 N. Y. 527; Stew-
art v. Lay, 45 Iowa 604; Handy v.
Draper, 23 Hun (N. Y.) 256; Conant
v. Van Schaick, 24 Barb. (N. Y.) 87.

™See Umsted v. Buskirk, 17 O. S.
113; Patterson v. Wyomissing Mfg.
§ 561 PERSONAL LIABILITY. < 493

attributable to the different purposes had in view by legis-
lative bodies in establishing the personal liabilities sought
to be imposed, and to the different wordings of the statutes.
Each enactment is in great part a law untoitself. Possibly
the dissensions are to some extent due to the locality and
to the differences of views which are often to be observed
in the opinions in corporation cases. Manifestly, there is
an important distinction between these two liabilities. If
the liability is that of surety, an extension of time to the
corporation, given without the assent of the stockholder,
extinguishes it ;* but, if the liability is direct, such an exten-
sion does not work a discharge.’

There is a form of personal liability that is the occasion
of much contention in the courts, where officers or direct-
ors have signed or indorsed obligations without making it
distinctly apparent that the intention was to bind the cor-
poration. Instances of our meaning are the familiar and
oft-recurring cases where individuals have signed their own
names and added the designation secretary, director, or the
like thereto. Mr. Thompson says:* ‘ Where the officer or
agent executes a promissory note, really in behalf of the
corporation, but neither in the body of the note nor in his
signature indicates the capacity in which he acts, there can,
of course, be no doubt that he is personally liable thereon.
So, too, where the intention to bind the corporation ap-
pears so distinctly upon the instrument as to leave no room
for question, his immunity from personal responsibility is
equally clear. The controversy arises only in cases in which
the agent’s intention to bind his principal is demonstrated
with less distinctiveness. Thus, in the body or the signa-

 

Co., 40 Pa. St. 117; Hoard v. Wilcox, 184. See Grand Rapids Savings Bank

47 Pa. St. 51; Perry v. Turner, 55 Mo. v. Warren, 52 Mich. 557.

418; Mansfield Iron Works v. Willcox, 1 Harger v. McCullough, 2 Denio

52 Pa. St. 377; Wright v. McCormack, (N. Y.) 119.

17 0. S. 86. *Thompson’s Liability of Officers
1 Hanson v. Donkersley, 37 Mich. and Agents of Corporations, p. 80.
PERSONAL LIABILITY. § 561

494

ture to the note, the maker may have indicated that he has
an official capacity. The decisions are not at all harmoni-
ous as to what effect shall be attributed to the official desig-
nation. By some courts it is held that the language is
merely descrapizo persone, and may be rejected as surplus-
age; by others that such a rule is abhorrent to common
sense ; that the designation obviously has a meaning, and
the only meaning to be attached to it is that the maker of
the note ac¢s in that official capacity and zz behalf of the
corporation designated.” We cannot further enter this
wide field of agency law, but must refer the reader to the
leading cases illustrating its conflicting phases.’ We may
here recall the fact that personal or partnership liability
against parties connected with unincorporated joint stock
companies? is often enforced with disastrous effect against
the private property of individual members.

In passing, the reader may be reminded that usually a
stockholder is only liable according to the law of the domi-
cil of the corporation.’ In one of the cases cited the court
said: “It will not do when a citizen of the State subscribes
to the capital stock of a foreign corporation to say that he
was ignorant of the terms of the act which created that cor-
poration. He is presumed to know what those terms are.
They are created by the law of another State, and he, for the
purpose of assuming his obligation, in a certain sense goes

 

1 See Randall v. Van Vechten, 19
Johns. (N. Y.) 60; Hopkins v. Mehaffy,
11 Serg. & R. (Pa.) 126; Stinchfield vy.
Little, 1 Me. 231; Tippets v. Walker,
4 Mass. 595; Slawson v. Loring, 5
Allen (Mass.) 340; Underhill v. Gib-
son, 2 N. H. 352; Babcock v. Beman,
11 N. Y. 200; Hicks v. Hinde, 9 Barb.
(N. Y.) 528; Brockway v. Allen, 17
Wend. (N. Y.) 40; Weare v. Gove, 44
N. H. 196. These and other cases may
be found collated in Mr. Thompson’s
Treatises on Liability of Officers and
Agents of Corporations,

®? Examine National Park Bank v.
Nichols, 2 Biss. 146; Frost v. Walker,
60 Me. 468; Holt v. Blake, 47 Me. 62;
Oliver v. Liverpool & L. Life & Fire
Ins. Co., 100 Mass. 531; Taft v. Ward,
106 Mass. 518 ; Whitman v. Porter, 107
Mass. 522; Savage v. Putnam, 32 Barb.
(N. Y.) 420; Dow v. Sayward, 12 N.
H. 271; Williams v. Bank of Michigan,
7 Wend. (N. Y.) 542.

5 See Seymour v. Sturgess, 26 N. Y.
134; McDonough v. Phelps, 15 How.
Pr. (N. Y.) 372; Payson v. Withers, 5
Biss, 269, 278.
$ 562 PERSONAL LIABILITY.

495

into another State and casts off for the time the vesture
which his own State throws around him, and puts on that
of the other State, and is bound by the obligations which
the legislature of that State has imposed upon the corpora-
tion, and the privileges which it has granted and the condi-
tions and terms of the grant.”?

§ 562. Who may enforce liability.— Some consideration
has already been given to the subject of who are proper
complainants in proceedings to reach corporate assets or
enforce individual: liability.” As a general proposition,
where the liability is to the credztors, any creditor may sue
at law;* but where the liability is for the amount of the
stock held by each, it is the better practice, and, according
to some authorities, necessary that the bill should be framed
so as to allow all the creditors to come in, and all the stock-
holders should be joined unless special reasons exist for
omitting some of them.‘ It is not easy to state any rule
of general application regulating this subject. Manifestly,
it would be unsafe to institute a suit to enforce personal
liability without making a critical examination of local
statutory provisions governing the liability. We have ad-
verted to the rule® that a creditor must, generally speak-
ing, exhaust his remedy against the corporation before pur-
suing a stockholder to assert a personal liability,® and must,
ordinarily, first secure a judgment." The bankruptcy of the

 

1 Payson v. Withers, § Biss. 278.

? See Chaps. III., XI.

3 Examine Weeks v. Love, 50 N. Y.
568; Hull v. Burtis, 90 Ill. 213; Cul-
ver v. Third Nat. Bank, 64 IIl. 528;
Garrison v. Howe, 17 N.Y. 463; Bank
of Poughkeepsie v. Ibbotson, 24 Wend.
(N. Y.) 473; Mathez v. Neidig, 72 N.
Y. 100; Perry v. Turner, 55 Mo. 418.

4 Compare Overmyer v. Cannon, 82
Ind. 457; Von Glahn v. Harris, 73 N.
C. 323; Terry v. Martin, 10 S, C. 263;
Coleman v. White, 14 Wis. 700; Eames
__ v. Doris, 102 Ill. 350.

® See Chap. IV.

® See Appeal ‘of Means, 85 Pa. St.
75; Baker v. Louisiana Portable R.R.
Co., 34 La. Ann. 754, 758; Jacobson
v. Allen, 20 Blatchf. 525; Bush v. Cart-
wright, 7 Oregon 335; Wright v. Mc-
Cormack, 17 Ohio St. 95; Matter of
Louisiana Savings Bank, 35 La. Ann.
199; Terry v. Anderson, 95 U. S. 636.

7 See Chap. 1V.; Wheeler v. Miller,
24 Hun (N. Y.) 541; Handy v. Draper,
89 N. Y. 334; Brown v. Eastern Slate

-Co., 134 Mass. 590.
PERSONAL LIABILITY. § 562

496
corporation may possibly excuse the idle ceremony of re-
covering a worthless judgment against it,’ but. this conclu-
sion has been denied under the Rhode Island statute.*
Possibly the condition precedent of a judgment against the
corporate body may be dispensed with where circumstances
have rendered it impossible to secure a judgment.® Ifa
liability is created and a remedy for its enforcement is
not pointed out, an appropriate common-law remedy must
be pursued ;* but a statutory remedy provided for a statu-
tory liability, is exclusive.’ The court-said in a Vermont
case:° “If the act creating a new liability provides the
remedy also, it is well established that that remedy
must be followed, and is the only remedy the creditors
have. It is also equally well established that where a new
liability is created by the charter, but no remedy is pro-
vided, the party may resort to the common-law remedy.”’
It is hardly necessary to recall to the reader’s attention the
fact that a suit to attack fraudulent acts of directors may be
brought by the corporation itself. It is said in an English
case: ‘In the great majority of suits instituted in this court
for the purpose of rescinding transactions, it is the act of the
plaintiff himself which he seeks to rescind. He says: ‘The
act was mine, but it arose from the fraud or other miscon-
duct of those who then had the management of my affairs,’
Why may not a corporation, upon the same ground, have
the same relief? Why are they alone to be denied the
exercise of this the most important jurisdiction of this

 

1 Shellington v. Howland, 53 N. Y.
371. Compare Chamberlin v, Hugue-
not Manf. Co., 118 Mass. 532.

* Lowry v. Inman, 46 N. Y. 119;
Mansfield Iron Works y, Willcox, 52
Pa. St. 377; Allen v. Walsh, 25 Minn,

* Fourth Nat. Bank v. Francklyn,
120 U. S. 747.

* Compare Kincaid v. Dwinelle, 59
N. Y. 551; Wheeler v. Miller, 24 Hun
(N. Y.) 542.

4 Windham Prov. Inst. v. Sprague, 43
Vt. 502 ; Pollard v. Bailey, 20 Wall. 527 ;
Lowry v. Inman, 46 N. Y. 119,

543; Peck v. Coalfield Coal Co., 3
Brad. (Ill.) 619.

* Windham Prov. Inst, v. Sprague,
43 Vt. 510.

7s. P. Peck v. Coalfield Coal Co., 3
Bradw. (Ill.) 623; Pollard v. Bailey, 20
Wall. 527.
§ 563 PERSONAL LIABILITY. 497

court? Certainly not because their affairs do not require
it. The true way of viewing this is to consider the mem-
bers of the governing body of the corporation as its agents,
bound to exercise its functions for the purposes for which
they were given, and to protect its interests and property ;
and if such agents exercise those functions for the purposes
-of injuring its interests and alienating its property, shall the
corporation be estopped in this court from complaining be-
cause the act done was ostensibly an act of the corpora-
tion?”! Official liquidators, assignees and receivers may,
as successors to the title of the corporation, or as repre-
sentatives of creditors, impeach acts in fraud of the rights
of either the one or the other.” But the corporate authori-
ties usually have no control over a liability created for the
exclusive benefit of creditors of the organization,® and the
liability is to be enforcéd by the creditors in their own
right ,

§ 563. Partnership liability.—We have already discussed
the principle that parties assuming to act in a corporate
capacity, without legal organization as a corporate body,
may, in some States, be held liable, in certain instances,
as partners to those with whom they contract.® Thus, in
a much criticised case, the defendants were held liable as
partners for goods sold to an assumed corporation, of which
they were members, where the defect in the incorporation

_ consisted in a failure to file the articles of incorporation
with the clerk of the city where the corporation was to
transact its business. The court observed: ‘There is a

 

_ 1 Attorney General v. Wilson, 1 27 Hun (N. Y.) 307; Billings v. Trask,
. Craig. & Phil. 1,23; S.C. 10 L. J.Ch.53. 30 Hun (N. Y.) 314; Farnsworth v.

2 See Libby v. Rosekrans, 55 Barb. Wood, 91 N.Y. 308. See Jacobson v.
(N. Y.) 217; Talmage v. Pell, 7 N.Y. Allen, 20 Blatchf. 525; Arenz v. Weir,
347; Gillet v. Moody, 3 N. Y. 479; 8g Ill. 25.

Chap. IIL, § 90; Chap. XI. 5 See Chap. XXII; also §27; Fuller
8 Wright v. McCormack, 17 0.5.86; v. Rowe, 57 N. Y. 26; Coleman v,
Umsted v. Buskirk, 17 O. S. 113. Coleman, 78 Ind. 344; Hurt v. Salis-

4 Mason v. New York Silk Manf.Co., bury, 55 Mo. 310,
32
498 PERSONAL LIABILITY. § 564
manifest difference where a corporation is created by a
special charter, and there have been acts of user, and where
individuals seek to form themselves into a corporation
under the provisions of a general law. In the latter case it
is only in pursuance of the provisions of the statute for
such purpose that corporate existence can be acquired.”!
But the differences of views upon this important contro-
versy have already been pointed out,’ and additional con-
sideration of the question would merely tend to render the

discrepancies in the authorities more glaring.

$ 564. Promoters.—We have alluded to the rule that usu-
ally a corporation is not liable for the claims of, or obliga-
tions incurred by, its promoters.? In Massachusetts, until
the issuance of the stock to the members, they own it in
common, and are all jointly and severally liable for the debts
contracted by the association before the capital was paid in.*
We may here observe that where a promoter of a company
ordered goods ostensibly as an agent, but the corporation
collapsed before the capital was paid in, a case of individual
liability was considered to exist." A promoter may be liable
ex delecto to a defrauded subscriber,® and may also be forced
to restore secret profits." Concerning promoters, Sir
Nathaniel Lindley says: ‘“‘ Upon the principles which are
now settled to be applicable to the case of an abortive,

 

1 Bigelow. v. Gregory, 73 Ill. 197,

National Bank of S.v. Almy, 117 Mass.
201. Compare Abbott v. Omaha Smelt- y

476.

ing & R. Co., 4 Neb. 416.
2 See Chap. XXII.
3 See § 71. Gent v. Manufacturers’
_& M. Mut. Ins. Co., 107 Ill. 659; Hall
v. Vermont & Mass. R.R. Co., 28 Vt.
401; Marchand v. The Loan & Pledge
Assn., 26 La. Ann. 389; Rockford, R.
I. & St. L. R.R. Co. v. Sage, 65 IN,
328; Western Screw & Mfg. Co. v.
“Cousley, 72 Ill. 531.
“Hawes v. Anglo-Saxon Petroleum
,€0., 111 Mags, 200, But compare First

> Kelner v. Baxter, L. R. 2 C. P. 174,

* Gerhard v. Bates, 2 El. & B. 476;
S.C, 20 Eng. L. & Eq. 129.

™Simons v. Vulcan Oil & M. Co., 61
Pa, St. 202. See Emma Silver Min.
Co. v. Grant, L. R. 11 Ch. D. 918;
New Sombrero Phosphate Co. v. Er-
langer, L. R. § Ch. D. 73, 103, affi'd
3 App. Cas. 1218; McElhenny’s Ap-
peal, 61 Pa, St. 188, 195. Compare
European & North American Ry. Co.
v. Poor, 59 Me. 277.
$ 564 PERSONAL LIABILITY. 499

unregistered company, it may be taken: 1. That a mere
-subscriber to or allottee of scrip in an abortive company is
not, by virtue of his subscription, or acceptance of scrip, a
contributory on the winding up of the company, whether
‘he has paid his deposit’ or not.* 2, That such a person
does not become a contributory by being one of the com-
mittee from which the scheme emanates, and by which it
is encouraged ; ot, in other words, by being what is com-
monly called a promoter of the company.®? This holds,
even although he may have subseribed something towards
the expenses, if he did so under the erroneous supposition |
that he was liable for them,* or merely for the sake of
peace ;° so, although he may have concurred in the -ap-
pointment of persons, and have incurred liability by so do-
ing, if all liability on that score is at an end ;° so, although
he may have been party to the appointment of a man-
aging committee, by which debts still unpaid have been
incurred ;* so, although his name may have been put on
that committee, if he never assented to join it, and he
never acted on it.2 3. That, @ fortzorz, subscribers to and
promoters of an abortive company are not, as such, liable
to be made contributories on its winding up, if they never

 

As in Mandslay and Field’s Case,
17 Sim. 157; Ex parte Beardshaw, 1
Drew. 226. See, too, Ex parte Wal-
stab, 20 L. J. Ch. 58, where the de-
posit had been paid and recovered.

2 As in Hutton v. Thompson, and
Norris v. Cooper, 3 H. L. C. 161; Ex

- parte Capper, 1 Sim. N.S. 178; Car-
rick’s Case, ib. 505; Ex parte Hirschel,
15 Jur. 942.

3 Citing Bright v. Hutton, 3 H. L.C.
341, reversing Bright’s Case, 1 Sim. N.
S. 602; Norris v. Cottle, 2H. L. C. 647,
affirming Ex parte Cottle, 2Macn. &

G. 185. See, too, Maitland’s Case, 3-

Giff. 28; Ex parte Roberts, 2 Macn. &
G. 192, and 14 Jur. 539; Ex parte
Clarke, 20 L, J. Ch. 14.

4 Citing Ex parte Besley, 3 Macn. &
G, 287, affirming Besley’s Case, 3 De G..
& S. 224; Hall’s Case, 3 De G. & S...
214.

5 Citing Ex parte Stocks, 22 L. J. Ch..
218; Hall’s Case, 3 De G. & S. 2143.
Carrick’s Case, 1 Sim. N.S. 505; Ex:

parte Roberts, 1 Drew. 204; Tanner’s.

Case, 5 DeG. & S. 182.

® Citing Carrick’s Case, 1 Sim. N. S..
505; £x parte Hight, 1 Drew. 485.

"Citing Tanner’s Case, 5 De G. & S..
182,

* Citing Ex parte Roberts, 1 Drew.
204. See, too, Ex parte Osborne, 15
Jur. 72. Compare Spottiswoode’s Case,,
6 DeG. M. & G, 345.
PERSONAL LIABILITY. § 565
have, in fact, entered into a binding agreement to take
shares. Even before Upfill’s case was reversed, this prop-
osition was well established.! 4. That if persons are act-
ively engaged in forming a company, if they act as a body,
and as a body incur debts for which they are all liable, if
‘not directly, at all events as between each other, then they
form a company or association which may be wound up,
and on its winding up they will be contributories, whether
they have actually subscribed for shares or not.” 5. That
persons who, without being actively engaged in forming a
company, agree not only to take shares in it, but also to
share the expenses incurred in forming the company, are,
on its winding up, liable to be made contributories.” ®

500

§ 565. Certificate of payment of capital stock—The ques-
tion of the statutory personal liability of stockholders to
creditors of a corporation in cases where the:capital has not
been all paid in and a certificate of that fact filed as re-
quired by statute has provoked endless litigation. This
liability has been declared to rest in contract. As we have
seen, the statute imposing the liability is said in effect to
withdraw the protection of the incorporation from the
stockholders and leave them liable as partners.° If the lia-
bility was penal the statute could, of course, have no opera-
tion in another State.® But it was considered that, as the
obligation under the operation of the New York statute
rested in contract, it could be enforced in Florida,’ the rule

 

1 Citing Mathew’s Case, 3 De G.& S.
234; Carmichael’s Case, 17 Sim. 163;
and Onions’ Case, 1 Sim. N. S. 394.

2 Citing Norbury’s Case, 5 De G. &
Sm. 243; Sharp and James’ Case, 1
De G. M. & G. 565; Pearson’s Ex-
cutors’ Case, 3 De G. M. & G. 241;
‘Spottiswoode’s Case, 6 DeG. M. & G,
345. See, also, Bowen and Martin’s
‘Case, 22 L. J. Ch. 856, and Ex parte
Apps, 18 L. J. Ch. 409.

32 Lindley on Partnership, 3d ed.,
pp. 1407 to 1409.

“Flash v. Conn, 109 U. S. 371;
Wiles v. Suydam, 64 N. Y. 173, Corm-
pare § 600,

* Corning v. McCullough, 1 N. Y.
47. See Chap. XXII. See § 563.

°Flash v. Conn, rog U. S. 376;
First Nat. Bank v. Price, 33 Md. 487;
Derrickson v. Smith, 27 N. J. Law 166;
Price v. Wilson, 67 Barb. (N. Y.) 9;
Bird v. Hayden, 2 Abb. Pr. N.S. (N.
Y.) 61.

"Flash v. Conn, 109 U. S, 379.
§ 565

PERSONAL LIABILITY.

501

being that transitory actions may be brought in any juris-

diction!

Still, this case of Flash v. Conn embodies a

border principle, and whether the statutory liability indi-
cated is for all purposes a penalty? or a contract liability
which may be enforced anywhere, is a vigorously litigated

proposition.®

 

‘ Dennick v. Railroad Co., 103 U.S.
It.

2 See Irvine v. M’Keon, 28 Cal. 472;
Bird v. Hayden, 2 Abb. Pr. N.S. (N.
Y.) 61; Gregory v. German Bank, 3 Col.
332; Craw v. Easterly, 4 Lans. (N. Y.)
513; Vincent v. Sands, 42 How. Pr.
(N. Y.) 235; Bruce v. Platt, 80 N. Y.
381; Victory Webb Printing Co. v.
Beecher, 26 Hun (N. Y.) 48; Rorke v.
Thomas, 56 N. Y. 559.

3 Compare Aultman’s Appeal, 98 Pa.
St. 505; Erickson v. Nesmith, 4 Allen

(Mass.) 233; Erickson v. Nesmith, 46

N.H. 378; Rice v. Merrimack Hosiery
Co., 56 N. H. 114; Flash v. Conn, 16
Fla. 428; Ex parte Van Riper, 20
Wend. (N. Y.) 614; Bird v. Hayden, 1
Robertson (N. Y.) 383; Halsey v. Mc-
Lean, 12 Allen (Mass.) 438; Merchants’
Bank v. Bliss, 35 N. Y. 412. In the
course of the opinion in Flash v. Conn,
109 U. S. 377, Mr. Justice Woods said :
“ We think the liability imposed by sec-
tion Io is a liability arising upon con-
tract. The stockholders of the company
are by that section made severally and
individually liable, within certain limits,
to the creditors of the company for its
debts and contracts. Every one who
becomes a member of the company by
subscribing to its stock assumes this
liability, which continues until the
capital stock is all paid up and a cer-
tificate of that fact is made, published
and recorded. The’ fact that the lia-
bility ceases when these events take
place does not change its nature and
make that a penalty which would, with-
out such limitation, be a liability founded

on contract. Such has been the con-
struction given to section 10 by the
Court of Appeals of New York. In the
case of Wiles v. Suydam, 64 N. Y. 173,
that court had under consideration sec-
tions 1o and 12 of the act under which
the Pensacola Lumber Company was
organized. The complaint alleged the
liability of the defendant, both as a
stockholder under section 10 and as a
trustee under section 12, The com-
plaint was demurred to, on the ground
that two causes of action were improp-
erly joined. The court sustained the
demurrer, In giving the reasons for
its judgment, it said: ‘The cause of
action against the defendant as a stock-
holder consists of the debt and the lia-
bility created by statute against stock-
holders where the stock has not been
paid in and a certificate of that fact re-
corded. In effect the statute in such a
case withdraws the protection of the
corporation from the stockholders, and
regards them liable to the extent of the
amount of their stock as copartners.
(Corning v. McCullough, 1 N. Y. 47.)
The allegations in the complaint are
sufficient to establish a perfect cause of
action against the defendant as a stock-
holder primarily liable for the debts to
the amount of his stock. The allega-
tions against the defendant as trustee
also constitute a distinct and perfect
cause of action, but of an entirely dif-
ferent character. Here the liability is
created by statute, and is in the nature
of a penalty imposed for neglect of duty
in not filing a report showing the situa-

-tion of the company, The object of
502 PERSONAL LIABILITY. § 566

§ 566. Construction of statutes imposing liability—Let us
notice briefly the rules of interpretation and construction
of statutes creating individual liability. The courts, as has
been made manifest, have considered that a statute which
imposed a personal liability upon stockholders for debts of
the corporation was in derogation of the principles and op-
posed to the course of the common law,’ and that therefore
the courts were not at liberty to extend its effect beyond
its literal terms by enlarging or aggravating the liability
of the stockholder.? The learned Chief Justice Shaw said,
in Gray v. Coffin:* “To create any individual liability of
members for the debt of a corporation, a body politic,
created by law, and regarded as a legal being, distinct from
that of all the members composing it, and capable of con-
tracting and being contracted with as a person, is a wide
departure from established rules of law, founded in con-
siderations of public policy, and depending solely upon pro-
visions of positive law. It is, therefore, to be construed
strictly, and not extended beyond the limits to which it is
plainly carried by such provisions of statute.” Thus, in the
case from which we quoted, an assignee of an insolvent

 

the action is the same, viz.: the collec~ ing provision of the code: “ An action

tion of the debt; but the liability and
the grounds of it are entirely distinct
and unlike. That there are two causes
of action in this complaint seems too
clear to require much argument. The
more difficult question is, whether they
may be united in the same complaint.
The first cause of action against the de-
fendant as a stockholder is an action
on contract. The six years’ statute of
limitations applies. (1 N.Y. supra.)
The defendant is entitled to contribu-
tion. (Bailey v. Bancker, 3 Hill (N. Y.)
188.) But in respect to the action
against defendant as trustee, this court
held, in Merchants’ Bank v. Bliss (35
N. Y. 412), that the three years’ statute
of limitations applied under the follow-

upon a statute for a penalty or forfeiture.
when the action is given to the party
aggrieved ”’(§92).’ This decision is upon
the precise point of the controversy in
this case. It declares that the liability
such as that which the plaintiffs in this
action seek to enforce is one arising
upon contract, and is not in the nature
of a penalty. This decision has never
been modified or overruled by the Court
of Appeals of New York.”

1 See Stedman v. Eveleth, 6 Metc.
(Mass.) 114.

? Chase v. Lord, 77 N.Y. 8. Butsee
Corning v. McCullough, 1 N. Y. 47;
Story v. Furman, 25 N. Y. 214.

+ 9 Cushing (Mass,) 199.
§ 566 PERSONAL LIABILITY.

593.
debtor, a portion of whose assets consisted of shares in a
corporation, was held not liable to contribute toward the
debts of the corporation for which the statute rendered the
members liable, although the assignee had acted as a stock-
holder.’ This is another embodiment of the rule that any
statute which is “very much out of the course of the com-
mon law,” ought to be strictly construed.?, Mr. Cook ob-
serves that these statutes ‘‘ are a wide departure from estab-
lished rules, and, although founded on considerations of
public policy and general convenience, are not to be ex-
tended beyond the plain intendment of the words of the
statute.”° We have adverted to this question of construc-

 

1 Compare Stedman v. Eveleth, 6
Met. (Mass.) 114; Corning v. McCul-
lough, 1 N. Y. 47; Story v. Furman,
25 N.Y. 214.

~? See McMullin v. McCreary, 54 Pa.
St. 231. In Carver v. Braintree Mfg.
Co., 2 Story 448, Judge Story, in seek-
ing a meaning for the words “ debts
contracted,” said: “If the words .
are to receive the limited construction,
that they are applicable only to debts in
the strict sense of the term, that is,
contracts of the party for the payment
of money, and nothing else, it is ob-
vious, that the purposes of the statute,
which, although, in some sense, it may
be deemed penal, is also in another
sense remedial, would be comparatively
of little value..... If, on the other
hand, we should construe the statute
broadly as a remedial statute, and give
to the word ‘debts’ a meaning, not
unusual, as equivalent to ‘dues,’ and
to the word ‘contracted,’ a meaning,
which, though more remote, is still le-
gitimate, as equivalent to ‘incurred’;
so that the phrase, ‘ debts contracted,’
in this sense would be equivalent to
* dues owing,’ or ‘liabilities incurred,’
the statute would attain all the objects
for which it seems designed.”

3 Cook on Stock and Stockholders,
§214. See Dane v. Dane Mfg. Co., 14
Gray (Mass.) 489; Gray v. Coffin, 9
Cush. (Mass.) 192; O’Reilly v. Bard,
105 Pa. St. 569; Coffin v. Rich, 45 Me.
511; Means’ Appeal, 85 Pa. St. 75;
Grose v. Hilt, 36 Me. 22; Diven v.
Lee, 36 N. Y. 302; Chamberlin v.
Huguenot Manf, Co., 118 Mass. 532;
Moyer v. Pennsylvania Slate Co., 71°
Pa. St. 293; Windham Provident In-
stitution v. Sprague, 43 Vt. 502; Salt
Lake City Nat. Bank v. Hendrickson,
40 N. J. Law 52; Lowry v. Inman, 46
N.Y. 119. The statute in New York,
Laws of 1848, ch. 4o, § 13, making any
of the trustees of a corporation liable
for its debts in case they declare a
dividend when insolvent, or which will
render it insolvent, was enacted ‘to
prevent the dissipation of the fund de-
signed for the security of creditors,
and all who have occasion to deal with
these corporations; and, although the
statute is highly penal, and a clear case
must be established, yet the substance
of the act, and not the mere form, must
be the ‘test of liability.” Rorke v.
Thomas, 56 N. Y. 564.
PERSONAL LIABILITY. §§ 567, 568

504
tion as applied to corporate ‘charters and incorporating
statutes,’ and have deprecated the use of the words strict
or libéral, as used in thisconnection. The statutes, it seems
to us, should be reasonably construed,’ and their fair mean-
ing reflected. The purposes of the statutes, even if ob-
noxious, should not be defeated or distorted by unreason-
able constructions.

§ 567. Statutes declaratory of the common law.—It would
seem to be clear that a statute prescribing that no share-
holder shall be liable to creditors of the corporation for
more than the amount subscribed by him, is only declaratory
of the common law? —

§ 568. Personal liability for certain classes of debts.—It is
not unusual to find statutes in the various States in this
country which create a personal liability against stockhold-
ers for debts due by the corporation to laborers and for cer-
tain kinds of material.‘ In some instances claims of this
kind are preferred out of the fund. Laborers, to be within
the provisions of these statutes, ‘“‘must be of a class whose
members usually look to the reward of a day’s labor or
service for immediate or present support, from whom the
company does not expect credit, and to whom its future
ability to pay is of no consequence.”* In general, the pro-
tection is extended to manual laborers only. These stat-
utes are enacted to subserve a beneficent purpose. Their
provisions must, however, be kept in view by parties con-

 

1 See § 482. *See Reading Industrial Manf. Co.
® See Mokelumne Hill C. & M.Co.v. v, Graeff, 64 Pa. St. 395; Harrod v..
Woodbury, 14 Cal. 265; Davidson v. Hamer, 32 Wis. 162; Weigley v. Coal
Rankin, 34 Cal. 505. Oil Co., 5 Phila. (Pa.) 67; Moyer v.

3 Walker v. Lewis, 49 Texas 123. In
the course of the opinion, the court
said: “The charter seems to be de-
claratory of the common-law rule, and
measures the liability of the stockhold-
er by the amount he subscribed, or
promised to pay into the corporate fund.”

Pennsylvania Slate Co., 71 Pa. St.
293, cited in Cook on Stock and Stock-
holders, § 215.
* Wakefield v. Fargo, 90 N. Y. 217.
*See Adams v. Goodrich, 55 Ga.

233. Compare Short v. Medberry, 29
Hun (N. Y.) 39.
$ 569 PERSONAL LIABILITY. 505

templating the purchase of stock in a corporation that em-
ploys labor or purchases materials of the class described in
these statutes where a personal liability is imposed.

$ 569. Liability to creditors only.—The statutory liability
of stockholders beyond the amount of the subscription
usually exists in favor of the creditors. It is considered a
novelty for the corporation itself to attempt to enforce this
additional liability.t In Dutcher v. Marine National Bank,?
the object of the bill was to enforce the provision of the
Constitution of the State of New York, which declares
that the stockholders of such a corporation shall be indi-
vidually liable for the debts of the corporation to the
amount of the stock held by them respectively. The de-
fendants demurred to the bill. ‘The learned Woodruff, J.,
said: “I am of opinion that the demurrer is well taken.
The liability thus provided for is purely collateral to the
liability of the bankrupt debtor. It is a liability to, and
created a right in favor of, the creditors of the corporation,,.
and is not a liability to the corporation itself, nor, in any
legal sense, for the benefit of the corporation. It is neither
property, nor a right of property, nor a credit of the bank-
rupt. In some broad sense, having respect to the rights of
the creditors, it may be called a provision for the payment
of debts, and, in that sense, as insisted by the counsel for
the complainants, ‘assets,’ but not assets of the bankrupt.
The assignee in bankruptcy has no legal or equitable title,
right, or interést therein.” But here again the particular
words of the statute must be consulted in arriving at a con-
clusion as to the right of a receiver to sue for the benefit of
creditors, as a tendency exists to make a receiver a trustee
for creditors, and by this means to avoid confusion in the
details of the process of liquidation of corporate affairs.*

 

_1 Liberty Female College Assoc. v. 2 12 Blatchf. 435.
Watkins, 70 Mo. 16. See Umsted v. 3 See Chaps, X., XI.
Buskirk, 17 O. 5S. 117.
506 PERSONAL LIABILITY. § 570

It may be recalled, in passing, that a stockholder who
has been forced to pay more than his proportional share of
the corporation debts, may sue his fellow-stockholders for
contribution.’ In Aspinwall v. Torrance,’ Ingraham, P. J.,
said: “The equitable doctrine of contribution rests upon
the principle that where all are equally liable for the pay-
ment of a debt, all are bound equally to contribute to that
purpose.” In Judson v. Rossie Galena Company ® the
Chancellor observed: ‘‘Those stockholders who are com-
pelled to pay more than their ratable proportions of the
debts contracted while they were stockholders, will un-
doubtedly have a claim for contribution against other
stockholders who are liable for the same debts and who
pay less than their shares.”

§ 570. Directors as trustees for stockholders and creditors.
—In contemplation of equity the directors of an insolvent
corporation while it is under their management, hold the
position of trustees of its assets for the benefit of its credit-
ors.* In Wardell v. Railroad Company® the court said:
‘Those directors, constituting the executive committee of
the board, were clothed with power to manage the affairs
of the company for the benefit of its stockholders and
creditors. Their character as agents forbade the exercise
of their powers for their own personal ends against the in-
terest of the company. They were thereby precluded from
deriving any advantage from contracts made by their au-
thority as directors, except through the company for which
they acted. Their position was one of great trust, and to
engage in any matter for their personal advantage incon-

 

~

1 Stewart v. Lay, 45 Iowa, 604, 614; 5 9 Paige (N. Y.) 598, 603.
Farrow v. Bivings, 13 Rich. Eq. (S. C.) ‘See Wardell v. Railroad Co., 103
25; Gray v. Coffin, 9 Cush. (Mass.) U.S. 651; The Great Luxembourg Ry.
192; Aspinwall v. Torrance, 1 Lans, Co, v. Magnay, 25 Beav. 586; Gaskell
(N. Y.) 381; Stover v. Flack, 30 N.Y. v. Chambers, 26 Beav. 360. Compare
64. Spering’s Appeal, 71 Pa. St. 11,

* 1 Lans. (N. Y.) 384. * 103 U. S. 651, 657.
§. 570 PERSONAL LIABILITY.

507: .
sistent with it was to violate their duty and to commit a.
fraud upon the company.” If they are themselves credit-
ors, they are precluded by their trust from securing to
themselves any advantage over other creditors.’ Still we
must admit that this salutary general rule is frequently
circumvented by wily corporate managers. Corporate
officers must account for secret profits.? Where the direct-
ors of a ferry company purchased a steamboat for themselves.
as individuals, and, so owning it, bought it of themselves,
in their character of directors, for the company, at a large.
advance upon cost, the transaction was considered fraudu-

 

1 Bradley v. Farwell, 1 Holmes 433,
440. In this case Shepley, J., said: “ The
relation between the directors of a cor-
poration and its stockholders is that of
trustee and cestud gue trust.” Citing
Butts v. Wood, 38 Barb. (N. Y.) 188;
York & North Midland Railway Co, v.
Hudson, 19 Eng. L. & Eq. 365; S.C. 16
Beav. 485; Scott v. Depeyster, 1 Edw.
Ch. (N. Y.) 513; Verplanck v. Mercan-
tile Ins. Co., 1 Edw. Ch. (N. Y.) 85;

Great Luxembourg Railway Co. v. Mag-:

nay, 25 Beav. 586; European & N. A.
Railway Co. v. Poor, 59 Me. 277; Ben-
son. v. Heathorn, 1 Younge & Coll. N.
R. 343; Sawyer v. Hoag, 17 Wall. 610;
Aberdeen Ry.Co. v. Blakie, 1 MacQueen
461. See Koehler v. Black River Falls
Iron Co., 2 Black 719. In Hoyle v.
Plattsburgh & M. R.R. Co., 54.N.Y. 328,
Johnson, C., said: “ Whether a director
of a corporation is to be called a trustee
or not, in a strict sense, there can be no
doubt that his character is fiduciary,
being intrusted by others with powers
which are to be exercised for the com-
mon and general interests of the cor-
poration, and not for his own private
interests. He falls, therefore, within
the great rule by which equity requires
that confidence shall not be abused by
the party in whom it is reposed, and
which it enforces by imposing a disa-

bility, either partial or complete, upon.
the party intrusted to deal on his own
behalf in respect to any matter involved
in such confidence.” Citing Greenlaw
v. King, 3 Beav. 49, 61; Gibson v.
Jeyes, 6 Ves. 278; Ex parte Lacey, 6
Ves. 627. The learned Sharswood said;
in the celebrated Spering’s Appeal, 71
Pa. St. 11, 20: “It is by no means
a well-settled point what is the precise
relation which directors sustain to
stockholders. They are undoubtedly
said in many authorities to be trustees,
but that, as I apprehend, is only in a
general sense, as we term an agent or
any bailee intrusted with the care and
management of the property of another,
It is certain that they are not technical
trustees,”

* European & North Am. Ry. Co. v.
Poor, 59 Me. 277. See Great Luxem-
bourg Ry. Co. v. Magnay, 25 Beav,
586; Redmond v. Dickerson, 9 N. J.
Eq. 509; Parker v. Nickerson, 112
Mass. 195; Blake v. Buffalo Creek
R.R. Co. 56 N. Y. 485; Butts v.
Wood, 37 N. Y. 317; Brewster v.
Hatch, 10 Abb. N. C. (N. Y.) 405;_
York & N. M. Ry, Co. v. Hudson, 16
Beav. 485; Cumberland Coal & Iron
Co. v. Sherman, 30 Barb. (N. Y.) 553;
Van Dyck v. McQuade, 86 N. Y. 46;
Parker v. McKenna, L. R. 10 Ch. 96.
508 PERSONAL LIABILITY. § 570
lent as against the company, and they were held bound to
restore to the company the profits so made by them.’ In
the leading and important case of Butts v. Wood,’ the New
York Court of Appeals, after adverting to the rule that the
relation of a director to the corporation is that of trustee
and cestud gue trust, say: “The rule that one holding a
position of trust cannot use it to promote his individual in-
terests by buying, selling, or in any way disposing of the
trust property, is now rigidly administered in every enlight-
ened nation, and its usefulness and necessity become more
and more apparent. A careful examination of the testi-
mony in this case shows that Wood could not have en-
forced this claim against the company; and the circum-
stances under which it was allowed and paid were a fraud
upon its stockholders. To permit such a transaction to
stand would be a reproach to the administration of justice.”
The same court have shown a disposition to somewhat re-
lax this rule in a later case.* Directors can be held for any
of the many forms of fraud and for breach of trust,* and
for losses occasioned by wétra vtres acts.®

 

' Parker v. Nickerson, 112 Mass. 196.
In the course of the opinion, Morton,
J., observed: ‘This transaction was
fraudulent in law. As a general rule,
a trustee or agent cannot purchase on
his own account what he sells on ac-
count of another, nor purchase on ac-
count of another what he sells on his
own account, He cannot unite in him-

Beav. 75; Kimber v. Barber, L. R. 8
Ch. 56. The case of the purchase of
the ‘John Adams’ clearly falls within
this rule. The defendants were both
buyers and sellers. Acting on their
own account, they sold the steamboat
to themselves acting as directors, at a
large advance upon its cost. All the
profits thus made, in equity enured to

self the opposite characters of buyer
and seller. And if he does so, the cestuz’
gue trust or principal, unless upon the
fullest knowledge of all the facts he
elects to confirm the act of the trustee
or agent, may repudiate it, or he may
charge the profits made by the trustee
or agent with an implied trust for his
benefit. Michoud v. Girod, 4 How. 503 ;
Gillett v. Peppercorne, 3 Beav. 78; York
& North Midland Railway Co, v. Hud-
son, 16 Beav. 485 ; Bentley v. Craven, 18

the benefit of the company, and the re-
ceivers are entitled to recover them in
this suit.’”’

* 37 N.Y. 317, 319.

5 Duncomb v. New York, H. & N.
Railroad Co., 84 N. Y. 190.

‘Charitable Corporation v. Sutton,
2 Atkyns 400. Compare Spering’s’ Ap-
peal, 71 Pa, St, 11.

5 Joint Stock Discount Co. v. Brown,
L. R. 8 Eq. 381.
§ 571 PERSONAL LIABILITY.

509

$ 571. Trustees cannot release stockholders.—The rule is
established that a release of a stock subscriber by the di-
rectors is of no avail, and that he remains bound for the
amount of the subscription to the other stockholders and
creditors of the corporation.’ In Upton v. Tribilcock,?
Hunt, J., observed: ‘ Equally unsound is the opinion, that
the obligation of a subscriber to pay his subscription may
be released or surrendered to him by the trustees of the
company. This has been often attempted, but never suc-
cessfully. The capital paid in, and promised to be paid in,
is a fund which the trustees cannot squander or give away.”
In Burke v. Smith® the United States Supreme Court say :
“Tt has been settled by very numerous decisions, that the
directors of a company are incompetent to release an original
subscriber to its capital stock, or to make any arrangement
with him by which the company, its creditors, or the State
shall lose any of the benefit of his subscription.”* Direct-
ors have no power to discriminate between stockholders,®

 

1 The Chouteau Ins. Co. v. Floyd, 74
Mo. 291; Gill v. Balis, 72 Mo. 432.

2791 U.S. 45, 48.

316 Wall. 395.

4s, P. Rider v. Morrison, 54 Md. 444 ;
Bedford Railroad Co, v. Bowser, 48 Pa.
St. 37; Alford v. Miller, 32 Conn. 543.

5 Jones v. Terre Haute & R. R.R.
Co., 57 N. Y. 204. Reynolds, C.,
said: ‘“ The question whether the plain-
tiff was legally entitled to both or either
of the dividends thus declared is not
free from difficulty, and mainly de-
pends, I think, upon the power of the
directors of the company in declaring
a dividend to discriminate between its
stockholders for any reason whatever,
and it is not important to consider
whether the plaintiff is to be regarded
as a stockholder on the 3d or on the
16th of December, 1856, for, in either

case, he was a stockholder before ‘the -

dividend was actually declared. No

such power of discrimination is con-
ferred by the charter of the company ;
and if it can be said to exist at all, it
must rest upon general principles of
law. It is certainly true, as a general
rule, that a stockholder in a corpora-
tion has an interest, in proportion to
his stock, in all the corporate property,
and has a right to share in any surplus
of profits arising from its use and em-
ployment in the business of the com-
pany; and this legal right does not
depend upon the question whether he
is a stockholder of long standing or of
recent date. The moment a person
becomes a stockholder in a corpora-
tion, all the incidents of interest or
guasz ownership in the corporate prop-
erty attach. Where stock is transferred
from one person to another, no ques-
tion could be made as to the right of
the stock to participate in any subse-
quent dividend ; and I do not discover
510 PERSONAL LIABILITY. §§ 572, 573
and are personally liable to the corporation and creditors
for any loss occasioned by an improper cancellation or

withdrawal of subscriptions.’

$ 572. Attempted condonation by corporation.—A corpo-
ration cannot condone the default of an officer of a corpo-
ration without the consent of all the stockholders.? In
Hazard v. Durant,’ Chief Justice Durfee said: ‘The juris-
diction does not appear to be so firmly settled and defined
in England as in this country, but we do not believe any
‘English judge has ever decided that a president or director,
who fraudulently converts or embezzles corporate funds,
cannot be sued in equity by a stockholder, when the cor-
poration wilfully neglects or refuses to bring the suit.
Indeed, to hold that a corporation could gratuitously con-
done or release such a fraud, by anything short of unan-
imous consent, would be monstrous; for it would be in
effect to hold that a president or director, who can control
a majority vote in the corporation, may rob or despoil it
with impunity.”

§ 573. Cancellation of subscription. — A subscription to
stock is a contract which cannot be dissolved at the option
of one party; the consent of both must be procured. The

 

that there can be any difference be-
tween stock obtained by the conver-
‘sion of bonds and stock which has
long existed and transferred on the
books of the company immediately be-
fore the declaration of a dividend. It
was, as before said, the right of the
plaintiff to convert his bonds into stock
whenever he elected to so do; and
when stock for his bonds was issued
to him he was equal in right, to the
amount of his stock, with every other
of his associate stockholders, and I am
unable to discover any principle by
which the directors had authority to
make any discrimination between them,

If such a rule should be approved it
might result in very great disasters to
holders of corporate stock.” .

1 See Bank of St. Mary's v. St. John,
25 Ala. 566; Hodgkinson v. Natl. Live
Stock Ins, Co., 26 Beav. 473.

* Hazard v. Durant, 11 R. I. 195;
Atwool v. Merryweather, L, R. 5 Eq.
464, 2.

Sir R.I. 195, 206,

4 Gaff v. Flesher, 33 O.S. 112; Mus-
kingum Valley Turnpike Co. v. Ward,
13 Ohio 120; Graff v. Pittsburgh & S,
R.R. Co., 31 Pa. St. 489; Upton v.,
Tribilcock, 91 U. S. 48.
$ 574 PERSONAL LIABILITY. Sti

corporation cannot, as we have shown, release subscribers
to the prejudice of intervening creditors' or of other stock-
holders? In Chandler v. Brown ® the court said: ‘Each
stockholder has a vested right in the contract for subscrip-
tion of every other stockholder.” 4

§ 574. Transfer to irresponsible party to avoid liability.—
It seems clear that a stockholder, whether original or hold-
ing by transfer, cannot rid himself of his responsibility to
creditors after the corporation has become insolvent® by a
simulated transfer to a party not able for any reason to re-
‘spond to such liability.6 In Bowden v. Johnson,” Blatch-
ford, J., observed concerning a defendant: “ As such share-
holder, he became subject to the individual liability pre-
scribed by the statute. This liability attached to him un-
til, without fraud as against the creditors of the bank, for
whose protection the liability was imposed, he should re-
lieve himself from it. He could do so by a dona fide trans-
fer of the stock. But where the transferrer, possessed of
information showing that there is good ground to appre-
hend the failure of the bank, colludes and combines, as in
this case, with an irresponsible transferee, with the design

‘of substituting the latter in

his place, and of thus leaving

 

1 Webster v. Upton, 91 U.S. 71.
See § 571.

? Upton v. Tribilcock, 91 U. S. 45.
_ See Goodrich v. Reynolds, 31 Ill. 490;
Mann v. Cooke, 20 Conn. 178; Litch-
field Bank v. Church, 29 Conn. 137;
Pittsburgh & C. R.R. Co. v. Stewart,
“4r Pa. St. 54; Pittsburgh & C. R.R.
Co. v. Graham, 36 Pa. St. 77; Robin-
son v. Pittsburgh & C. R.R. Co., 32 Pa.
_ St. 334; New Albany & S. R.R. Co. v.
' Fields, 10 Ind. 187; Downie v. White,
12 Wis. 176; Blodgett v. Morrill, 20
Vt. 509.

377 Ill. 337.

4 Compare Nathan v. Whitlock, 9
Paige (N. Y.) 152.

5 Aultman’s Appeal, 98 Pa. St. 516;
Thompson’s Liability of Stockholders,
§215; Miller v. Great Republic Ins.
Co., 50 Mo. 57; Marcy v. Clark, 17
Mass. 334; Johnson v. Laflin, 5 Dill.
65; s.c. 6 Cent. L. J. 131; Nathan v.
Whitlock, 3 Edw. Ch. (N. Y.) 215; Gaff
v. Flesher, 33 O. S. 112; Providerice
Savings Inst. v. Jackson Place Skating
Rink, 52 Mo. 557.

6 Bowden v, Johnson, 107 U.S. 251;
Bowden v. Santos, 1 Hughes 158;
Marcy v. Clark, 17 Mass. 334; Davis
v. Stevens, 17 Blatchf. 259; Veiller v.
Brown, 18 Hun (N. Y.) 571.

7 107 U.S. 261,
512 PERSONAL LIABILITY. § 574
no one with any ability to respond for the individual liabil-
ity imposed by the statute, in respect of the shares of stock
transferred, the transaction will be decreed to be a fraud on
the creditors, and he will be held to the same liability to the
creditors as before the transfer. He will be still regarded
as a shareholder guoad the creditors, although he may be
able to show that there was a full or a partial consideration
for the transfer, as between him and the transferee.”* In
Johnson v. Laflin,? Dillon, J., said: ‘‘While we maintain
the right of a shareholder to dispose of his shares abso-
lutely by an out and out sale and registered transfer, and
thus escape liability, provided the sale is made dona fide,’
and the purchaser is in law capable of assuming the liabili-
ties of the transferrer, yet this does not involve the right to
transfer shares for a fraudulent purpose or under circum-
stances which the transferrer knows will make the transfer,
if it is sustained, work a fraud upon the other shareholders
or upon the creditors of the bank.”* ‘We cannot doubt,
then,” said Chief Justice Parker, ‘that a transfer of an in-
terest in the stock of such corporations, not doxa fide, but
for the purpose of defeating the creditors of the company,
is fraudulent and void.”> The Supreme Court of Missouri
say: “The question in such case is whether the transfer
was fraudulent and void as to the creditors of the com-
pany. If the stockholder knew of the insolvency at the

 

1See Paine v. Stewart, 33 Conn.
516; Lund’s Case, 27 Beav. 465;
Provident Savings Institution v, Jack-
son Place Skating Rink, 52 Mo. 557;
Daniell’s Case, 22 Beav. 43; Castellan
v. Hobson, L. R. 10 Eq. 47; Slater’s
Case, 35 Beav. 391; McClaren v.
Franciscus, 43 Mo. 452; Marcy v,
Clark, 17 Mass. 330; Ex parte Ben-
nett, 18 Beav. 339; Mitchell’s Case, L.
R. 9 Eq. 363; Roman v. Fry, 5 J.J.
Marsh (Ky.) 634.

25 Dill. 86; s.c. 6 Cent. L, J. 131,

3 See Matthews v. Albert, 24 Md. 527;
Bordman v. Osborn, 23 Pick. (Mass.)
295; Holyoke Bank v. Burnham, 11
Cush. (Mass.) 183; Chouteau Springs
Co. v. Harris, 20 Mo. 382; Cole v.
Ryan, 52 Barb. (N. Y.) 168; Johnson
v. Underhill, 52 N. Y. 203; Miller v.
Great Republic Ins. Co., 50 Mo. 55;
Mayhew’s Case, 5 De G. M. & G, 837.

4s. P, Marcy v. Clark, 17 Mass. 330;
Bowden v. Santos, 1 Hughes 158,

* Marcy v, Clark, 17 Mass, 334.
$§ 575, 576 PERSONAL LIABILITY. 513

time of the transfer, it would be very strong evidence of
fraud, and it would be hard to resist the conclusion that
such transfer was made in bad faith.”’ It will be manifest
from an examination of these opinions that any transfer. of
stock may become the subject of attack in the interest of
creditors under the rule promulgated in the authorities
cited. The party making the transfer will generally be
compelled to submit to the determination of a jury the
question as to his good faith in disposing of the stock.
Simulated sales or transfers in form or of record, which are
not in substance or in spirit actual transfers, will not bear
the test, and any liability incident to the stock will in such
cases be enforced against the transferrer.

$ 575. Transfer to fictitious person.—In a case which arose
in Ohio,’ the stockholder sought to avoid liability to pay a
“subsequent instalment” upon the ground that prior to
the call he had transferred his stock to a fictitious person,
which he claimed constituted an abandonment of it. But
the court said: “The assignment to a fictitious person is a
mere nullity. It transferred no right, simply because there
was no real person to receive it on its passing from the
original proprietor. Assuming it to be sufficient evidence
of an abandonment, it still does not help the defendant, for
an individual cannot release himself from the obligation of
a contract against the consent of the obligee; and the de-
fendant’s subscription to the capital stock of the plaintiff is
a contract.” In Pugh and Sharman’s Case® the court said :
“There can be no difference between a fraudulent attempt
to get rid of liability by a transfer of shares, and a fraudu-
lent attempt to obtain shares by taking them in a false or
fictitious name.”

§ 576. Release by alteration of charter—It must be con-
ceded as a general rule that a subscriber to the stock of a

 

1 Miller v. The Great Republic Ins, ? Muskingum Valley Turnpike Co. v
Co., 50 Mo. 57. Ward, 13 Ohio 127.
°L. R. 13 Eq. 572.
33
514 PERSONAL LIABILITY. § 576

corporation is released from obligation to pay his subscrip-
tion by a fundamental alteration of the charter. Mr. Jus-
tice Strong observed :* ‘‘The reason of the rule is evident.
A subscription is always presumed to have been made in
view of the main design of the corporation, and of the
arrangements made for its accomplishment. A radical
change in the organization or purposes of the company
may, therefore, take away the motive which induced the
subscription, as well as affect injuriously the consideration
of the contract. For this reason it is held that such a
change exonerates a subscriber from liability for his sub-
scription ; or, if the contract has been executed, justifies a
stockholder in resorting to a court of equity to restrain the
company from applying the funds of the original organiza-
tion to any project not contemplated by it.” But, accord-
ing to the American cases, the subscriber is released from
his subscription by a subsequent alteration of the organiza-
tion or purpose of the corporation only when such altera-
tion is both fundamental axd not provided for or contem-
Plated by etther the charter ztself or the general laws of
the State.2 Thus, in Indiana, where it appeared that after
a public act had taken effect. authorizing the consolidation
of the charters of two railroad companies, the defendant
had subscribed for shares in one of them, and a consolida-
tion was afterward made, he was liable to the consolidated
company for the subscription, and this though the con-
solidation took place without his knowledge or consent.‘
A subscriber is not released by an alteration of the denomi-
nation of shares of stock where slight evidence of assent on

 

' Nugent v. Supervisors, 19 Wall. * Nugent v. Supervisors, 19 Wall,
241; Kenosha, R. & R.I.R.R.Co.v. 248.
‘Marsh, 17 Wis. 13; Manheim, P. & L. * Ibid.
Turnpike & Plank Road Co. v. Arndt, — 4 Sparrow v. Evansville & Crawfords-
31 Pa. St. 317; Bankv. Charlotte, 85 N. ville R-R. Co., 7 Ind. 369. See Bish v.
C. 439; Supervisors of Fulton Co. v. Johnson, 21 Ind. 299; Bishop v. Brain-
Miss. & W. R.R. Co., 21 Ul. 338. See erd, 28 Conn. 289. See Chap. XX,

§ 439.
$ 577 PERSONAL LIABILITY. 515

his part is shown ;! nor by achange in the corporate name ;”
nor, it seems, by an alteration of the line of the contem-
plated road.* This latter statement may, however, be seri-
ously questioned, for the change of route may remove the
road miles away from the point where the subscriber sup-
posed it would be constructed, and deprive him of all an-
ticipated benefit.‘ There seems to be a fair distinction
between such changes as only add something to the original
enterprise, which becomes tributary to it, and makes its
operation more perfect and successful, and changes which
abandon the original undertaking for a new one. There is
certainly some ground for saying that changes of the former
character may be deemed to be fairly within the scope of
the original object, as it may reasonably be assumed that
every association which undertakes the accomplishment of
a particular enterprise, intends to make such changes as ex-
perience may show to be necessary for its most successful
prosecution. And if this may be assumed, then, although
such changes were, of course, not originally provided for,
yet they may fairly be regarded as so far incidental to the
original purpose as to be within the scope of the authority
which each member has conferred upon the corporation to
bind him by its action whenever the necessary legislative
assent is obtained.*

_ $577. Stock held as collateral_The cases seem now to

hold that when stock is transferred to a man as collateral
security for a debt, and stands in his name, he incurs lia-

 

1 Kennebec & P.R.R. Co. v. Palmer, 13; Manheim, P. & L. Turnpike &
34 Me. 366, 369. Plank Road Co. v. Arndt, 31 Pa. St.
2 See Milwaukee & N.1.R.R. Co. v. 317.
Field, 12 Wis. 340; Buffalo & N. Y. 4 See Hester v. Memphis & C. R.R..
City, etc. R.R. Co. v. Dudley, 14 N. Y. Co., 32 Miss. 378,
336. 5 See Kenosha, R. & R.I.R.R Co..
3 Irvin v. Turnpike Co., 2 P. & W. v. Marsh, 17 Wis.15; Hartford & New
(Pa.) 466. But see Hester v. Memphis Haven R.R. Co. v. Croswell, 5 Hill
& C.R.R.Co., 32 Miss. 378; Kenosha, (N. Y.) 383; Buffalo & J. R.R. Co.v..
R. & R. R.R. Co, v. Marsh, 17 Wis. Clark, 22 Hun (N. Y.) 365.
516 PERSONAL LIABILITY. § 577
bility as a stockholder the same as though he was the act-
ual beneficial owner. In Adderly v. Storm?” the court
say that “If we depart from the terms of the law, and en-
quire into the equities which may exist between the stock-
holder and some third person, it cannot fail to embarrass
creditors in seeking a remedy for the wrongs which may
be done by the corporation. If creditors must look be-
yond the legal title, they can never know against whom to
proceed.”® But the practitioner is not to conclude that
the books of the corporation are necessarily conclusive
upon the question of ownership of the stock. Thus in
Cutting v. Damerel‘ it appeared that the defendant had
transferred his stock in blank to a third party, who had
neglected to have the transfer entered upon the corporate
books; but who had nevertheless received the dividends

 

1 National Bank v. Case, 99 U. S.
628; Pullman v. Upton, 96 U. S. 328;
Magruder v. Colston, 44 Md. 349;
Griswold v. Seligman, 72 Mo. 110;
Matter of Empire City Bank (U. S.
Trust Co. v. U. S. Fire Ins. Co.,) 18 N.
Y. 199; Hale v. Walker, 31 Iowa 344;
Rosevelt v. Brown, 11 N. Y. 148; Barre
Nat. Bank v. Hingham Mfg. Co., 127
Mass. 563; Adderly v. Storm, 6 Hill
(N. Y.) 624; Holyoke Bank v. Burn-
ham, 11 Cush. (Mass.) 183; Wheelock
vy. Kost, 77 Ill. 296; Newry, etc. Rail-
way Co. v. Moss, 14 Beav. 64; Bowden
v. Johnson, 107 U.S. 251.

26 Hill (N. Y.) 624, 628,

3 In Pullman v. Upton, 96 U. S. 330,
Strong, J., said: “The only question
remaining is, whether an assignee of
corporate stock, who has caused it to
be transferred to himself on the books
of the company, and holds it as collat-
eral security for a debt due from his
assignor, is liable for unpaid balances
thereon to the company, or to the
creditors of the company, after it has
become bankrupt. That the original

holders and the tranferees of the stock
are thus liable we held in Upton v.
Tribilcock (91 U. S. 45), Sanger v.
Upton (91 U.S. 56), and Webster v.
Upton (91 U.S. 65); and the reasons
that controlled our judgment in those
cases are of equal force in the present
case. The creditors of the bankrupt
company are entitled to the whole cap-
ital of the bankrupt, as a fund for the
payment of the debts due them. This
they cannot have, if the transferee of
the shares is not responsible for what-
ever remains unpaid upon his shares;
for by the transfer on the books of the
corporation the former owner is. dis+
charged. It makes no difference that
the legal owner—that is, the one in
whose name the stock stands on the
books of the corporation—is in fact
only, as between himself and his debtor,
a holder for security of the debt, or
even that he has no beneficial interest
therein. This was ruled in The New-
ry, etc. Railway Co, v. Moss, 14 Beav.
64.”
488 N. Y. 415.
§ 578: PERSONAL LIABILITY. : Sy

upon the stock. The receiver sued for an unpaid balance
on the stock. Distinguishing many of the cases above
cited, the court held the rule to be well settled that a party
who takes a certificate with the usual power of attorney as
between him and the transferrer, takes the whole title, both
legal and equitable, even though the blanks are not filled
up ;’ and that the company having recognized the transfer,
the receiver as its successor had no greater or better right,
and the defendant was not liable.

-§ 578. Taking pledge of stock in name of third party—The
Supreme Court of the United States, in Anderson v. Phil-
adelphia Warehouse Company,” held, Justices Miller and
Matthews dissenting, that a pledgee of stock who in good
faith and with no fraudulent intent took the security for
his benefit in the name of an irresponsible trustee for the
avowed purpose of avoiding individual liability as a share-
holder, and who exercised none of the powers or rights of
a stockholder, incurred no liability as such to creditors of
the bank in case of its failure. Cases like National Bank
v. Case,* and Bowden v. Johnson,‘ are distinguished, as in
those cases the transfer appeared on the books. Chief
Justice Waite said: ‘It has never, to our knowledge, been
held that a mere pledgee of stock is chargeable where he is
not registered as owner.”® This case may seem to be in
some measure an infringement of the rule that the courts
will generally bring to naught the many schemes and cun-
ningly devised transactions by means of which men seek to
receive and enjoy the benefits and privileges of a stock-
holder, and be exonerated from the burdens and risks im-
posed thereon by law.$ In Burr v. Wilcox” it was held
that the fact that one subscribed for stock in the name of

1See Holbrook v. New Jersey Zinc 5 Anderson v. Philadelphia Ware-

Co., 57 N. Y. 624, and cases cited. house Co., 111 U. S. 483.
® 111 UL. S. 479 ® Compare Fisher v. Seligman, 75
399 U. S. 628. Mo, 14, 26.

4107 U.S. 251. See § 577. "22N, Y. 551.
518 PERSONAL LIABILITY. § 578

an agent would not exempt him from personal liability.
Clerke, J., said : ‘‘The counsel for the defendant contends
that, as the stock was subscribed for in the name of Jordan,
although really for Wilcox, the latter was not a stockholder
within the meaning of the statute. .... Supposing, for a
moment, that the counsel is correct in this position, can it
be truly said that Wilcox was merely an equitable owner of
this stock? Jordan subscribed for this stock for Wilcox,
as one of the original subscribers, at Wilcox’s request : on
the 15th April, 1853, it was apportioned to Jordan for
Wilcox, as appears on the records of the company. Wil-
cox himself paid for the stock, in monthly instalments,
the company receiving it from him as principal ; and when
all his instalments were paid, he received, on the 6th of
February, 1854, his certificate of stock. Under these cir-
cumstances, he was, I think, a legal, and not merely an
equitable, owner of the stock. Jordan acted merely as his
agent ; the relation between him and Wilcox was not of a
trustee and cestuz gue trust, but that of principal and agent ;
which, although, in a certain sense and for certain purposes,
involving the idea of a trust, does not make the principal
the equitable, and the agent the legal, owner of everything.
he buys for the former in his own name, particularly when
he discloses the name of his principal. If it is known to
the seller that the agent acts on behalf of another, and that
other is recognized by the seller as the real owner, the
principal is at once entitled to the possession of the thing
purchased. So, in this case, the certificate of stock was is-
sued to Wilcox in his own name; and, although the name
of Jordan was originally employed, the certificate of stock,
in view of the whole circumstances, related back to make
Wilcox the legal owner from the commencement of the
transaction.” ?

 

1 Burr v. Wilcox, 22 N. Y. 552. ing opinion in Anderson v. Philadelphia
Justice Miller, with whom Justice Warehouse Co., 111 U. S. 485: “I
Matthews concurred, said, ina dissent- do not concur in this judgment. I
$ 579 PERSONAL LIABILITY. 519

$ 579. Holding stock as trustee or agent.— Persons holding
national bank stock as trustees, etc., must, to relieve them-
selves from liability as individual stockholders, cause it
to appear on the books that they hold as such trustees.
Creditors have a right to know who have pledged their
personal liability; and if a trustee fails to disclose his
trusteeship, he is guilty of laches, for which others should
not suffer.1 In Stover v. Flack * it appeared that two per-
sons agreed to purchase stock for joint account, to be sub-
scribed for in the name of one of them, which was done.
The other party agreed to contribute his proportion of the
purchase price when required. The corporation subse-
quently became insolvent, and it was held that the party in
whose name the subscription was made could compel the

 

think if, in any case between private
persons, one of them had placed prop-
erty in the hands of minors, servants,
or other irresponsible persons, for the
purpose of escaping the responsibility
attaching to the ownership of such
property, while securing all the ad-
vantages of such ownership, it would
be held to be a transaction which could
not be supported on any legal or equit-
able principle. It does not remove this
case from the control of that principle,
that the parties to be injured are the
unknown creditors of the bank, who
are, by this means, deprived of the
right which they have to ‘resort to a
responsible shareholder for the contri-
bution which the law gives for their
benefit. If not an actual fraud, itis a
fraud upon the banking law, and was
so intended to be by both the original
holders of the bank shares and the offi-
cers of the Warehouse Company, by
which the latter could control the shares
without the responsibility which the
law attaches to the owner. It is an
easy device to make the right which the
law gives to creditors of a failing bank

ineffectual, and to evade it in all cases.”
One who subscribes for stock in the
name of a minor, to avoid liability, is
individually responsible. Castleman v.
Holmes, 4 J.J. Marsh. (Ky.) 1; Roman
v. Fry, 5 J.J. Marsh. (Ky.) 634. In this
latter case, the court said: ‘‘ If Dallam
were permitted to escape by taking
stock in the names of infant children,
the whole object of the charter in se-
curing the community against the in-
solvency of the corporation might be
defeated. We cannot suffer it to be
done. Such a thing would be a fraud
on the community.”

1 Davis v. Essex Baptist Society, 44
Conn. 582, per Shipman, J., U. S. Dist.
Judge. Where executors have, with-
out lawful authority, invested the funds
of an estate in stock, they do not there-
by constitute the estate a stockholder,
but the stock is rather the property of
the executors as individuals. Diven v.
Lee, 36 N. Y. 302. See Diven v. Dun-
can, 41 Barb. (N. Y.) 520; Taylor v.
Taylor, L. R. 10 Eq. 477.

_ 230 N, Y. 64.
a7e PERSONAL LIABILITY. §§ 580, 581

other party to contribute one-half the liability which at-
tached to the stock.

§ 580. Pro tanto discharge of liability Whenever the debt
of a corporation is satisfied in part there is pvo ¢anto a dis-
charge of the liability of the stockholders.'’ Accordingly
it was held in an action against a stockholder for his pro-
portion of a corporation debt which had been partially satis-
fied by a sale of mortgaged and pledged property, that the
defendant was liable only for his proportion of the indebted-
ness of the corporation after the payment had been credited.
In Young v. Rosenbaum? the court said: “ Whatever satis-
fies or extinguishes the debt as to the corporation, extin-
guishes, also, the liability of the stockholders, because the
creditor can claim only one satisfaction of the debt.” Quot-
ing this sentence, the same court, in a later case,® say: “It
necessarily follows that whenever the debt of the corpora-
tion is satisfied in part, there is also, pro ¢anzo, a discharge
of the liability of the stockholders,”

§ 581. Hold-over officers—Liability—Though by a general
rule of law directors of a corporation elected for a definite
term may hold over, yet there is no rule which compels
them to do so; and when a director sells out his stock in a
corporation, and ceases to take part in the management of
its affairs or the meeting of its directors, he need not, after
the expiration of his term of office, tender a formal resig-
nation or see that his successor is elected, and will not be
liable for the subsequent mismanagement of the affairs of
the corporation by the directors, though no successor to
him was elected.* Trustees are, of course, only liable for

 

1San José Savings Bank v. Pharis, arbitrary rule to hold that a director

58 Cal. 380. elected for one year, after thus severing
2 39 Cal. 654. all connection with a company, should
§ San José Savings Bank v. Pharis, 58 be responsible for the acts of those who
Cal. 382. were in its management at the time of

4 Sturges v. Vanderbilt, 73 N. Y. 391. its dissolution five years afterwards,
Rapallo, J., said: “1t would be avery and who alone had the charge and
§ 581 PERSONAL LIABILITY. 521

matters which transpired while they were in office! In the
case cited, Comstock, Ch. J., said: “ Equally opposed, in
my judgment, to the equity and good sense of the statute,
is a construction which imposes upon a succeeding board
of trustees a liability for debts which have become charged
upon their predecessors by reason of the default of the lat-
ter. According to this construction one body of trustees
may retire from office charged with all the debts of the
company, because they had not complied with the law,
while those who are appointed to succeed in the manage-
ment cannot assume the trust without taking also the per-
sonal burdens which the former trustees had incurred by
their own neglect. This will appear the more unreasona-
_ble when we consider that the trustees thus coming into
office after a default of those who preceded them, had no
power to prevent that default, and that they have none to
avert its consequences. They could not prevent it, because
they were not in the management when it occurred. They
cannot avert its consequences if this be the true construc-
tion of the law, because although they may, with the utmost
promptitude, file a report as the statute requires, that pro-
ceeding on their part will not discharge any personal lia-
bility, either of themselves or their predecessors, which has
already accrued. The liability, when it has once attached,
and upon whomsoever it has attached, remains fixed and
unalterable. This is plain. Such an interpretation of the
statute would be a most unfortunate one for these corpora-
tions; for I apprehend the stockholders would find great
difficulty in electing prudent and careful trustees in the
place of a reckless and improvident board, if the persons
elected, at the moment of taking office, must become per-
sonally involved in all the embarrassments and debts of the

 

custody of the property of the corpora- interest is quite equivalent to a formal
tion then remaining, and the control of resignation and an unequivocal aban-
its affairs, Such long continued ab- donment of any right to hold over.”

sence after having parted with all his |! Boughton v. Otis, 21 N.Y. 261, 263.
522 PERSONAL LIABILITY. § 582

company. A sounder and juster view of the question, it
seems to me, is that a board of trustees guilty of the default
in January, and retiring from office, is liable for all antece-
dent debts, and for those only ; and that the successors, if
they continue the default until the next January and no
longer, are liable for the debts afterwards contracted during
that year, and for no other.”

§ 582. Stockholder’s liability for calls. —The original holder
of stock of a corporation is liable for the unpaid balances on
the stock without proof of any express promises to pay."
An agreement with the corporation or its agents limiting
his liability may, it is said, be avoided by creditors or their
representatives. The transferee of stock is also liable for
calls made after he has been accepted as a stockholder and
his name registered upon the books. The law implies a
promise to pay.® Strong, J., said in one of the cases
cited :* “If the law implies a promise by the original hold-
ers or subscribers to pay the full par value when it may be
called, it follows that an assignee of the stock, when he has
come into privity with the company by having stock trans-
ferred to him on the company’s books, is equally liable.
The same reasons exist for implying a promise by him as
exist for raising up a promise by his assignor.” An assess-
ment or call, it has been said, cannot generally be enforced
against a party, who, prior thereto, has made a valid trans-
fer of his stock.* But this rule must not be too firmly re-
lied upon, for a disposition is manifested in some quarters

 

‘Upton v. Tribilcock, 91 U.S. 45; United States Ins. Co., 5 Gill. (Md.)
Webster v. Upton, 91 U. S. 65. 484. But see Delaware & S. Canal

* Webster v. Upton, 91 U. S. 65; Co.v. Sansom, 1 Binn. (Pa.) 70; Palmer
Cowles v. Cromwell, 25 Barb. (N. Y.) v. Ridge Mining Co., 34 Pa. St. 288;
413; Merrimac Mining Co. v. Bagley, Seymour v. Sturgess, 26 N. Y. 134;
14 Mich. 501; Huddersfield Canal Co. Messersmith v. Sharon Savings Bank,
v. Buckley, 7 T. R. 36; Hartford & N. 96 Pa. St. 440.
H. R.R. Co. v. Boorman, 12 Conn, ® Webster v. Upton, 91 U. S. 69.
530; Bend v. Susquehanna Bridge & +See Cutting v. Damerel, 88 N. Y.
Bank Co., 6 H. & J. (Md.) 128; Hallv. 4ro.
§ 583 PERSONAL LIABILITY. Boe

to hold an original subscriber so long as the stock remains
unpaid. But, aside from this tendency, the original stock-
holder, as we have said, may be compelled to submit to a
jury the question of the good faith of his transfer, and
whether or not it was colorably made for the purpose of
avoiding liability. There is a prevalent disposition mani-
fested in the authorities to limit the personal statutory lia-
bility of stockholders to those who were such when the
debts sought to be enforced were created.1. In Windham
Provident Institution v. Sprague* the court observed :
“The creation of this additional liability seems to have
been intended as a check upon the directors and stockhold-
ers in the contraction of debts, and to have been imposed,
in some sort, as a penalty for the infraction of that part of
the clause prohibiting the contraction of debts beyond
three-fourths its capital paid in. It declares that, in such
a case, they shall lose the protection of their charter, and
stand related to the creditors as a body of individual debt-
ors. To visit this penalty upon any others than those who
caused the infraction of the charter, would be manifestly
unjust as well as unintended. Those holding the relation
of directors and stockholders to the company at the time
the suit is brought, may not have added a farthing to the
indebtedness of the company, and so be entirely innocent
of any infraction of the prohibitory clause in the charter.”
In certain cases where the statute gives a right of execution
against stockholders for corporate debts after return of an
execution unsatisfied against the corporation, it 1s consid-
ered that those only are liable who were stockholders at
the time the execution was issued against the corporation.®

§ 583. Stock issued for property.— As we have already

 

"See Williams v. Hanna, 4o Ind. 243 Vt. sit.
544; Moss v. Oakley, 2 Hill (N. Y.) 3 Dodgson vy. Scott, 2 Exch. 457; Le-
265; Reeder v. Maranda, 66 Ind. 485; land v. Marsh, 16 Mass. 389; Skrainka
Chesley v. Pierce, 32 N. H. 388; Lar- v. Allen, 7 Mo. App. 434; McClaren
rabee v. Baldwin, 35 Cal. 155. v. Franciscus, 43 Mo. 452.
524 PERSONAL LIABILITY. $ 584
seen,’ where property is turned over to the corporation in
payment for stock, the question of good faith in the trans-
action and as to the value of the. property must usually, in
a suit to hold the stockholder individually liable, be sub-
mitted to a jury.” ‘The value must be determined in any
action in which the question arises upon such evidence as
may be given, having respect to the circumstances and the
nature of the property, and the sczen¢er and guilty action
of the trustees may be proved either directly or inferred
from circumstances.”* But, as a general rule, where stock
is issued in good faith for property supposed to equal in
value the amount of stock issued for it, the subscriber will
not be liable to creditors because subsequent events show
that the property was worth less.‘

$ 584. Subscriber’s default no defense.—A subscriber to
the stock of a corporation in West Virginia cannot escape
liability to pay his subscription on the ground that he did
not pay the sum required to be paid by the statute at the
time he subscribed.” The court said: “To hold that the
stockholder is exempt from liability because he received
indulgence from the corporation, is to permit him to take
advantage of his own wrong.” By statute in New York,
however, an action to enforce a subscription to the stock
of a corporation organized under the general railroad act,
if made after incorporation, may be defeated by showing
that the ten per cent. required by statute has not been paid.*

 

1 See § 498.

* See Douglass v. Ireland, 73 N. Y.
100; Coit v, Gold Amalgamating Co.,
119 U.S. 345; Lake Superior Iron Co.
v. Drexel, 90 N. Y. 92; Van Cott v.
Van Brunt, 82 N. Y. 535. See § 148.

5 Douglass v, Ireland, 73 N.Y. 104.

‘ Coit v. North Carolina Gold Amal-
gamating Co., 14 Fed. Rep. 12; affi'd
119 U.S, 343. See Brant v. Ehlen, 59
Md. 1.

5 Pittsburgh, W. & K. R.R. Co. v.
Applegate, 21 W. Va. 172, 182.

*New York & O. M. R.R. Co. v.
Van Horn, 57 N. Y. 473. See Black
River & U, R.R.Co. v, Clarke, 25 N.Y.
208 ; Beach v, Smith, 30 N.Y. 116, 130.
In this latter case, Davies, J., said:
“The intent of the section of the gen+
eral railroad act, requiring the payment
of ten per cent. in cash on the amount
of the subscription, to be made in cash
§ 585 PERSONAL LIABILITY. 525
§ 585. Excusing failure to file report.—For the purpose
of defeating a suit brought in New York against a trustee
of a manufacturing corporation, for failure to file an annual
report as required by statute, it is sufficient to show that
the corporation has been abandoned; its property sold out; -
its means of carrying on its business exhausted; and that
for every practical purpose it was in reality dissolved,
although technically no decree of dissolution had been en-
tered." In Bradt v. Benedict? it was considered as estab-
lished that by the rules of the common law a virtual sur-
render of the franchise of a corporation might be inferred
from its condition and the manner in which it had con-
ducted its affairs. In-Slee v. Bloom* the court say: “In
point of good sense, this corporation was dissolved, within .
the meaning and intent of the act, as regards creditors,
when it ceased to ows any property, real or personal, and
when it ceased, for such a space of time, from doing any
one act manifesting an intention to resume their corporate
functions. Zhe end, being, and design of the corporation
were completely determined. . ... With respect to the
period of the dissolution, it appears to me, that, we may
safely say, it happened on the ist of February, 1818, when
all the property of the company was sold; for, since that

 

at the time of subscribing, doubtless
was that no subscription should be
valid until ten per cent. was paid
thereon, and not that it should be in-
valid if a short interval should occur
between the actual subscription and
the payment of the money. The sub-
scription and the payment of the ten
per cent. must both concur to make a
valid subscription. The subscription
one day, with payment the next, would
satisfy the statute; and so would act-
ual payment at any period after sub-
scription, with intent to effectuate and
complete the subscription, The writ-
ing of the name in the subscription

book should be deemed but part of the.
transaction, and provisional or condi-
tional till the ten per cent. is paid. But
after the payment .... on the sub-
scription, the statute requirement on
this point must be deemed fully com-
plied with.”

1See Bruce v. Platt, 80 N. Y. 379,.
reviewing the authorities as to when,
so far as trustees and stockholders are
concerned, a corporation may be con-
sidered as dissolved.

217 N, Y. 93.

5 19 Johns. (N. Y.) 456, 477; S.C. 20
Johns. (N. Y.) 669.
526 PERSONAL LIABILITY. § 586

time, no corporate act has been done.” * In Losee v. Bullard,?
Rapallo, J., said : ““ We think the corporation was practically
abandoned and broken up, if not technically dissolved, and
that the statutory requirement had no application to it. It
had not only ceased business, but was incapable of trans-
acting any. It had no trustees or officers who could man-
age its affairs, or make the required statement. All its
powers were suspended, if not finally extinguished. It
would, we think, be a perversion of the intent of the statute
in question to visit its penalty upon a party upon the ground
that he had been a trustee of a corporation thus situated.”
$ 586. Liability of directors for fraud—Directors of a cor-
poration are liable where they cast upon the market, with
fraudulent intent, false securities in the name of the corpo-
ration.2 The mere fact that a trustee of a corporation
allows his name and credit to be used to sell its stock,
which afterward turns out to be valueless, does not consti-
tute actionable fraud in the absence of proof of knowledge
on his part, or that he has made or permitted any false
statement; but ‘‘it is hardly necessary to say that a director
of a company, who knowingly issues or sanctions the cir-
culation of a false prospectus, containing untrue statements
of material facts, the natural tendency of which is to mis-
lead and deceive the community, and to induce the public
to purchase its stock, is responsible to those who are in-
jured thereby. Mere exaggerated statements of the pros-
pects of a new enterprise will not subject those who make
them to liability ; but, as was said by the chancellor in Cen-
tral Railway Company v. Kisch:* ‘No misstatement or
concealment of any material facts or circumstances ought

 

1See Penniman v. Briggs, Hopkins * Bruff v. Mali, 36 N. Y. 200; Clark
(N. Y.) 300; Bank of Poughkeepsie vy. v. Edgar, 12 Mo. App. 353. Compare
Ibbotson, 24 Wend. (N. Y.) 473; Hu- Eaton, C. & B.Co. v. Avery, 83 N. Y.
guenot Nat. Bank v. Studwell, 74 N.Y. 33.
621; Losee v. Bullard, 79 N. Y. 404. *L. R. 2 Eng, and Irish App. 100,
279 N. Y. 407. 113.
§ 587

PERSONAL LIABILITY. 527
to be permitted,’ The directors of a company are supposed
to know the facts touching its condition and property, and
their statements in respect to its affairs naturally attract
public confidence. If they fraudulently unite in an attempt
to deceive the public, and by false statements of facts to
give credit and currency to its stock, it is but simple jus-
tice that they shall answer to those who have been deluded
into giving confidence to them.”! The director of a com-
pany is not liable for statements false in fact, but not
known to him to be such, made in its circular, and on
which his name appears only as one of the directors.”

It has been held that stockholders cannot usually main-
tain an action at law against directors for negligence in the
management of the corporate affairs by means of which
the capital was lost and the shares rendered worthless.®
But, as already shown, directors may be pursued in equity
for a fraudulent breach of trust.*

§ 587. Wrongful acts of directors.—A corporation may be
enjoined by a stockholder from spending money in induc-
ing a rival corporation to retire from business,” or from pay-

 

1 Andrews, J., in Morgan v. Skiddy,
62 N. Y. 326. See Eaton, Cole &
Burnham Co. v. Avery, 83 N. Y. 33.

2? Wakeman v. Dalley, 51 N. Y. 27,
affi’g 44 Barb. (N. Y.) 498. In Acker-
man v. Halsey, 37 N. J. Eq. 363, Chan-
cellor Runyon said: “As a general
rule, the directors of a corporation are
only required, in the management of
its affairs, to keep within the limits of
its powers, and to exercise good faith
and honesty. They only undertake,
by virtue of their assumption of the
duties incumbent on them, to perform
those duties according to the best of
their judgment and with reasonable
diligence, and a mere error of judg-
ment will not subject them to personal
liability for its consequences. And un-
less there has been some violation of
the charter or: the constating instru-

ments of the company, or unless there
is shown to be a want of good faith, or
a willful abuse of discretion, or negli-
gence, there will be no personal lia-
bility. They are personally only bound
in the management of the affairs of the
corporation to use reasonable diligence
and prudence, such as men usually ex-
ercise in the management of their own
affairs of a similar nature..... But
they are personally liable if they suffer
the corporate funds or property to be
wasted by gross negligence and inat-
tention to the duties of their trust.”

3 Smith v. Hurd, 12 Met. (Mass.) 371.

4Hodges v. New England Screw
Co., 1 R. I. 312, petition for rehearing
3R.I1.9.

5 Leslie v. Lorillard, 4o Hun (N. Y.)
392. In the course of the opinion
Pratt, J., said: “(In form the contract
528

PERSONAL LIABILITY.

§ 587

ing dividends otherwise than out of earnings.’ In an Eng-
lish case it is asserted that directors are not authorized to
expend corporate funds in buying up the promoters of a
rival company,? and the promoters may be made defendants
and compelled to repay the money. Directors are liable
for corporate moneys used in lobbying schemes.’ So, as

 

mentioned in the complaint binds the
Old Dominion Steamship Company,
Delaware, to pay the Lorillard Steam-
ship Company $12,000 as a lump sum,
together with $750 per month. The
monthly sum is the agreed price to be
paid to induce the Lorillard company
to cease to exercise its franchises, and
that company agrees to cease to exer-
cise its franchises in consideration of
that sum. The $12,000 is an aggregate
made up of various sums which, in
form, accrued for like considerations
under a former contract made with

like intent and imposing like obliga-:

tions. I think the contracts were illegal
and ultra vires. These companies
were organized under laws which con-
template a pudlzc benefit to be derived
from the exerczse of their powers in a
public service, and this contract is in
plain violation of the object of their in-
corporation as well as against public
policy. It would, therefore, seem plain
that the Delaware company has con-
tracted to pay, and has paid, large
sums of money for illegal purposes, and
threatens to continue the wrong. The
complaint, therefore, makes a plain
case of accomplished waste and threat-
ened waste. The plaintiff, being a
stockholder of the company whose
funds have been thus wasted and which
are threatened with like wrongs, is in-
jured and deprived of his just rights.
It was the duty of his company to cease
this wrong. It has refused to do its
duty. Plaintiff has requested it to sue
to cancel the contract. It has been

sued by the Lorillard company upon.

these illegal claims, and refused to in-
terpose any defense, although plain-
tiff has requested it to make such de-
fense. This gives plaintiff the right to
intervene for the protection of his own
rights and those of persons in like situa-
tion.”

1 Carpenter v. New York & N. H.
R.R. Co., 5 Abb. Pr. (N. Y.) 277.

? Russell v. Wakefield Waterworks
Co., L. R. 20 Eq. 474; 8. P. Colles v.
Trow City Directory Co., 11 Hun (N.
Y.) 397.

3 Shea v. Mabry, 1 Lea (Tenn.) 319.
Compare York & North Midland Rail-
way Co. v. Hudson, 16 Beav. 485. In
Shea v. Mabry, 1 Lea (Tenn.) 340, e#
seg., the court say: “The trust fund
has been used for some other purpose
than the construction and equipment
of the road, that is, the attempt to
secure further legislative aid, or it has
been appropriated by the president to
his private use. The defendants, di-
rectors, all knew, or might have known,
how much the president claimed to
have used as expenses in securing
additional appropriation. They re-
fused to call upon him for an itemized
bill of expenses because lobbying ex-
penses could not safely be itemized.
. .. » Good faith will not protect even
trustees in bad acts. And if it be said
that some of these defendants did not
know how the money was used, we
answer, it was their duty to know.
They might easily have known. They
should have called upon the president
for a statement in detail of his expendi-
tures. It was his duty to give it, and.
$$ 588, 589 PERSONAL LIABILITY.

529
we have said, directors may be sued for deceit for issuing
false prospectuses and fraudulently inducing parties to pur-
chase sharesinacompany.' And they may be held liable in
damages for a fraudulent over-issue of stock.” If directors
of an insurance company fraudulently misrepresent the
solvency of the company, and by this means induce a per-
son to insure his property therein, and the property is
burned, and it turns out that the company cannot pay the
loss, he will have an action against the directors for the
fraud. It will be no defense that the contract was with
the company, and that his action should be upon the con-
tract. He has an action ex dedzcto against the parties guilty
of the wrong.®

§ 588. Sacrificing property.—The officers of a bank may
properly make sacrifices of the corporate property for the
purpose of. passing a crisis in the affairs of the institution.
But such an act can only be justified when the object is to
protect the rights of creditors, and do equal justice to all.
the stockholders of the corporation. It must not be an
act for the exclusive benefit of a particular individual, es-
pecially if he be one who has been intrusted with the man-
agement of the funds of the institution.‘

$ 589. Liability of members of fraternities. — Members of
unincorporated fraternities are not, generally speaking,
liable as partners, though such bodies are sometimes
treated as partnerships as regards certain parties, or the
members may be held individually or personally liable for
debts. The members are all personally liable where, in

 

theirs to demand it, and their failure to Cazeaux v. Mali, 25 Barb. (N. Y.) 578;

do so is culpable negligence, which in
law is the equivalent of fraud.”

*See Morgan v. Skiddy, 62 N. Y.
319; Scott v. Dixon, 29 L. J. Exch. 62
m.; Wontner v. Shairp, 4 C. B. 404;
Bale v. Cleland, 4 Fost. & F. 117;

34

Bedford v. Bagshaw, 4 H. & N. 538.

2 Bruff v. Mali, 36 N. Y. 200; Shot-
well v. Mali, 38 Barb. (N. Y.) 445.

3 Salmon v. Richardson, 30 Conn.
360. See Thompson on Liability of
Directors, p. 380.

4 Gillet v. Moody, 3 N. Y. 487.
53° PERSONAL LIABILITY. § 590

pursuance of a rule or custom, servants or officials are per-
mitted to incur debts. If no such rule or custom can be
proved, then it would seem that only those members would
be personally liable who sanctioned or ratified the act.’

$ 590. Directors of national banks.—The liability of direct-
ors of national banks for neglect of duty, may be enforced
in State tribunals. In Brinckerhoff v. Bostwick,” the com-
plaint charged that the directors “negligently permitted
various persons and corporations who were insolvent and
irresponsible to overdraw their accounts to a large amount
without security, and negligently permitted the money of
the bank to be loaned to irresponsible persons and corpo-
rations, without adequate security, whereby said money was
lost ; that they employed a cashier who was dishonest, un-
faithful and incompetent, all of which was known to them ;
that they neglected to take and keep good and sufficient
‘security for the performance of the duties of said cashier,
and of the president and other officers of the bank, and
that they so negligently and carelessly conducted its affairs
that its entire capital, surplus, property and effects were
lost and the stock rendered worthless, and the stockholders
were rendered liable for a large sum of money on account
of the unpaid debts of the bank.” A demurrer to the
complaint was sustained in the lower courts, but the decision
was reversed on appeal, Rapallo, J., entertaining ‘no doubt
of the sufficiency of the allegations of the coniplaint to con-
stitute a cause of action against the defendants, who are
sued as directors.” The doctrine of Robinson v. Smith,?

 

1 See as to various phases of this
question of liability in this connection :
Cockerell v. Aucompte, 40 Eng. Law &
Eq. 284; Ja re The St. James Club, 16
Jur. 1075; Park v. Spaulding, ro Hun
(N. Y.) 131; Ferris v. Thaw, 72 Mo.
446; Abbott v. Cobb, 17 Vt. 597; Wolf
v. Schleiffer, 2 Brewst. (Pa.) 563; Vol-
ger v. Ray, 131 Mass. 439; Newell v.

Borden, 128 Mass. 31; Barry v. Nuck-
olls, 2 Humph. (Tenn.) 326; Sizer v.

‘Daniels, 66 Barb. (N. Y.) 429; Fred-

endall v. Taylor, 23 Wis. 538; Hall v.,
Siegel, 7 Lans. (N. Y.) 206. See also
the discussion in Chap. XXII.

7 88 N.Y. 54.

3 3 Paige (N. Y.) 222, 231.
$$ 591, 592 PERSONAL LIABILITY. 531

elsewhere adverted to, that directors are “liable if they
suffer the corporate funds or property to be lost or wasted
by gross negligence and inattention to the duties of their
trust,” was applied.

§ 591. Religious corporations.—Where the members of a
religious corporation wasted the funds in litigation, the
court ordered the members to respond personally for the
deficiency."

$ 592. Nature of savings banks—Personal liability of officers
for errors of judgment.—Savings banks properly organized
and conducted are guasz charitable and purely benevolent
institutions ;* public trusts for the benefit of depgsitors ;°
charities for the advantage of the poor;* incorporated
agencies for receiving and loaning money on account of
its owners.’ A corporation of this character is not a com-:
mercial partnership, nor an artificial being, the members of
which have property interests in it, nor is it strictly elee-
mosynary. The depositors bear in great degree the same
relation to each other and to the property of the bank as
do the stockholders in other monetary institutions. To the
corporation itself they occupy the double relation of stock-
holders and creditors. In prosperity, they are the stock-
holders among whom the profits are divided ; in insolvency,
they are usually the only creditors among whom the re-
maining assets are to be distributed.® The relation of its
managers to such an institution does not differ essentially
from that of directors of any other corporation to their
company.’ After keen contention in the courts, the grounds

 

1 Bigelow v. Congregational Society, 5 Coite v. Society for Savings, 32

« Ir Vt, 283; S.C. again, 15 Vt. 370. Conn. 173; Bunnell v. Collinsville Sav-
2 Hannon v. Williams, 34 N. J. Eq. ings Society, 38 Conn. 203.
255. ® Hannon y. Williams, 34 N. J. Eq.

3 Stockton v. Mechanics’ and Labor- 258; Huntington v. Savings Bank, 96
ers’ Savings Bank, 32 N. J. Eq. 163. U.S. 392.

* Burrill v. Dollar Savings Bank, 92 7 Williams v. Halliard, 38 N. J. Eq.
Pa, St. 134. 376; Hun v. Cary, 82 N. Y. 65.
532

PERSONAL LIABILITY.

§ 592

of official liability in the respective cases have been held to

be the same.

In either case z¢ seems to be perfectly clear,

both from reason and authority, that persons standing tn
the relation of trustees are not to be held responsible for tn-
nocent mistakes or errors of judgment in regard to their
corporate rights and privileges.’ Any different rule would

 

’ Scott v. Depeyster, 1 Edw. Ch. (N.
Y.) 534; Spering’s Appeal, 71 Pa. St.
11; Miller v. Proctor, 20 Ohio St. 442;
Godbold v. Branch Bank at Mobile, 11
Ala. 191; Hodges v, New England
Screw Co., 1 R. I. 312; Harman v.
Tappenden, 1 East 555; Overend v.
Gurney, L. R. 4 Ch. Ap. zor; Van
Dyck v. McQuade, 86N. Y. 44. See
Hun vy. Cary, 82 N, Y. 65.

Observations by Sharswood and by
Kent.—In Spering’s Appeal, 71 Pa. St.
24, the learned Sharswood, J., defines
the law applicable to the liability of
trustees for neglect of duty as follows :
“ While directors are personally respon-
sible to the stockholders for any losses
resulting from fraud, embezzlement or
wilful misconduct or breach of trust for
their own benefit and not for the bene-
fit of the stockholders, for gross inat-
tention and negligence by which such
fraud or misconduct has been perpe-
trated by agents, officers or co-direct-
ors, yet they are not liable for mistakes
of judgment, even though they may be
SO gross as to appear to us absurd and
ridiculous, provided they are honest
and provided they are fairly within the
scope of the powers and discretion con-
fided to the managing body.” This
case has been criticised as embodying
a rule too favorable to directors. The
frequency of breaches of trust and the
constant recurrence of sins of omission
and commission has called for the en-
forcement of a more stringent rule. In
Thompson v. Brown, 4 Johns. Ch. (N.
Y.) 619, 628, Chancellor Kent says:
“ This court has always treated trustees

acting in good faith with great tender-
ness. In Knight v. The Earl ef Plym-
outh, (Dickens 120; S. C. 3 Atk. 480,)a
receiver had deposited money with a
banker of good credit, who afterwards
failed, and as he was not chargeable
with any wilful default or fraud, he was
not held responsible for the loss of it.
The observations of Lord Hardwicke
are strong and pointed. ‘Suppose,’ he
observes, ‘a trustee having in his hands
a considerable sum of money, places it
out in the funds, which afterwards
sink in their value, or on a security at
the time apparently good, (which after-
wards turns out not to be so,) for the
benefit of the cestud que trust, was
there ever an instance of the trustee’s
being made to answer for the actual
sum so placed out? I answer, no. If
there is no mala fides, nothing wilful
in the conduct of the trustee, the court
will always favor him. For, as a trust
is an office necessary in the concerns
between man and man, and which, if
faithfully discharged, is attended with
no small degree of trouble and anxiety,
it is an act of great kindness in any one
to accept it. To add hazard or risk
to that trouble, and to subject a trustee
to losses which he could not foresee,
and consequently not prevent, would
be a manifest hardship, and would
be deterring every one from accept-
ing so necessary an office.’” This
case also has been characterjzed as em-
bodying sentiments too favorable to
the trustee class. Evidently the great
Chancellor had not contemplated the
alarming growth of corruption in finan-
§ 593 PERSONAL LIABILITY. 533

practically preclude directors, trustees, and officers, who
possessed any financial standing, from incurring the re-
sponsibility incident to trust positions, and would result in
a serious impairment if not total destruction of the useful-
ness of this relationship. But the statement in Lyman v.
Bonney,’ that directors are not responsible for want of pru-
dence in conducting or closing up the business of a cor-
poration, cannot be accepted as embodying a true rule of
law.

$ 593. The doctrine of Hun v. Cary—Form of remedy.—
Hun v. Cary? a case which we have frequently cited, estab-
lishes a rigid rule of liability against the officers of a savings
bank for loss resulting from improvident investments. The
scope of the decision has been restated in a later case in the
same tribunal,’ in which Danforth, J., said the recovery was
upheld in Hun v. Cary “because it was thought the evi-
dence justified a finding by the jury that the case....
was one of improvidence and of reckless and unreasonable
extravagance, and not a mere error or mistake of judg-
ment.” The facts in Hun v. Cary‘ are instructive, and
were as follows: The bank had average deposits of $70,-
000 ; its expenses had uniformly exceeded its income; the
charter authorized the purchase of a suitable bank building ;
the bank had, theretofore, hired unpretentious quarters; in
1873 the defendant trustees purchased a lot for $30,000 and
built thereon an attractive banking house at a cost of $27,-
ooo; the bank failed in 1875, practically without assets.
The action was prosecuted by a receiver of the bank against
the trustees to recover the loss resulting to the bank from
the depreciation in the value of the lot. The trustees
strenuously insisted that the investment was made in entire

 

cial circles, which the past generation ' 118 Mass, 222.

has witnessed. The exaction ofreason- ° 82 N. Y. 65.

able capacity for the discharge of the | * Van Dyck v. McQuade, 86 N. Y.
duties of the position has come tobe 45.

considered an element. 482 N. Y. 65.
534 PERSONAL LIABILITY. § 593

good faith, and that the purchase was effected to promote
the best interests of the bank by moving into a desirable
neighborhood and erecting an attractive building. It was
urged, moreover, that the loss in depreciation of the lot was
the result of the panic and revolution in values which swept
over the country soon after the investment was made; a
cause against which human skill and foresight could not rea-
sonably have been expected to guard.

The finding of the jury in favor of the receiver was, how-
ever, upheld. The contention that the breach of trust, if
any, was innocent, non-fraudulent, and unintentional, and,
therefore, an action at law for damages would not lie, but
recourse must be had to proceedings in equity in the nature
of an accounting, was overruled,’ The trustees, it was con-
sidered, might be treated as agents of the bank,” and for any
misfeasance or nonfeasance, causing damage to the bank,
they were deemed to be responsible to it upon the same
principle that any agent is for like cause responsible to his
principal in an action at law. “No equitable rights,” said
Earl, J., “ were to be adjusted, and there was no occasion to
appeal to an equitable forum.”*® The impracticability of cor-
rectly reviewing and deciding, during the brief and hurried
deliberations which are the necessary incidents of a jury
trial, the delicate questions involved in the discharge of the
duties assumed by trustees or directors of a corporation,
seems to have escaped attention. These suits to establish
the liability of officers of corporations are frequently mere
accountings, and it would seem to be manifest that a jury
cannot from the nature of the case discharge the functions
of a master.* The objection to the consideration by a jury

 

1 Compare Brinckerhoff v. Bostwick, 4 Denio (N. Y.) 299; Ohio & Miss.
105 N. Y. 567. R.R. Co. v. McPherson, 35 Mo. 13.

* In re German Mining Co.,27 Eng. * Hun v. Cary, 82 N. Y. 65, 79.
Law and Eq. 158; Belknap v. Davis, 4 The contention was made in Halsey
19 Me. 455; Bedford R.R. Co.v. Bow- v. Ackerman, 38 N. J. Eq. 509, that
ser, 48 Pa. St. 29; Butts v. Wood, 38 courts of equity could not assess dam-
Barb. (N. Y.) 181; Austin v. Daniels, ages for negligence, but it was consid-
$ 594 PERSONAL LIABILITY. 535

of such questions as were involved in Hun v. Cary! came
up in a later case in the same court. The action in the
case last referred to was brought by a stockholder of a bank,
on behalf of himself and all other stockholders, against its di-
rectors, for loss and damages sustained by the bank by rea-
son of the misconduct and negligence on their part in the
discharge of their duties. This was characterized as an
equitable action, wherein the defendants were not entitled
as matter of right to a trial of the whole issues by jury.

$ 504. The test in that case—The rule laid down in Hun
v. Cary is, that a depositor in a bank or stockholder in a
corporation, who, by becoming such, has divested himself
of the immediate control of his property, has a right to
expect that the trustees or directors, who are chosen to
occupy his place in the management and control of his
property, will exercise ordinary care and prudence in the
discharge of the trusts committed to them; the same de-
gree of care and prudence that men prompted by self-
interest generally exercise in their own affairs. Good
faith, exact justice, and public policy, it is contended, unite
in requiring of a trustee this degree of care and prudence,

 

ered that the difficulty arose only from
the terms employed to state the propo-
sition. Such bills do not in substance
call for the allowance of damages, but
to hold the defendants for definite sums
of money which are alleged to have
been lost by their criminal negligence.
The case is considered entirely paral-
lel with proceedings to call a trustee to

. account for moneys that of right should
be in his hands.

1 82 N. Y. 65.

? Brinckerhoff v. Bostwick, 105 N.
Y. 567.

3 In the course of the opinion, Peck-
ham, J., said: “(In Hun v. Cary, 82 N.
Y. 65, there was but one negligent or
improper act alleged, that being the

purchase of the lot and erection of the
building on it under the circumstances
proved. The damage was plain; it
was of the same amount against all
who were liable at all, and a general
verdict in damages could properly be
given which could be entered without
any further application to the court,
and would be final in regard to the
rights of all parties. The court said
under such circumstances it was not
error to try the issue there involved by
a jury, and that there were no equitable
rights to be adjusted and no occasion
to appeal to an equitable forum.”
Brinckerhoff v. Bostwick, 105 N.Y. 571.

4 Bank of Mutual Redemption v. Hill,
56 Me. 385. -
536 PERSONAL LIABILITY. $ 595

and a failure to bestow it is considered a gross breach of
duty—crassa negligentza. We must confess, however,
that this general statement of the test of liability furnishes
a rule of very doubtful utility, if indeed it is to be consid-
ered as any rule at all.’

§ 595. Certain illustrations—In Hodges v. New England
Screw Company® counsel said:* ‘The sole question is
whether the directors have or have not bestowed proper dili-
gence. They are liable only for ordinary care; such care
as prudent men take in their own affairs.” And in the same
case, counsel also said: * “ They should not, therefore, be lia-
ble for innocent mistakes, unintentional negligence, honest
errors of judgment, but only for willful fraud or neglect,
and want of ordinary knowledge and care.” The same case
came again under consideration,’ and Greene, C. J., said:
“We think a board of directors, acting in good faith and
with reasonable care and diligence, who nevertheless fall
into a mistake, either as to law or fact, are not liable for the
consequences of such mistake.” In case of the Western
Bank of Scotland v. Baird® it is said: “Whatever the
duties (of directors) are, they must be discharged with
fidelity and conscience, and with ordinary and reasonable
care. It is not necessary that I should attempt to de-
fine where excusable remissness ends and gross negligence
begins. That must depend to a large extent on the circum-
stances. It is enough to say that gross negligence in the
performance of such a duty, the want of reasonable and or-
dinary fidelity and care, will infer liability for loss thereby

 

*In a Missouri case, Gorham v.Guar- for the selection of more efficient
dian Savings Bank, 4 Mo. App. 184, officers.” But clearly is not this too
this language occurs: “If there has broad a statement ?
been imprudence, bad judgment, or ?*1 R.I. 312.
want of care in the taking of secu- 3p. 324.
rities,—no fraud being alleged,—the  ‘p. 326,
remedy does not reside in the judicial 53 R.I.9, 18.
power, but in the charter provisions  ° 11 Sess, Cas. [3d series] 112.
§ 595 PERSONAL LIABILITY. 537

occasioned.” In The Charitable Corporation v. Sutton,’
Lord Chancellor Hardwicke said that a person who ac-
cepted the office of director of a corporation “is obliged to
execute it with fidelity and reasonable diligence,” although
he acts without compensation. In Litchfield v. White,
Sandford, J., said: “ In general, a trustee is bound to manage
and employ the trust property for the benefit of the cestuz
gue trust with the care and diligence of a provident owner.
Consequently he is liable for every loss sustained by reason
of his negligence, want of caution, or mistake, as well as
for positive misconduct.” In ,the case of Overend v.
Gurney,’ and the same case on appeal, reported as Overend
& Gurney Company v. Gibb,* where the question was
most elaborately discussed in respect to the negligence of
directors, it was held, that facts which may show impru-
dence in the exercise of powers clearly conferred upon di-
rectors will not necessarily subject them to personal responsi-
bility ; but if the imprudence be so great and manifest as to
amount to crassa negligentia, and consequently a breach of
trust, personal responsibility will be incurred. It is con-
tended that all the cases agree that directors are not liable
for the consequences of unwise or indiscreet management, if
their conduct is entirely due to mere defaults or mistakes of
judgment. And the ozus of proof of fraud, unlawful com-
bination, or gross negligence, to render the directors person-
ally liable, is upon the party making the charge; and the
proof must be clear and manifest.’ In these cases, the proper
‘and primary party to complain and call the directors to an
account, in a court of equity, for fraud or breaches of trust
in the management of the affairs of the corporation, is the
corporation itself; because the duty is owing, and the wrong
is done directly to the corporation, and only indirectly to

 

12 Atkyns 406. 5 See Turquand v. Marshall, L. R.
23 Sandf. (N. Y.) 545, 551. 4 Ch. 376; Hodges v. New England
3L. R. 4 Ch. 7ot. Screw Co., 1 R. I. 312,

4L,R.5 H.L. 480.
§ 596

the shareholders, And therefore, to enable a shareholder,
either for himself alone, or for himself and others, to main-
tain a bill against directors for such fraud or breaches of trust,
he must allege and show, not only violations of duty or
breaches of trust on the part of the directors, but that he
as stockholder has been damnified thereby, and that the
corporation has failed or refused to take the proper legal
steps for the redress of the wrong.*

538 PERSONAL LIABILITY.

$ 596. Compensation of officers as affecting liability for
negligence.—The contention has been made? that a trustee
or director who acts without compensation is not liable
for the same degree of care as an officer receiving compen-
sation.®

Thus it has been observed that the subject “ of a trustee’s
compensation is intimately connected with his liability.”
‘Where he is treated as a paid agent, and has undertaken
the trust as such, it would seem that his accountability
should be much greater than where his services have been
gratuitously rendered.* This distinction seems to possess
merit, but it received little recognition in the New York
Court of Appeals in Hun v. Cary.® Earl, J., said: “One
who voluntarily takes the position of director, and invites
confidence in that relation, undertakes, like.a mandatary,
with those whom he represents or for whom he acts, that
he possesses at least ordinary knowledge and skill, and that

 

1 Dodge v. Woolsey, 18 How. 331;
Memphis City v. Dean, 8 Wall. 73;
Robinson v. Smith, 3 Paige 222;
Greaves v. Gouge, 69 N. Y. 154;*Pea-
body v. Flint, 6 Allen (Mass.) 52;
Brewer v. Boston Theatre, 104 Mass.
378; Foss v. Harbottle, 2 Hare 461;
Thompson on Liability of Directors,
385; Booth v. Robinson, 55 Md. 438.
See Chap. IV.

* Hun v. Cary, 82 N. Y. 71, 74.

8 Compare Litchfield v. White, 7 N.

Y. 438. ‘The defendant was a gratu-
itous bailee—that is a depositary with-
out compensation for the benefit of the
bailor—and was therefore only liable
for gross negligence.” The First Nat.
Bank v. The Ocean Nat. Bank, 60 N.
Y. 278, 294.

4 See Ex parte Cassel, 3 Watts (Pa.)
443; Robinson v. Pett, 2 Lead. Cas. in
Eq,., Part L., p. 238; S.c. 3 P. Wms. 249;
Clark v. Anderson, 10 Bush (Ky.) 108.

5 82N. Y. 74.
§§ 597-599 PERSONAL LIABILITY, 539

he will bring them to bear in the discharge of his duties.’
Such is the rule applicable to public officers, to professional
men, and to mechanics, and such is the rule which must be
applicable to every person who undertakes to act for another
in a situation or employment requiring skill and knowl-
edge; and it matters not that the service is to be rendered
gratuitously.”

$ 597. Protesting against improper action—Where a di-
rector becomes possessed of knowledge concerning an im-
proper use of corporate funds, he cannot escape liability by
merely filing a protest against the scheme in which the
money is being used, but it is his duty to take some decided
action, such as seeking relief by filing a bill.?

$598. Liability of officers for theft.—Concerning the liability.
of officers of a corporation for funds in their hands, we may
state that the secretary of a company, who is charged with
the duty of receiving and paying over to the treasurer the
moneys due the corporation, must exercise reasonable dili-
gence in making such payments, and failing in this he and
his sureties will be liable for moneys that may be stolen
from him.? If, however, the money has not been withheld
from the corporation for an unreasonable length of time,
and is taken from the officer by irresistible violence, he is
absolved from liability.

$ 599. Effect of judgment against corporation.—A judg-
ment against a corporation for a debt for which its officers
are personally liable, does not merge the debt so as to ex-
tinguish their liability.» Morton, J. said: “The corpora-
tion is the principal debtor, primarily liable for the plain-
tift's debt ; the liability of the defendants is secondary and

 

' Citing Story on Bailments, § 182. 4 Walker v. British Guarantee Ass’n,
. * Joint Stock Discount €o.v. Brown, 18 Q. B. 277.
L. R. 8 Eq. 381. 5 Byers v. Franklin Coal Co., 106

3 Odd Fellows’ Mutual Aid Ass’nv. Mass. 131.:
James, 63 Cal. 598.
940 PERSONAL LIABILITY. §§ 600, 601

collateral. The plaintiffs judgment merges his original
debt as to the corporation, and all the necessary conse-
quences of such merger must follow. If he should sue the
corporation upon the original debt, it would be a conclusive
answer to say that it was merged in the judgment ; but as
to the defendants, it does not merge the debt, in the sense
that it extinguishes or satisfies it, so as to deprive the plain-
tiff of the remedy which the statute gives him to enforce
their collateral liability.” !

§ 600. Effect of repeal of penal statutes.—We may note in
this connection that no absolute property rights vest under
statutes imposing personal liability for debts by reason of
the failure to file a certificate or report, etc., and hence a
repealing statute without a saving clause sweeps away all
rights of action.? In Gregory v. German Bank ®* the court
said: “The right of the creditor to proceed against the
trustee depended excluszvely upon the statute, and when it
ceased to exist, all proceedings commenced under it, in the
absence of a saving clause in the repealing statute, fell
with it. Inchoate rights arising under the statute were
swept away. No right can be said to have accrued to
creditors under the statute, unless before its repeal such
right was carried into judgment. There is no such thing
as a vested interest in an unenforced penalty.” *

§ 601. Non-survival of cause of action.—In New York, an
action to recover the penalty imposed upon a trustee, be-
cause of the failure to file an annual report, is considered to
be ex delicto, and dies with the person.

 

' Byers v. Franklin Coal Co., 106 = 3 Col, a
Mass, 137. 4 Citing Sedgw. on Stat. Law 111;
2See Gregory v. German Bank, 3 Norris v. Crocker, 13 How. 429; Gaul
Col. 332; Knox v. Baldwin, 80 N.Y. v. Brown, 53 Me. 496; Curtis v. Leavitt,
610; Union Iron Co. v. Pierce, 4Biss. 15 N. Y. 152; Nichols v. Squire, 5
327; Victory Webb Printing Co. v. Pick. (Mass.y 167; Bay City & E.& S.
Beecher, 26 Hun (N. Y.) 48; Breitung R.R. Co. v. Austin, 21 Mich. 391.
v. Lindauer, 37 Mich. 217, But see  * Stokes v. Stickney, 96 N. Y. 323.
§ 563. Chief Justice Ruger said: ‘ This court
§ 601 PERSONAL LIABILITY.

541

The consideration of the various phases and ramifications
of the law governing the individual liability of parties con-
nected with corporate associations, might be almost indefi-
nitely extended. We have indicated some of its leading
features, because, as we have said, the enforcement of this
liability is an almost inseparable incident of insolvency.
That some of the features of this law remain in an unset-
tled condition, may be readily conceded. This is to be
deeply regretted, for, as has been shown, people join or in-
vest in corporate undertakings in part to escape personal
care and individual risk, and are too often misled into seri-

ous embarrassments.

 

held, in the case of Merchants’ Bank v.

Bliss (35 N. Y. 412), that an action
brought against a trustee of a corpora-
tion to recover the liability imposed by
section 12 of chapter 40 of the Laws of
1848, was governed by the statutory
limitations applicable in actions to re-
cover penalties. Since that decision
the subject of actions under that sec-
tion of the statute has frequently been
under the consideration of this court,
with the uniform conclusion that the
actions therein provided for are penal
in character, and are not in any respect
based upon the theory of affording com-

pensation to the injured party for dam- -

ages sustained by reason of the omis-
sion complained of (Wiles v. Suydam,
64 N. Y. 173; Easterly v. Barber, 65
N. Y. 252; Knox v. Baldwin, 80 N. Y.
610; Veeder v. Baker, 83 N. Y. 156;
Pier v. George, 86 N. Y. 613). The
logical effect of these decisions is to

classify such actions among those usual-
ly designated as actions ex delicto, and
which, at common law, were extin-
guished by the death of the ord feasor.
The cause of action, not being such as

‘ would survive at common law, can‘only

be maintained against executors or
personal representatives, by bringing it
within the provisions of the statute
authorizing the survivorship of certain
actions for torts. It is quite clear that
this is not one of the actions therein
provided for. Those actions embrace
only thase brought to recover damages
for ‘wrongs done to the property,
rights or interests of another’ (2 R.S.,
§1, p. 448). Noallegation is contained
in the complaint that the act or omis-
sion of the deceased defendant oc-
casioned any injury to the property,
rights or interests of the plaintiff, and
an .action under the statute bears no
relation to any such injury.”
CHAPTER XXVII.

STOCKHOLDERS,
§ 602. Comments concerning stock- | § 617. Calls by court of equity.
holders. 618, Attempt of corporation to repu-
603. Relationship of stockholder— diate certificate.
How created. 619. Repudiation for fraud.
604. What are shares of stock ? 620. Subscribing in name of another.
605. Certificates of stock. 621. Exhausting remedy against cor-
606. Evidence to establish relation of poration.
stockholder. 622, Intervention of court at request
607. Corporators succeeded by stock- of stockholder.
holders. 623. Carrying on unauthorized busi-
608. Conditional subscriptions. ness.
609. Stock issued for property. 624, Remedy in equity.
610, Relation of stockholders to the | 625. Acts enjoined by stockholders.
corporation. 626. Acts not enjoined.
611. Majority of stockholders govern. | 627. Action for deceit.
612. Collusive forfeiture of stock. 628. Purchasing stock for purpose of
613. Release of subscription. suit.
614. Remedies of defrauded sub-| 629. ae ama what law gov-
scriber. erned,
615. Concerning assessments, 630. Bona fide purchaser.
616. Transfer of shares—Future calls. | 631. Statute of limitations, etc.

 

§ 602. Comments concerning stockholders.—It would,
manifestly, be a hopeless task to attempt, in our present
undertaking, any exhaustive consideration of the rights,
duties, and liabilities of stockholders of corporations. An
entire volume might be profitably devoted to such a dis-
cussion.’ The great proportion of our private corporations
are those having capital stock. To the custody of -organ-
izations of this character is constantly committed the fulfil-
ment of the most gigantic business enterprises. Millions
of capital is annually entrusted to the care of these in-

 

1 See Cook on Stock and Stockholders ; Baker, Voorhis & Co., New York 1887,
$ 603 STOCKHOLDERS.

543
visible entities! Occasionally a golden harvest of dividends
rewards the venture ; but too often, as we have shown, the
investment results not only in the loss of the capital con-
tributed, but also in fastening upon the stockholder dis-
agreeable statutory and common-law personal liabilities.”
It is our purpose now to glance at a few prominent fea-
tures of this branch of the law of corporations, relating to
stock and stockholders, additional to the incidental allu-
sions necessarily made to it in various portions of the dis-
cussion.

§ 603. Relationship of stockholder— How created.—First we
will notice the question as to how the relationship of stock-
holder comes into existence. Generally it is created by
signing the subscription paper.’ It may be originated not
only by the usual formalities of subscription and the accept-
ances of stock, but by other acts which are, in contempla-

tion of law, their legal equivalent.*

“« Stockholders,” said

 

1 See §§ 5,7.

* See Chaps. XXVI., XXII, and § 3.

* See Strong v. Wheaton, 38 Barb.
(N. Y.) 616; Upton v. Tribilcock, 91
U.S. 47; Burr v. Wilcox, 22 N.Y. 551;
Dayton v. Borst, 31 N. Y. 435; Kenne-
bec & P. R.R. Co. v. Palmer, 34 Me. 366;
Spear v. Crawford, 14 Wend. (N. Y.)
20; Hartford & N. H. R.R. Co. v. Ken-
nedy, 12 Conn. 499; Dutchess Cotton
Manufactory v. Davis, 14 Johns, (N. Y.)
238; Pickering v. Templeton, 2 Mo.
App. 424; Brigham v. Mead, 1o Allen
(Mass.) 245; Rensselaer & W. P. R.
Co. v. Barton, 16 N.Y. 457 #.; Hart-
ford & N.H. R.R. Co. v. Croswell, 5
Hill (N. Y.) 383; Connecticut & P. R.
R.R. Co. v. Bailey, 24 Vt. 465. In Hart-
ford & N. H. R.R. Co. v. Croswell, 5
Hill (N. Y.) 385, Nelson, Ch. J., said:
“The original charter conferred upon
the company all the usual and necessary
powers for locating and constructing a
railroad from the town of Hartford to

the city of New Haven. The ten shares
subscribed for by the defendant were
expressly taken upon ‘¢he terms, con-
ditions and limttations’ mentioned in
the charter, And such would doubt-
less have been the legal effect of the
subscription had no reference to the
charter been made in it. The contract
thus entered into was as specific and
definite as the charter of the company
could make it; and the meaning and
intent of the parties cannot, therefore,
be mistaken. It was a contract to take
stock in an association incorporated for
a particular object, having such limited
and well-defined powers as were neces-
sary to the accomplishment of that ob-
ject. The defendant assented to the
object by his subscription, and thereby
agreed that his interest should be sub-
ject to the direction and control of the
powers thus expressly conferred, but
nothing more.’

4 Griswold v. Seligman,.72 “Mo. 114;
544 STOCKHOLDERS. § 603

Strong, J., ‘become such in several ways, either by original
subscription, or-by assignment of prior holders, or by direct
purchase from the company.”? It may be here recalled to
the reader’s attention, that it is not necessary that the party
should have paid for his stock or that he should have re-
ceived a certificate to constitute him a stockholder. In a
controversy in Maine the Supreme Court of that State say :
“To make him an owner, it is not necessary that he should
have paid for his stock. A corporation may give credit for
its stock as well as for any other property sold by it. Nor
is it necessary that certificates should have been issued.
These only constitute proof of property which may exist
without them. When the corporation has agreed that a
person shall be entitled to a certain number of shares in its
capital, to be paid for in a manner agreed upon, and that
person has agreed to take and pay for them accordingly, he
becomes their owner by a valid contract, made upon a valu-
able consideration.”* So a man may be held to be a stock-
holder when he has suffered his name to appear on the
books, or has failed to disavow the relationship upon dis-
covering the use of his name.* In one of the cases cited,®
Comstock, Ch. J., said: ‘“‘ But if a party makes an actual
purchase of shares, whether from the bank or an individual
holder, and voluntarily allows himself in this manner to be
represented to the world as a stockholder, he must take the

responsibilities of that situation.
terms and the policy of the act.

He comes within the
His title may be imper-

 

London G., J. Railway Co. v. Graham,
2 Eng. Ry. Cas. 870; Cheltenham &G.
W. Union Railway Co. v. Daniel, 2
Eng. Ry. Cas. 728; Maguire’s Case, 3
DeG. & S. 31; Pittsburgh & C. Rail-
road Co. v. Stewart, 41 Pa. St. 54; Up-
ton v. Tribilcock, 91 U.S. 45.

1 Webster v. Upton, gr U. S. 67.

* Chaffin v. Cummings, 37 Me. 76;
Burr v. Wilcox, 22 N. Y. 551; Hawes
v. Anglo-Saxon Petroleum Co., lor

Mass. 385; /# re South Mountain
Consol. Min. Co., 7 Sawyer 30; Spear
v. Crawford, 14 Wend. (N. Y.) 20;
Chester Glass Co. v. Dewey, 16 Mass,
94.
® Chaffin v. Cummings,’ 37 Me. 83.
4 See Matter of the Reciprocity Bank,
22 N. Y. 17; McHose v. Wheeler, 45
Pa. St. 32. :

® Matter of the Reciprocity Bank, 22
N. Y. 17.
§ 603 STOCKHOLDERS. 545

fect. Equities may exist between him and other parties;
the shares may be in dispute ; they may be claimed by some
one else in hostility to his own right. The statute has no
regard to such questions. The person who has caused or
allowed his title to be registered on the books cannot deny
the truth of that representation and disavow the ownership
when it ceases to be a benefit and comes to be a burden.”
As indicating the permanent nature of the relationship we
may state that, until a dissolution of a corporation, and so
long as a stockholder performs his duty to it, he cannot. be
forced out of the body by any action of the board of direct-
ors or by the combined action of the other stockholders.
In the course of the opinion in the case cited the court
further said: ‘It follows that the association has no au-
thority to retire or cancel any part of his stock against his
will, and without any default on his part, and that any such
retiring or cancelling is, under the articles of incorporation,
ultra vtres. That, through some defect in the plan of its
organization—some unforeseen difficulties—the association
will not work as well as was expected, and will fail of com-
pletely accomplishing the purposes of its projectors, is
wholly unimportant. That is a matter which should have
been thought of when the articles of incorporation were
. framed, and before the defendant took the stockholder’s
money. If, through the common fallibility of human judg-
ment, it was not foreseen, the disappointment is not to be
remedied at a stockholder’s expense, any further than he
may be necessarily called upon under the charter to share
the consequences of the common error with his fellow share-
holders.”® This language is employed in:a Michigan case :*
“Where persons subscribe for a future organization, their
mutual agreements for a common enterprise may operate

 

" Bergman v. St. Paul Mutual Build- =? Carlisle v. Saginaw Valley & St. L.
ing Ass’n, 29 Minn. 275. R.R. Co., 27 Mich. 317.
2 Ibid. 279.
35
546 STOCKHOLDERS, § 604

as mutual considerations until the enterprise becomes organ-
ized, and thereby the common interest is carried into its
proposed form. But where the corporation is already in
existence, a stock subscription is a transaction between the
subscriber and the company, and the obligation of one can
only be sustained by the corresponding obligation of the
other. If both are not bound, neither is bound, and the
transaction is a nullity.” Ownership of corporate stock is
not limited to natural persons and private corporations. A
State or government may become a stockholder. Chief
Justice Marshall said: “It is, we think, a sound principle,
that when a government becomes a partner in any trading
company, it divests itself, so far as concerns the transactions
of that company, of its sovereign character, and takes that
of a private citizen. Instead of communicating to the com-
pany its privileges and its prerogatives, it descends to a level
with those with whom it associates itself, and takes the
character which belongs to its associates, and to the busi-
ness which is to be transacted.” ?

§ 604. What are shares of stock ?—Andrews, J., said, in a
recent case in the New York Court of Appeals, that “the
right which a shareholder in a corporation has, by reason of
his ownership of shares, is a right to participate according
to the amount of his stock in the surplus profits of the cor-
poration on a division, and ultimately on its dissolution, in
the assets remaining after payment of its debts.” * The capital
stock, as we have shown, is that money or property which
is put into a single corporate fund, by those who, by sub-
scription therefor, become members of the corporate body.*

 

‘ Bank of United States v. Planters’ = * Citing Burrall v. Bushwick Railroad
Bank, 9 Wheat. 907. Co., 75 N. Y. 216. See Chap. VII,

2 Plimpton v. Bigelow, 93 N. Y. 599. Compare Payne v. Bullard, 23 Miss.
See s. Pp. Field vy. Pierce, 102 Mass. 90; Mannv. Pentz, 3 N.Y. 422; State
261; Jones v. Davis, 35 O. S. 474,477; v. Morristown Fire Ass’n, 23 N. J. Law
Harrison v. Vines, 46 Texas 15, 21; 195; Adler v. Milwaukee Patent Brick
Kent v. Quicksilver Mining Co., 78N. Manuf. Co., 13 Wis. 57.
Y. 159; Barksdale v. Finney, 14 Gratt,

(Va.) 338, 357.
§ 605 STOCKHOLDERS. 547

Shares of stock have been considered to be goods, wares,
and merchandise, within the meaning of the statute of
frauds.!

§ 605. Certificates of stock.—Stock is said to be “one
thing and certificates another. The former is the sub-
stance and the latter is the evidence of it.” Mr. Justice
Davis said of certificates of stock: ‘ Although neither in
form nor character negotiable paper, they approximate to it
as nearly as practicable. If we assume that the certificates
in question are not different from those in general use by
corporations, and the assumption is a safe one, it is easy to
see why investments of this character are sought after and
relied upon. No better form could be adopted to assure
the purchaser that he can buy with safety. He is told,
under the seal of the corporation, that the shareholder is
entitled to so much stock, which can be transferred on the
books of the corporation, in person or by attorney, when
the certificates are surrendered, but not otherwise. This is
a notification to all persons interested to know, that who-
ever in good faith buys the stock, and produces to the cor-
poration the certificates, regularly assigned, with power to
transfer, is entitled to have the stock transferred to him.” ®
The certificates are considered to be valuable, because they
constitute Arzma facze evidence of title.* But, generally
speaking, the rights and liabilities of a stockholder may at-
tach without the formal issuance of any certificate.” In
National Bank v. Watsontown Bank,® Mr. Justice Mat-
thews said: ‘“‘ A complete transfer of the title to the stock
upon the books of the bank, it is not doubted, would have

 

. 1 Fine v. Hornsby, 2 Mo. App. 61. 5 See Mitchell v. Beckman, 64 Cal.
? Hawley v. Brumagim, 33 Cal. 394. 117; Beckett v. Houston, 32 Ind. 393 ;
* Bank v. Lanier, 11 Wall. 377. National Bank v. Watsontown Bank,

_ 4 Courtright v. Deeds, 37 Iowa 503; 105 U. S. 217; Ellis v. Proprietors of
Walker v. Detroit Transit Ry. Co., 47 Essex Merrimack Bridge, 2 Pick.
Mich. 338; Broadway Bank v. Mc- (Mass.),243.

Elrath, 13 N. J. Eq. 24. ; ® 105 U.S. 222,
STOCKHOLDERS. § 606

548
the effect to vest it in the transferee, free from any claim
or lien of the bank. The consent of the bank, made neces-
sary to such transfer, is the waiver of its right, as its refusal
would be the assertion of it. The transfer, when thus con-
summated, destroys the relation of membership between
the corporation and the old stockholder, with all its in-
cidents, and creates an original relation with the new mem-
ber, free from all antecedent obligations. This legal rela-
tion and proprietary interest on which it is based, are quite
independent of the certificate.of ownership, which is mere
evidence of title. The complete fact of title may very well
exist without it.” This principle has been enforced, with
disastrous effect, against parties who have trifled with
‘‘bubble” corporations, upon the theory that no personal
liability was incurred where no certificates had been issued
or accepted.

If a corporation negligently cancels a person’s stock, and
issues certificates therefor to a third person, the true owner
may proceed against the corporation to obtain the replace-
ment of his stock, or to secure its value, without pursuing
the person to whom the certificate has been improperly
issued.?

$ 606. Evidence to establish relation of stockholder.—The
fact that the name of a person appears upon the books of a
corporation as a member or stockholder is pvzma facze evi-
dence that he occupies that relation.» As we have shown,?
a party may be held personally liable as a stockholder,

 

1 St. Romes v. Levee Steam Cotton
Press Co., 127 U. S. 614. Compare

Y.) 57; Skowhegan Bank v. Cutler, 49
Me. 315; Fisher v. Essex Bank, 5 Gray

Telegraph Co. v. Davenport, 97 U.S.
_369; Loring v. Salisbury Mills, 125
Mass. 138; Pratt v. Taunton Copper
Manuf. Co., 123 Mass. 110; Pennsyl-
vania R.R. Co.’s Appeal, 86 Pa. St.
80; Loring v. Frue, 104 U.S. 223; Salis-
bury Mills v. Townsend, 109 Mass. 115.
' 2 See Hoagland v. Bell, 36 Barb. (N.

(Mass.) 373; Turnbull v. Payson, 95
U. S. 418; Matter of Empire City
Bank, 18 N. Y. 200; Coffin v. Collins,
17 Me. 440; Hoppin v. Buffum, 9 R. I.
513; Stanley v. Stanley, 26 Me. 191;
State v. Ferris, 42 Conn. 560; Fowler
v. Ludwig, 34 Me. 455.
* See § 577.
§ 606 STOCKHOLDERS. 549

though he holds the shares as collateral security for a
debt; but the entries on the books will not bind a man,
who, as matter of fact, never accepted the stock,” the books
not being necessarily conclusive? In New York a sub-
scription to the articles of incorporation with a statement of
the number of shares opposite the name constitutes a bind-
ing subscription which takes effect upon the filing of the
certificate.t In a case which arose in Missouri, it was held
that a widow who assents to an order of distribution of her
husband’s estate, by which certain shares of stock are al-
lotted to her, becomes a stockholder and liable to creditors
of the corporation, though she has not received the certifi-
cates of stock, and though they have not been transferred
on the company’s books.® With reference to establishing
subscriptions by municipal corporations, Chief Justice '
Waite said in Bates County v. Winters:® “An actual
manual subscription on the books of a railroad company
is not indispensably necessary to bind a municipality as a
subscriber to the capital stock. If the body or agency
having authority to make such a subscription passes an or-
dinance or resolution to the effect that it does thereby, in
the name and on behalf of the municipality, subscribe a
specified amount of stock, and presents:a copy of that ordi-
nance or resolution to the company for acceptance as a
subscription, and the company does, in fact, accept, and
notifies the municipality, or its proper agent, to that effect,
the contract of subscription is complete, and binds the par-
ties according to its terms.”

 

" Hale v. Walker, 31 Iowa 344; Ma- ? Mudgett v. Horrell, 33 Cal. 25.
gruder v. Colston, 44 Md. 349; National 3 Cutting v. Damerel, 88 N. Y. 415.
Bank v, Case, 99 U. S. 628; Matter of | * Phoenix Warehousing Co. v. Bad-
Empire City Bank, 18 N.Y. 199; Pull- ger, 67 N. Y. 295. See Strong v.
man v. Upton, 96 U. S. 328; Rosevelt Wheaton, 38 Barb. (N. Y.) 616.

v. Brown, 11 N. Y.148; Holyoke Bank = Coquard v. Marshall, 14 Mo. App.
v. Burnham, 11 Cush. (Mass.) 183; 80.

Bowden v. Johnson, 107 U. S. 251; § 112 U.S, 327.

Adderly v. Storm, 6 Hill (N. Y.) 624.
550 STOCKHOLDERS. $§ 607, 608

The written contract of subscription for stock cannot be
varied or contradicted by parol proof of a different agree-
ment.’ In Grosse Isle Hotel Company v. L’Anson’s Exec-
utors,? the Chancellor observed: “The written instrument
is the only competent evidence of the agreement, and its
terms could not be contradicted by parol proof that, at the
time when it was signed, the understanding was, not that
he should pay according to calls, but without any call
whatever.” In a Connecticut case, this language is em-
ployed :* ‘The parol agreement cannot upon any prin-
ciple have the effect to vary or qualify the written
contract of subscription. It is familiar and elementary
law that all negotiations between the parties relating
to the subject-matter are merged in the written con-
tract. Neither party will, therefore, be permitted to prove
by parol a contract different from that expressed in the
written instrument. Is it so that a third party, for the pur-
pose of relieving himself of an obligation, will be permitted
to show by parol that this written contract is different from
what it purports to be on its face ?”

$ 607. Corporators succeeded by stockholders. — Corpo-
rators exist before stockholders, and do not exist with
them. When stockholders come in, corporators cease to
be.* It would be unreasonable and absurd to hold corpo-
rators liable for matters transpiring after their functions
had ceased and after their interest and control in the cor-
poration had come to an end.

§ 608. Conditional subscriptions —Where a subscription

 

1 Methodist Episcopal Church v. son’s Ex’rs, 43 N. J. L. 442; Whitehall
Town, 49 Vt. 29; Roche v. Roanoke & P. R.R. Co. v. Myers, 16 Abb. Pr.
Classical Seminary, 56 Ind. 198; Fair- N.S. (N.Y.) 34.
field County Turnpike Co. v. Thorp, 13 +43 .N. J. Law 448,

Conn. 173; Noble v. Callender, 20 O. * Ridgefield & N. Y. R.R. Co. vy.
S. 199; Ridgefield & N.Y. R.R. Co. Brush, 43 Conn. 98.

v. Brush, 43 Conn. 86; McClure v. * Chase v. Lord, 77 N. Y. 11, per
Peoples’ Freight Ry. Co., 90 Pa. St. Danforth, J.

269; Grosse Isle Hotel Co. v. L’An-
$ 608 STOCKHOLDERS. 551
is conditional, before a recovery can be secured upon it, the
corporation or its representative must establish a perform-
ance of the condition." Hence, where a subscription is
made upon condition that the company shall not be organ-
ized, or shall not enter upon the principal object of its
organization, until a given amount of its stock shall be sub-
scribed, such a proviso is a condition precedent, and the
company will not be authorized to enforce the collection
of such subscription until it has complied with such
conditions on its part.2 Mr. Waterman says :* “A con-
ditional subscription is a continuing proposition, which
upon compliance with the condition becomes an absolute
subscription ; but before the condition is fulfilled, the
subscriber is not a stockholder nor liable on his subscrip-

tion.” ®

In a Massachusetts case the court said: ‘ The lia-

 

1 Penobscot & K. R.R. Co. v. Dunn,
39 Me. 589; Jewett v. Lawrenceburgh
& U.M.R.R. Co., 10 Ind. §39; Ticonic
Water Power & Manuf. Co. v. Lang,
63 Me. 480; People’s Ferry Co. v.
Balch, 8 Gray (Mass.) 303; Ashtabula
& N. L. R.R. Co. v. Smith, 15 O. S.
328; Chase v. Sycamore & C. R.R.
Co., 38 Ill. 215; North Missouri R.R.
Co. v. Winkler, 29 Mo. 318; Hanover
Junction & S. R.R. Co. v. Haldeman,
82 Pa. St. 36; Buffalo, C. & N.Y. R.R.
Co. v. Pottle, 23 Barb. (N. Y.) 21;
Dayton & C. R.R. Co. v. Hatch, 1 Dis-
ney (Ohio) 84; Burlington & M. R.
R.R. Co. v. Boestler, 15 Iowa 555;
‘Roberts v. Mobile & O. R.R. Co., 32
Miss. 373; Philadelphia & W. C. R.R.
_Co. v. Hickman, 28 Pa. St. 318.

*’Penobscot & K. R.R. Co. v. Dunn,
39 Me. 595; S. P. Chase v. Syca-
more & C. R.R. Co., 38 Ill. 215. In
Santa ‘Cruz Rail Road Co. v. Schwartz,
53 Cal. 110, the court observe: “The
‘prospectus’ to which the signa-
ture of the defendant was obtained

contemplated an organization of the

proposed corporation only after secur-
ing subscriptions for one hundred
and fifty thousand dollars. The or-
ganization was, however, subsequently,
and without the consent of the defend-
ant, effected when subscriptions for
only one hundred and ¢4zrty thousand
dollars had been obtained. This was
a clear departure from the scheme set
forth in the ‘prospectus’ to which the
‘defendant had become a party, and it
operated to release the defendant, at
his option, from proceeding further in
the business.”

32 Waterman on Corps., § 179.

4 Citing Ashtabula & N. L. R.R. Co.
v. Smith, 15 Ohio St. 328.

5 Citing Evansville, I. & C..S. L.
R.R. Co. v. Shearer, 10 Ind. 244; Mon-
adnock R.R. v. Felt, 52 N. H. 379;
‘Chase v. Sycamore & C. R.R. Co., 38
Ill. 218; Garrett v. Dillsburg & M.
R.R. Co., 78 Pa. St. 465; Cole v.
Joliet Opera~House Co., 79 Ill. 96;
Santa Cruz R.R. Co. v. Schwartz, 53
Cal. 106.
STOCKHOLDERS. § 609

.

bility of the defendant, either to contribute capital for a
joint stock company, or to take shares in an incorporated
company, was made to depend on the expressed condition
‘that sufficient is subscribed for the purpose.’ The whole is
to be taken together and to have a reasonable construction,
according to the intent of the parties. A sufficient amount
must be subscribed. It might never be paid, because
some might become unable; but it must be an undertak-
ing, received in good faith, on the part of the company or
associates, to take and pay for the sums subscribed.”!
In a case in Pennsylvania these words are employed:
“The defendant in this case cannot be made liable on his
subscription, ‘until the plaintiff shows a compliance with
the conditions on which the subscription was made, and
that the installments were subsequently called in by the
president and managers before suit brought.”? In this
connection we may note that parol representations or agree-
ments not necessarily fraudulent, made at or about the
time of subscribing, but not embodied in the paper, will
not usually be received in evidence.*

552

§ 609. Stock issued for property—It is common practice
for corporations to issue stock in exchange for property

 

1 People’s Ferry Co. v. Balch, 8 Gray
(Mass.) 312.

2 Philadelphia & W. C. R.R. Co. v.
Hickman, 28 Pa. St. 328. The condi-
tion may be waived: Dayton & C. R.R.
Co. v. Hatch, 1 Disney (Ohio) 97. It
is said in this case: “I do not think it
necessary to enter into an examination
of the facts offered to show that the
stock subscribed amounted to the sum
named, or of the particular objections
to some of the subscriptions. I am
entirely satisfied that the acts and con-
duct of the parties must be considered
as a waiver of the condition, and that
they do fully estop and conclude them
from insisting on any such objection,

The paying of the first instalment of
the stock, the voting the whole stock
at an election of officers, not to speak
ot acting as the chief officer of the
company, under that election, must be
deemed sufficient to conclude a party
from denying that he ever was a stock-
holder.”

*Examine Evansville, I. & C. S.L.
R.R. Co. v. Posey, 12 Ind. 363; Clem
v. Newcastle & D. R.R. Co., 9 Ind.
488 ; Mississippi, O. & R. R. R.R. Co.
v. Cross, 20 Ark. 443; Smith v. Tal-
lassee Branch P. R. Co., 30 Ala. 650;
Connecticut & P.R.R.R. Co. v. Bailey,
24 Vt. 465.
§ 609 STOCKHOLDERS. 553

which they are authorized by charter to acquire! In New
York it is said that “the right of the officers of a railroad
corporation to enter into an agreement to build its road
and pay for the construction of the same in stock or bonds
cannot be seriously questioned, and contracts of this de-
scription are frequently made for such a purpose.”* Sher-
wood, J., has said :* ‘“‘ The class of authorities which declare
that a subscription may be paid otherwise than in money,
we regard as asserting a more reasonable. doctrine, a doc-
trine better adapted to the practical affairs of business life.
Regarding the matter then in this light, we shall rule that
payment of stock subscriptions need not be in cash, but
may be in whatever, considering the situation of the cor-
poration, represents to that corporation a fair, just, lawful,
and needed equivalent for the money subscribed. Any
other doctrine than this would, as it seems to us, place a
corporation at a disadvantage, under a disability not con-
templated by the law, and under which a natural person
* does not labor.” The question as to whether there was in
such a transaction an over-valuation of the property, and if
so, whether it was fraudulent, is generally for the jury to
decide,* unless the over-valuation was palpably and mani-
festly fraudulent, in which event the court may so declare.®
A gross and obvious over-valuation of property conveyed
to a corporation in consideration of an issuance of stock is,
of course, evidence of fraud. This question was considered
in National Tube Works Company v. Gilfillan,” in which
Daniels, J., said: “ A further circumstance indicating the in-
ventions to be of less value than the stock of the company, is

 

1 See Coit v. Gold Amalgamating Co., * Douglass v. Ireland, 73 N. Y.

119 U.S. 345. 100,
7 Van Cott v. Van Brunt, 82 N. Y. 6 Coit v. Gold Amalgamating Co.,
535) 539- 119 U. S. 345. See Van Cott v. Van
2 Liebke v. Knapp, 79 Mo. 24. Brunt, 82 N. Y. 535; Carr v. Le Fevre,

4 Boynton v. Hatch, 47 N. ¥. 225; 27 Pa, St. 413.
Lake Superior Iron Co. v. Drexel, 90 7 46 Hun (N, Y.) 252.
N. Y. 87.
554 STOCKHOLDERS. § 610

the fact that no patent was at any time issued for either of
them, and the company accordingly acquired no exclusive
right to use, employ, or vend them in its manufactories,
but all other persons were equally at liberty to use and vend
the inventions with this incorporation. And where that may
be the case the right to the invention scarcely rises to the
dignity of property... The jury certainly had ample evi-
dence, notwithstanding the denial of the defendant, from
which they could determine that he understood at the time
when these inventions were taken and the stock was issued
and afterwards divided, that the company was nominally
‘paying a much larger sum for the inventions than they in
fact were worth.”

As has appeared, a majority cannot bind a non-consent-
ing minority to accept stock of a foreign corporation in
exchange for their own.” A man cannot be forced into an
association against his will.®

§ 610. Relation of stockholders to the corporation.—It is
but just that when the interest of the public, or of strangers
dealing with a corporation, is to be affected by any transac-
tion between the stockholders who own the corporation,
and the corporation itself, such transaction should be sub-
ject to a rigid scrutiny, and if found to be infected with
anything unfair towards such third person, calculated
to injure him, or designed intentionally and inequitably to
screen the stockholder from loss at_the expense of the
general creditor, it should be disregarded or annulled so far
as it may inequitably affect him.* Yet the reader is re-

 

1 Citing Gillette v. Bate, 10 Abb, N.
Cc, (N. Y.) 88.

* Taylor v. Earle, 8 Hun (N. Y.) 1;
Frothingham v. Barney, 6 Hun (N. Y.)
366. See McVicker v. Ross, 55 Barb.
(N. Y.) 248.

3 See Clearwater v. Meredith, 1 Wall.
40; Kean v. Johnson, 9 N. J. Eq. 407;

Jn re Empire Assurance Corporation,
L. R. 4 Eq. 341. See § 425.

‘Sawyer v. Hoag, 17 Wall. 623.
Compare Lawrence v, Nelson, 21 N.
Y.158. In Sawyer v. Hoag, 17 Wall.
618, Mr. Justice Miller said: “The
transaction by which the appellant pro-
fesses to have paid up his stock sub-
§ 611 STOCKHOLDERS. 555

minded that the fiduciary relation existing between a director
of a corporation and its creditors is a different thing from
the position occupied by a stockholder as regards creditors.
In the recent case of Christensen v. Eno,! Andrews, J., ob-
served: ‘No trust relation exists between a stockholder in
a corporation and its creditors.”

§ 611. Majority of stockholders govern.—A minority of
stockholders cannot in the nature of things control the
business of a corporate body. “The very foundation prin-
ciple of a corporation is that a majority of its stockholders
have a right to manage its affairs so long as they keep
within their chartered rights. They may—they often do
—manage very foolishly, make very bad contracts, and do

very reckless things.”* But

this does not deprive the ma-

 

scription is, shortly, this: He gave to
the company his check for the full
amount of his subscription; namely,
$5,000. He took the check of the
company for $4,250, being the amount
of his subscription less the 15 per cent.
required of each stockholder to be paid
in cash, and he gave his note for the
amount of the latter check, with good
collateral security for its payment, with
interest at 7 per cent. per annum. The
appellant and the company, by its
officers, agreed to call this latter trans-
action a loan, and the check of the ap-
pellant payment in full of his stock ;
and on the books of the company, and
in all other respects 2s between them-
selves, it was treated as payment of the
subscription and a loan of money. It
is agreed that at this time the current
rate of interest in Chicago was greater
than 7 per cent., and it is not stated as
‘a fact whether these checks were ever
presented and paid at any bank, or that
‘any money was actually paid or received
by either party in the transaction. It
‘must, therefore, be treated as an agree-
ment between the corporation, by its
officers, on the one part, and the appel-

lant, as a subscriber to the stock of the
company, on the other part, to convert
the debt which the latter owed to the
company for his stock into a debt for
the loan of money, thereby extinguish-
ing the stock debt... .. In the case
before us the assignee of the bankrupt,
in the interest of the creditors, has a
right to inquire into this conventional
payment of his stock by one of the
shareholders of the company; and on
that inquiry, we are of opinion that, as
to these creditors, there was no valid
payment of his stock by the appellant.
.... The debt which the appellant
owed for his stock was a trust fund de-
voted to the payment of all the credit-
ors of the company. As soon as the
company became insolvent, and this
fact became known to the appellant,
the right of set-off for an ordinary debt
to its full amount ceased. It became a
fund belonging equally in equity to all
the creditors, and could not be appro-
priated by the debtor to the exclusive
payment of his own claim.”
1106 N. Y. 103.
? Hand v. Dexter, 41 Ga. 461.
556 STOCKHOLDERS.

§§ 612, 613
jority of its prerogative to select the governing agents of
the body. As we have already observed,’ the voice of a
majority of bondholders will have much weight in uphold-
ing a reorganization scheme.”

§ 612. Collusive forfeiture of stock.—The New York Court
of Appeals say, in speaking of the subject of forfeiture of
stock : “The power to forfeit, like the power to manage all
the affairs of the corporation, is vested in the directors, upon
the assumption that they will exercise it inthe best manner
practicable for the promotion of the interest of the com-
pany and its creditors. That they will not forfeit stock un-
less the ‘interest of all concerned will be promoted thereby.
Should they forfeit it for the purpose of defrauding the cor-
poration or any creditor, such forfeiture would, for that rea-
son, be set aside.”® In a case before the Supreme Court
of Illinois, Treat, C. J., said: “The right of forfeiture be-
longs exclusively to the corporation. It was conferred as
an additional remedy, to enforce payment from stockhold-
ers. The corporation may waive or insist upon a forfeiture.
It may, at its election, pursue the cumulative remedy of a
forfeiture of the stock of a subscriber in default, or resort
to the common law remedy, of an action on the express
promise to pay the amount of the subscription.” ¢

§ 613. Release of subscription—Mr. Cook declares® that
the established rule “is that corporate directors have no
power to agree with a subscriber that his subscription shall
be cancelled, unless such power is given to them by charter

 

1 See § 451.

2 See Gates v. Boston & N. Y. Air
Line R.R. Co., 53 Conn. 345; Canada
Southern Ry. Co. v. Gebhard, 109 U.
S. 537; Shaw v. Railroad Co., 100 U.
S, 605.

3 Mills v. Stewart, 41 N.Y. 384, 390.
See Richmond’s Case, 4 Kay & J. 305,
323; Gowers’ Case, L. R. 6 Eq. 77.
in ve St. Marylebone J. S. Banking Co. ;

Stanhope’s Case, 3 De G. & Sm. 198;
North Eastern Railroad Co. v. Rod-
rigues, 10 Rich. Law (S. C.) 278;
Klein v. Alton & S. R.R. Co., 13 IIL.
514.

‘ Klein v. Alton & S. R.R. Co., 13
Til. 514, 515.

5 Cook on Stock and Stockholders,
(Baker, Voorhis & Co., New York,)
§ 168,
§ 613 STOCKHOLDERS. sys

or statute or the by-laws of the corporation.” A Pennsyl-
vania case was cited in which it appeared that just prior to
the expiration of office the directors released part of the
subscribers, and the court, adverting to the transaction,
said: “It is an abuse of their trust, wholly unauthorized,
and at war with the design of the charter, to single out
some of the stock subscribers and release them from their
liability. No such authority in them has ever been recog-
nized.”* In Burke v. Smith,? Mr. Justice Strong ob-
served: “It must also be conceded that if the company
has, in fraud of its creditors, released subscribers to its stock
from the payment of their subscriptions, the release is in-
operative to protect those subscribers against claims of the
creditors. Under the law of the State, all railroad com-
panies are required to have a subscription to their capital
stock not less than $1,000 for every mile of their proposed
roads before they may exercise corporate powers. This re-
quirement is intended as a protection to the public, and to
the creditors of the companies. And it is clear that the
directors of a company, organized under the law, have no
power to destroy it, to give away its funds, or deprive it of
any means which it possesses to accomplish the purposes
for which it was incorporated. The stock subscribed is the
capital of the company, its means for performing its duty
to the commonwealth, and to those who deal with it. Ac-
cordingly, it has been settled by very numerous decisions ©
that the directors of a company are incompetent to release
an original subscriber to its capital stock, or to make any
arrangement with him by which the company, its creditors,
or the State shall lose any of the benefit of his subscription.
Every such arrangement is regarded in equity, not merely
as ultra veres, but as a fraud upon the other stockholders,

 

1 Bedford R.R. Co. v. Bowser, 48 Pa. Jn re Esparto Trading Co., L. R. 12
St. 29, 37. See Spackman v. Evans,L.R. Ch. D. 191.
3 H. L. 171; Hall’s Case, L. R. 5 Ch, 2 16 Wall. 394.
707; Rider v. Morrison, 54 Md. 429;
558 STOCKHOLDERS.

§ 613
upon the public, and upon the creditors of the company.”
A secret agreement to release a subscriber will manifestly
not be sustained to the prejudice of other subscribers or
of creditors! In Jewell v. Rock River Paper Company *
the court say: “It is clear that the creditors of the com-
pany cannot be affected by mere private understandings
between the subscriber and the subscription agent of the
company, by which the former is exonerated from the per-
formance of that which his subscription, by its. very terms,
plainly requires. To permit such a thing would be to sane-
tion a palpable fraud upon the creditors of the company
and the other stockholders.” The learned Cooley, J., said
in a Michigan case :* ‘The defendant also claimed that if
originally liable on his subscription, he was released there-
from by an arrangement under which, if the town in which
he resided voted a certain amount of municipal aid, and the
subscribers to stock paid thirty-five per centum of their
subscriptions, they were to be discharged from liability
upon the balance. The circuit judge held this arrange-
ment to be ineffectual. The sum agreed upon was voted,
but the company never received the bonds, nor could they
legally be issued. The arrangement made by the officers
of the company was consequently one which was to release
a portion of the subscriptions, without authority of law, and
it was, of course, wholly void.”

A subsequent material alteration in the powers and pur-
poses of the corporation will release a subscriber.* We

 

1 Melvin v. Lamar Ins. Co., 80 IIl.
446; Connecticut & P. R. R.R. Co. v.
Bailey, 24 Vt. 465; Jewell v. Rock
River Paper Co., ror Ill. 57; Robinson
vy. Pittsburgh & C. Co., 32 Pa. St. 334;
Graff v. Pittsburgh & S. R.R. Co., 31
Pa. St. 489; Swartwout v. Michigan
A.L.R.R. Co., 24 Mich. 389; New Al-
bany & S. R.R. Co. v. Fields, 10 Ind.
187; White Mts. R.R. Co, v. Eastman,
34 N. H. 124.

? yor Ill. 68.

3’ Swartwout v. Michigan A. L. R.R.
Co., 24 Mich. 389, 404.

‘Zabriskie v. Hackensack & N. Y.
R.R. Co., 18 N. J. Eq. 178 ; State v. But-
ler, 13 B. J. Lea (Tenn.) 400; Chartiers
Ry. Co. v. Hodgens, 77 Pa. St. 187;
Ashton v. Burbank, 2 Dillon 435;
Noesen v. Town of Port Washington,
37 Wis. 168; Peoria & R. I. R.R. Co.
v. Preston, 35 lowa 125; Hoey v. Hen-
§ 614 STOCKHOLDERS. 559

have glanced at this question in considering the subject of
consolidation. In a case which arose in New York,’ it
appeared that a party signed a subscription paper agreeing
to unite with others in the formation of a joint stock com-
pany, for the purpose of purchasing a patent “for preserv-
ing fruit or other products out of season,” and erecting a
building, and ‘stocking the same with fruits to be pre-
served.” Some of his co-subscribers organized a company,
the objects of which were ‘‘the manufacture of preserved
fruits and the canning of fruits and other products, and
the preserving and keeping of fruits and other articles from
decay, etc.” It was held that the defendant, when sued on
his subscription, might contest the validity of the incorpo-
ration, and, in any event, that he was not liable on the
subscription, as the business of the corporation so formed.
included branches in which the subscriber had not con-
tracted to engage. Rapallo, J., said: ‘‘The insuperable
difficulty in the way of sustaining this action is, that the
only business in which the defendant agreed to embark
was that of preserving fruits by the method described in
Nyce’s patent. He did not agree to invest capital in any
other business, The corporation actually formed included,
in addition to that of thus preserving fruits, those of man-
ufacturing preserved fruits, and of canning fruits. He had,
never agreed to engage in those branches of business, and
yet if he were compelled to pay in his money and take
stock in the corporation actually formed, the capital might
have been employed in manufacturing preserves and can-
ning fruits, even to the exclusion of the patented process,
which was the sole subject of the contract he had made.”

§ 614. Remedies of defrauded subscriber.—Mr. Cook® in-
stances five remedies available to a defrauded subscriber :

 

derson, 32 La. An. 1069; Hartford &  * Dorris v. Sweeney, 60 N. Y. 463,

N. H. R.R. Co. v. Croswell, 5 Hill (N. 468.

Y.) 383. 8 Cook on Stock and Stockholders,
1 See § 439. § 152: Baker, Voorhis & Co., 1887,
560 STOCKHOLDERS. § 614

Recission by simple notification; setting up the fraud
when sued in an action of law; proceeding in equity to
cancel the subscription, restrain its enforcement, and re-
cover instalments already paid; action for deceit against
the parties “inducing the subscription,” and action for
money had and received. All the elements of a fraudulent
representation must exist in order to avoid a subscription.
The misrepresentation must be of some fact, not a mere
expression of opinion, or statement of law,’ and it must
have been uttered with a fraudulent intent? and relied upon
by the subscriber? In a Maryland case the court said:‘
“In order to avoid the contract of subscription, it must
appear to have been made upon the fazth of false repre-
sentatzons of the agent, in regard to a matter of fact, ma-
tertal to the value and success of the enterprise. The mere
statement that the rents of the Emmet property would
pay six per cent. on the capital stock for the first year, and
then the company could determine whether to build or
not, etc., must be regarded as the mere expression of opinion
in regard to the success of the undertaking, upon which the
appellant had no right to rely. In all probability, he was
as competent to judge of the success, or profits to be real-
ized, as the agent, and contracts thus deliberately made,
and upon the faith of which others may have acted, are
not to be avoided, because of the flattering prospects held
out by parties soliciting subscriptions.”

Laches* and insolvency® of the corporation have been

 

‘New Albany & Si R.R. Co. v. Road Co., 30 Ala. 650; Andrews v.
Fields, 10 Ind. 187 ; Vicksburg, S.& T. Ohio & Miss. R.R. Co., 14 Ind. 169.
R.R. v. McKean, 12 La, Ann, 638;  ‘4Hughes v. Antietam Mfg. Co., 34
Walker v. Mobile & Ohio R.R. Co., 34 Md. 329.

Miss. 245; Hughes v. Antietam Mfg. * City Bank of Macon vy. Bartlett, 71
Co., 34 Md. 316; Oregon Central R.R. Ga. 797; Denton v. Macneil, L. R. 2
Co. v. Scoggin, 3 Ore. 161; Upton v. Eq. 352.

Tribilcock, 91 U.S. 45. ° Tennent v. City of Glasgow Bank,
* See Salem Mill-Dam Co, v. Ropes, L. R. 4 App. Cas. 615; Ruggles v.
9 Pick. (Mass.) 187. Brock, 6 Hun (N.Y.) 164; Chubb v.

4 See Smith v. Tallassee Branch Plank Upton, 95 U. S. 665; Ogilvie v. Knox
“ Ins. Co., 22 How, 380.
$$ 615, 616 STOCKHOLDERS. 561
considered sufficient defenses to proceedings to cancel or

avoid a fraudulent subscription.

§ 615. Concerning assessments.—In the case of a solvent
corporation there is no liability on the part of shareholders
to pay in the capital until an assessment is levied by the
proper corporate authorities ; but, when the corporation be-
comes insolvent, especially if it ceases to do business, this
condition precedent no longer exists, and payment may be
enforced at the suit of creditors in the absence of an assess-
ment.!' A court of equity, as we shall see, may make calls
upon subscribers.?

§ 616. Transfer of shares—Future calls——Authority is not
wanting for the doctrine that when the subscriber, after re-
ceiving his shares, makes a transfer in good faith and the
company accepts a surrender of his certificate, and issues a
new one to the transferee, the transaction amounts to a
consent by the company to a release of the old stockholder
from liability for future calls, and a substitution of the lia-

bility of the transferee.’

It is said, in a recent case in

 

1 Hatch v. Dana, ro1 U. S. 205;
Holmes v. Sherwood, 3 McCrary 405;
Crawford v. Rohrer, 59 Md. 599.

2 Scovill v. Thayer, 105 U. S. 143;
Glenn v. Williams, 60 Md. 93. See
§ 617.

3 Billings v. Robinson, 94 N. Y. 420;
Wakefield v. Fargo, 90 N. Y. 213;
Chouteau Spring Co. v. Harris, 20 Mo.
382; Miller v. Great Republic Ins. Co.,
50 Mo.55; Allen v. Montgomery R.R.
Co., 11 Ala. 451; Johnson v. Laflin, 5
Dill. 65; Hartford & N. H. R.R. Co. v.
Boorman, 12 Conn. 530; Webster v.
Upton, 91 U.S. 65; Cowles v. Crom-
well, 25 Barb. (N. Y.) 414. In Isham
v. Buckingham, 49 N. Y. 220, Chief
Justice Church said: “The referee
found that the defendant transferred
the stock to one Ripley, after having
paid fifty per cent. of the amount upon

36

previous calls; that such transfer was
in good faith, and that the company
acquiesced in the same and recognized
Ripley as the owner of the stock..
These findings of fact, if decisive of the
case, are conclusive upon this court, as.
the evidence was sufficient to justify
them. It is not denied that a legal.
transfer under such circumstances will
operate to release the vendor from per-
sonal liability, and substitute that of
the purchaser, but it is claimed that
this result cannot be accomplished un-
less the transfer is made in precise
accordance with the provisions of the
charter and the by-laws of the com-
pany.” In Cowles v. Cromwell, 25

Barb. (N. Y.) 415, Mitchell, P. J., said :.

“There is nothing in the evidence to
show any bad faith on the part of the
defendant in making the transfer, or on
562 STOCKHOLDERS. § 616

Maryland,’ that “it is only when the transfer is consum-
mated by the actual transfer from one party to another,
upon the books of the corporation (if that be the require-
ment), that the relation of membership between the cor-
poration and the old stockholder is destroyed, with all its
incidents, and a new and original relation created with the
new member, free from all antecedent obligations.”* This
language is used by Mr. Justice Matthews: “A complete
transfer of the title to the stock upon the books of the
bank, it is not doubted, would have the effect to vest it in
the transferee. . . . . The consent of the bank, made nec-
essary to such transfer, is the waiver of its right, as its
refusal would be the assertion of it. The transfer, when
thus consummated, destroys the relation of membership
between the corporation and the old stockholder, with all
its incidents, and creates an original relation with the new

member.” ®

Upon the death of the stockholder intestate, and the ap-

 

the part of the bank in accepting it.
So that the question is, whether a per-
son agreeing to take stock, who has
transferred his stock, in good faith,
with the consent of the bank, to a per-
son who is liable to the bank, still re-
mains liable for the stock transferred.
The bank could not sue in such a case,
By its consent the stock, making a con-
sideration for the defendant’s promise,
had passed from him to another per-
son, who became directly a debtor to
the bank. No other intention could be
inferred, in such a case, than that the
new debtor should be substituted for
the original debtor. .... The articles
of association declared that no shares
should be transferable on which any
call for an installment was unpaid.
But this was merely for the protection
of the bank, to prevent their being
transferred without its consent ; and not
to prevent the bank from consenting to
a substitution of one stockholder for

another. A ‘transfer’ is the act of the
holder of the stock alone; a ‘substitu-
tion’ is the joint act of him and of the
transferee and the bank.”

1 Baltimore Retort & Fire Brick Co.
v. Mali, 65 Md. 96; s. P. Swift v.
Smith, 65 Md. 435.

® Citing National Bank v. Watson-
town Bank, ros U.S. 222. But com-
pare Stone v. Hackett, 12 Gray (Mass.)
227; Cushman v. Thayer Manf. Jewelry
Co., 76 N. Y. 365.

§ National Bank v. Watsontown Bank,
tos U.S. 222. A transfer of shares in
a corporation procured from the owner
while so intoxicated as to be incapable
of transacting business, by fraud, with
knowledge of his condition, will be set
aside in equity, and if, without any
fault of his, he is unable to restore the
consideration, provision for its repay-=
ment may be made in the final decree.
Thackrah v, Haas, 119 U.S, 499.
STOCKHOLDERS. 563

§ 617
pointment of administrators and the acceptance of the
trust, the latter become, by operation of law, vested with
the legal title to the stock in question, and, consequently,
stockholders of the company, representing the estate of the
decedent. As such they are possessed of all the rights ap-
pertaining to the ownership of the stock, one of which is
the right of voting at elections of directors of the company.’

§ 617.’ Calls by court of equity—A call has been defined
as an official declaration that the sums subscribed or agreed
to be paid for stock are required and needed.*_ It generally
proceeds from the board of directors,® who have the right
to determine concerning its necessity,* though it may be
made by a receiver or assignee, or the chancellor may re-
quire the board of directors to order it.5 ‘It is well set-
tled that when stock is subscribed to be paid upon call of
the company, and the company refuses or neglects to make
the call, a court of equity may itself make the call, if the in-

terests of the creditors require it.” ®

In Glenn v. Will-

 

_! Matter of North Shore Staten
Island Ferry Co., 63 Barb. (N. Y.) 571.
' 2 Braddock v. Philadelphia, M. & M.
R.R. Co., 45 N. J. Law 365.

® See Grosse Isle Hotel Co. v. L’An-
son’s Exrs., 42 N. J. Law1o; Spangler
v. Ind. & Ill, Central Ry. Co., 21 Ill.
276.
4 Chouteau Ins. Co. v. Floyd, 74 Mo.
286; Judah v. American L. S. Ins. Co.,
4 Ind. 333.

5 See Germantown Passenger Ry.
Co. v. Fitler,60 Pa. St. 124. On the
subject of calls, Mr. Brice observes,
Green’s Brice’s Ultra Vires, p. 150:
“Companies having their capital di-
vided into shares have, as incident
thereto, the power to make calls. It is
purely a question of internal arrange-
ment in whom this power is vested. It
will generally be in the directors; and
where it is so, a call made by those who

are actually directors, and not yet; re-,

moved, will be good. (Swansea Dock
Co. v. Levien, 20 L. J. Ex. 447; York
& Cumberland R.R. Co. v. Ritchie, 40
Me. 425; Hays v. Pittsburgh & S. R.R.
Co., 38 Pa. St. 81 ; Ross v. Lafayette &
Ind. R.R. Co., 6 Ind. 297; Roberts v.
Mobile & Ohio R.R. Co., 32 Miss. 373.)
But if made by persons not having the
power (Howbeach Coal Co. v. Teague,
5 H. & N. 155), or not acting at a
board meeting when this is required
(Kirk v. Bell, 16 Q. B. 290), the call
will be simply nugatory ; though other
trifling irregularities will of course not
vitiate. (/# re British Sugar Refining
Co., 3 K. &. J. 408; Shackleford v,
Dangerfield, L. R. 3 C. P. 407; Shef-
field, A. & M. Ry. Co. v. Woodcock, 7
M. & W. 574.)”

6 Scovill v. Thayer, 105 U.S. 143,155;
Glenn v. Williams, 60 Md. 93. See
Curry v. Woodward, 53 Ala. 371. See

$218,
564 STOCKHOLDERS. § 617

iams* the court said: “The corporation suspended all
active operations, and was supposed to be insolvent. Its
tangible property was of uncertain value, and was dispersed
over the country, and consequently liable to great loss.
Large debts had been contracted, with but small amount
of assets in hand with which to pay them; and the only
real reliable fund for the payment of the debts was the un-
paid subscriptions to the capital stock of the company. In
the deed of assignment for the benefit of the creditors, such
unpaid subscriptions were expressly assigned to constitute
a part of the trust fund with which to pay the debts; but
the corporation could not, and did not attempt to, assign
the discretionary power vested by law in the president and
directors, as to the time and amount of the calls, in respect
to the balance of the unpaid subscriptions of stock. That
power was still left with the president and directors. The
corporation was not dissolved; it had only suspended
active operations; and the president and directors, by the
terms of the charter, continued in office until their succes-
sors were chosen, with power to fill vacancies, as prescribed
by the by-laws. They made no assessment upon the un-
paid subscriptions, and, in that respect, either neglected or
refused to do their duty towards the creditors, and left the
trustees without the means of realizing the trust funds to
fulfil the objects of the trust confided to them. In such
a state of the case, both the trustees and the creditors were
powerless, without the assistance of a court of equity.
Under such circumstances, what was to be done? Was
the trust to fail, and the creditors to go unpaid, simply be-
cause the board of directors, or the trustees under the deed,
thought proper to be inactive and neglectful of their duties ?
Justice would be very imperfectly administered indeed, if
such a case was without an adequate remedy at the instance
of the creditors. The law has provided a remedy, and one

 

ae es 1 60 Md, 113.
§ 618 STOCKHOLDERS. 565

that was plain and adequate. It was the right of any
creditor of the corporation, interested in the administra-
tion of the trust, to apply to a court of equity for relief ;
and the fact that, to obtain relief, it was necessary to take
an account of the debts due from the corporation, and to
do what the president and directors of the company ought
to have done, make an assessment upon the unpaid sub-
scriptions of stock, to raise funds with which to pay the
debts, could form no substantial reason, in the view of a
court of equity, for refusing relief. It was but the ex-
ercise of the ordinary powers of a court of chancery for the
execution of trusts, embarrassed with difficulties and im-
pediments that could not be readily overcome without the
assistance of the court. Such proceeding was strictly analo-
gous, indeed similar, to that adopted in many other cases
for the accomplishment of the same objects; and the pre-
cedents are not confined to recent times.”* And until the
order of the court is made directing the assessment, or there
has been some’ authorized demand upon the stockholder to
pay the balance due upon his stock, no cause of action ac-
crues against him in favor of an assignee of the corpora-
tion, and the statute of limitations does not begin to run in
his favor. This is an important principle to keep in view,
for, under it, a stockholder, long after the usual period of
limitations against ordinary contract obligations has expired,
and many of the facts attending the subscription have been
forgotten, or have become impossible of proof, may find
himself confronted with a disagreeable claim. The statutes
of limitations, which are supposed to be enacted as statutes
of repose, do not seem to cover such a case.

§ 618. Attempt of corporation to repudiate certificate.—
The corporation itself, after issuing stock which purports

 

1 Citing Salmon v. The Hamborough 598; Sanger v. Upton, 91 U. S. 56;
Co., 1 Cas, in Ch. 204; Hall v. United Scovill v. Thayer, 105 U.S. 155.
States Ins. Co., 5 Gill (Md.) 484; Ward ? See § 631.
vy. Griswoldville Mfg. Co., 16 Conn.
566 STOCKHOLDERS. § 619

to be paid up, cannot repudiate the declaration contained
in the certificate, and attempt to collect the unpaid value.’
But the rule is different where the stock is not as matter
of fact paid up and the rights of creditors are concerned.
As we have said, the capital of a corporation constitutes a
trust fund for the payment of its debts.” This doctrine, as
we have seen, applies to unpaid subscriptions, liability upon
which cannot be defeated as against creditors by any sim-
ulated payment.®

§ 619. Repudiation for fraud—The subscriber, it is clear,
may repudiate the subscription where it was procured by
means of a false prospectus, and in such a case his name
should not be placed in the list of contributories.* It may
be here stated that a dona fide compromise of a dispute,
concerning the question as to whether shares of stock had
been legally issued, is valid and binding.’ Proof of false
representations, made as inducements to the entering into
a contract, is admissible'as a defense, not as going to vary
the terms or conditions of the contract, but to establish
that the defendant was induced to enter into it as drawn,
in consequence of fraudulent misrepresentations in respect
to the subject-matter.6 Speaking of representations em-
bodied in a prospectus, the House of Lords say: “In an
advertisement of this description, some allowance must
always be made for the sanguine expectations of the pro-
moters of the adventure, and no prudent man will accept
the prospects which are always held out by the origin-
ators of every new scheme, without considerable abate-
ment.”* Speaking of fraud in procuring a subscription,
this language is used by Lord Romilly in the case last

 

1 Scovill v. Thayer, 105 U. S. 143. 5 Bath’s Case, L. R. 8 Ch, Div, 334.
2 See Chap, VII. °Sandforl v. Handy, 23 Wend. (N.
’Sawyer v. Hoag, 17 Wall. 610. Y.) 260.
See Burke v. Smith, 16 Wall. 390; Central Ry. Co. v. Kisch, L. R. 2
New Albany v. Burke, 11 Wall. 96. H. L. 99, 113.
4 Blake’s Case, 34 Beav. 639.
$ 620 STOCKHOLDERS, 567

cited :* “Contracts of this description between an indi-
vidual and a company, so far as misrepresentation or
suppression of the truth is concerned, are to be treated
like contracts between two individuals. If one man
makes a false statement which misleads another, the
way in, which that is to be treated affords the example
for the way in which a contract is to be treated where a
company makes a false statement which misleads an indi-
vidual.” But as elsewhere stated a defrauded subscriber
must be prompt in extricating himself, lest bankruptcy
meanwhile overtake the corporation, and he be held liable
on his subscription to dona fide creditors of the corporation
who have a right to rely upon the subscription lists as a
part of the trust fund for the payment of their debts.”

$ 620. Subscribing in name of another.—If one subscribe
to the capital stock of a corporation in the name of an-
other without authority, he thereby binds himself, and be-
comes the equitable owner of the stock.® But an unau-
thorized subscription may be ratified. In Musgrave v.
Morrison‘ the court say: “It was further argued that there
is no evidence of the appellant’s subscription to the stock
of the company. It was necessary, of course, to prove
this, to entitle the plaintiffs to recover, but it was not nec-
essary to prove that the subscription was made in the hand-
writing of the defendant. If it was made by his authority,
or if made without his authority, and he afterwards ratified
and adopted it, this would be sufficient. The evidence
shows that his name was entered on the stock ledger, and
that he continued to pay his weekly dues and to receive
his dividends upon the faith of such subscription, and that

 

- 1Central Ry. Co. v. Kisch, L.R.2 Barnes, 39 Miss. 399; Oakes v. Tur-
H. L. 99, 125. quand, L. R. 2 H. L. 325.

2See Ogilvie v. Knox Ins. Co. 22 State v. Smith, 48 Vt. 266. Com-
How. 380; Hamilton v. Grangers’ Life pare Ticonic Water Power & Mfg. Co,
& Health Ins. Co., 67 Ga. 145; Upton v. Lang, 63 Me. 480, See § 578.
v. Englehart, 3 Dillon 496; Saffold v. 454 Md. 165.
568 STOCKHOLDERS. §§ 621, 622
he authorized his attorney to vote his stock. These facts
are undisputed, and it is difficult to imagine a case of
stronger proof, unless the subscription be in fact in the

handwriting of the party.”!

§ 621. Exhausting remedy against corporation—As al-
ready shown,’ the creditor’s right to proceed against stock-
holders on unpaid subscriptions is only allowed after the
remedy against the corporation itself has been exhausted.?
Where the corporation has been adjudged bankrupt, and a
practical dissolution or suspension of its functions has in
this way been brought about, the remedy against the cor-
poration need ‘not, it seems, be first exhausted before pur-
suing stockholders. As a general rule, however, it is
more prudent, when possible, to first secure a judgment and
the issuance and return of an execution against the corpo-
ration.®

§ 622. Intervention of court at request of stockholder.—
The rights of stockholders as complainants are elsewhere
discussed,° and the defenses common to stockholders whom
it is sought to charge with personal liability are also con-

sidered.”

In a recent case in the Supreme Court of the

United States® it is asserted ‘‘that no sufficient reason is

 

1See Mississippi & T. R.R. Co. v.
Harris, 36 Miss. 18; Fiser v. Missis-
sippi & Tenn. R.R. Co., 32 Miss. 369.

2 See Chap. IV., §§ 97, ror, 103.

® McClaren v. Franciscus, 43 Mo.
452; New England Comml. Bank v.
Stockholders of Newport Steam Fac-
tory, 6 R. 1.154; Drinkwater v. Port-
land Marine R’way, 18 Me. 35; Shel-
lington v. Howland, 53 N. Y. 371;
Priest v. Essex Hat Manfg. Co., 115
Mass. 380; Handy v. Draper, 89 N. Y.
334; Lindsley v. Simonds, 2 Abb. Pr.
N.S. (N. Y.) 69; Lane v. Harris, 16
Ga, 217,

4 Compare Dryden v. Kellogg, 2 Mo.
App. 87; Shellington v. Howland, 53

N.Y. 371; State Savings Association

v. Kellogg, 52 Mo. 583; Kincaid v.
Dwinelle, 59 N. Y. 548.

5In Shellington v. Howland, 53 N.
Y. 374, Allen, J., said: “When the
performance of a condition becomes
impossible by the operation and effect
of a statute, that is, becomes illegal,
the performance is excused, and the
rights of the parties will be preserved.”
Citing Cohen v. New York Mutual
Life Ins. Co., 50 N. Y.610; Semmes v.
Hartford Ins. Co., 13 Wall. 158; Han-
ger v. Abbott, 6 Wall. 532.

* Chap. IIT, §§74, 75, 78, 179.

1 Chaps. XXV., XXVI.

* Taylor v. Holmes, 127 U. S. 492.
§ 622 STOCKHOLDERS. 569

shown why the suit should be brought by two stockholders
instead of by the corporation itself, in its own name.” Mr.
Justice Miller said: “Although the allegation of the bill
is that many of the directors of the company are dead, still
it is shown that one of them survives, and no assertion is
made that there was any application to this surviving di-
rector on the part of the defendants for the purpose of in-
stituting any proceedings looking to the rectification of
this deed or for the recovery of the real estate in North
Carolina; nor does it appear that there was any request
made to him to bring any suit either at law or in chancery
for that purpose. No effort was made to call together the
stockholders to take any action on the part of the com-
pany, or to elect other directors, or to obtain any united
action in the assertion of the claims now set up. Al-
though there is in the bill a declaration that the two com-
plainants are owners of a majority of the stock of the Gold
Hill Mining Company, there is no statement as to when or
how they became such, or whether they were such stock-
holders during the times that injuries were inflicted, of
which they now complain, in regard to the taking posses-
sion of the property by the defendants, or whether they be-
came stockholders afterwards. In short, there is no such
. averment of their relation to the corporation or of their
interest in the matter, about which they now seek relief, as
brings this action within the principle of the decisions of
this court upon the subject.” Manifestly, a stockholder
has no standing in court to restrain any action of the cor-
poration which might benefit the corporation but injure
the complainant in an independent character.* The stock-
holder can interfere, only when some unauthorized or im-
proper act is threatened, and there is no opportunity to ef-
fect a change in the corporate management, the general

 

' Citing Hawes v. Oakland, 104 U.S.  7?Baltimore & Ohio R.R. Co. v.
450. City of Wheeling, 13 Gratt. (Va.) 4o.
570 STOCKHOLDERS. § 623

rule being that the right of action is in the corporation.
Where a party holds stock as trustee and refuses to insti-
tute a suit, the cestud gue trust may do so, making the
trustee a party defendant.

$ 623. Carrying on unauthorized business.—A corporation
has no right to undertake a business not contemplated by
its charter, and a stockholder may interfere and enjoin its
so doing.” A life insurance company cannot usually extend
its business to fire or marine insurance® and at the same
time hold original subscribers. A railroad corporation
usually has no right to apply its funds toward a scheme to
improve a river,‘ and a corporation created to make iron
cannot go into the mill business® In this latter case, the
court said: ‘It is very plain that if the real purpose of the
managers of this company is to erect a corn and flour mill
for general purposes as an independent enterprise, and not
as a mere incident to the iron works, they are entering into
a business w/tva vives, and one which the complainant is
not committed to—nay, one that the corporation, as such,
has no legal right to undertake... .. Whether the corn
and flour mill is not the best investment, is not the ques-
tion. The complainant has a right to insist on it that the
funds of the company shall go to the uses designed by the
charter, and all the parties together do not, as a corpora-
tion, have the legal right to engage in the milling business,
except as a mere incident to the purposes of their incorpo-
ration.” Stockholders may be estopped by their acquies-
cence from objecting to the acts of a corporation which
are not illegal or mala prohibita, but merely ultra vires,

 

_ ?Great Western Railway Co. v. Jones, 52 Ga, 276; Hartford & N, H.

Rushout, 5 De G. & Sm. 290. R.R. Co. v. Croswell, 5 Hill (N. Y.)
2?See Wiswall v. Greenville & R. 383.

P. R. Co., 3 Jones’ Eq. (N. C,) 183; — # Ashton v. Burbank, 2 Dill. 435.

Pratt v. Pratt, 33 Conn. 446; Ashton 4 Munt v. Shrewsbury & C. Ry. Co.,

v. Burbank, 2 Dillon 435; Maunsell 13 Beav. 1.

v. Midland Great Western Ry. Co., 1 ® Cherokee Iron Co. v. Jones, 52 Ga,

Hem. & M. 130; Cherokee Iron Co, v. 276, 280.
§§ 624, 625

when the rights of innocent third persons have intervened.
Express assent is not necessary to estop the stockholders.
When they neglect to promptly and actively condemn the un-
authorized act, and to seek judicial relief after knowledge
of its being done, they will be deemed to have acquiesced,
and will be estopped as against innocent third persons.’

STOCKHOLDERS. 571

§ 624. Remedy in equity.—On a bill in equity filed to set
aside a subscription the court may give full relief by decree-
ing that the directors who practiced the fraud shall refund
payments made before its discovery.” A stockholder has a
right in equity to an injunction against directors and third
persons to prevent violation of the charter or a misappro-
priation of corporate property.? The general subject of
remedies has already been considered.‘

§ 625. Acts enjoined by stockholders.—A stockholder may
enjoin an act which will render a corporation subject to
forfeiture or fines and penalties ;* a person occupying this
relation may enjoin a corporation from applying moneys
toward building a line which it possessed no chartered
power to construct with such funds ;® or from executing a
mortgage which would be wé¢tra veres ;" or from rendering

 

1 Kent v. Quicksilver Min. Co., 78
N. Y. 159, 187, 188, and cases cited ;
Zabriskie v. Cleveland, C. & C. R.R.
Co., 23 How. 381, 395, 398; Parks v.
Evansville, I. & C. S. L. R.R., 23 Ind.
567; Evans v. Smallcombe, L. R. 3
H. L. 249; Brotherhood’s Case, 31
Beav. 365; Jn re Magdalena Steam
Nav. Co., 6 Jur. (N. S.) 975, cited in 2
Pom. Eq. Jur. § 819.

® Vreeland v. N. J. Stone Co., 29 N.
J. Eq. 188, 195. In this case Vice-Chan-
cellor Van Fleet said: “ All who get
gain by fraud must bear the legal conse-
quences of the wrong they do. When
a fraud is committed in the name, and
under cover of a corporation, by per-
sons having the right to speak for it,

for their personal gain and benefit, they
are bound to answer personally for their
wrongful acts. Their tongues uttered
the false words and their purses should
pay the damages. In this case the de-
fendants constituted the whole proprie-
torship of the corporation, and they
merely employed the corporate name
the more effectually to accomplish their
purposes against the complainant.”

3 Wilcox v. Bickel, 11 Neb. 154. See
§§ 74, 75, 78, 179, 622.

4 See Chap. II.

5 Bliss v. Anderson, 31 Ala. 612.

6 Bagshaw v. Eastern Union Ry. Co.,
7 Hare 114.

* McCalmont v. Phil. & R. R.R. Co.,

3 Am. & Eng. R.R. Cas, 163.
572 STOCKHOLDERS. $§ 626, 627
a toll bridge free, thereby injuring the revenues of the cor-
poration, and impairing the value of the stock.’ In a Con-
necticut case this language is employed :* “ Where a cor-
poration is about to exceed its powers by applying its
property to objects beyond the authority of its charter, it is
well settled that a court of equity will grant relief to a
minority of its stockholders, who dissent from such use of
its funds.”* Shareholders, as we have seen,* may restrain a
misappropriation of corporate assets, whatever form the at-

tempt may take.°

§ 626. Acts not enjoined.—A stockholder cannot interfere
to prevent the leasing of part of the corporate property
where sufficient remains to enable the corporation to prop-
erly conduct its business. Nor can a minority of stock-
holders prevent the use of corporate profits to develop the
business of the corporation, instead of being paid out in
dividends.”. Stockholders who are in a minority cannot,
through a court of equity, overrule the judgment and dis-
cretion of a majority. In Fountain Ferry Turnpike Road
Company v. Jewell ® this language is employed : ‘‘ The ques-
tion of expediency, of practicability, of extravagance, or of
prudent economy, must be left to be decided by the man-
agers and the corporators.”

§ 627. Action for deceit—As has appeared, an action to
recover damages for deceit lies where the plaintiff was in-
duced to purchase worthless stock, and it is unnecessary to

 

1 East Rome Town Co. v. Nagle, 58
Ga, 474. See § 54.

2 Pratt v. Pratt, 33 Conn. 455.

8 Citing Hartford & N. H. R.R. Co,
v. Croswell, 5 Hill (N. Y.) 383; Stevens
y. Rutland & B. R.R. Co., 29 Vt. 545;
Sears v. Hotchkiss, 25 Conn. 171;
Scofield v. Eighth School District, 27
Conn. 499.

4 See § 54.

° Kean v. Johnson, 9 N. J. Eq. 4o1 ;

Colman v. Eastern Counties Ry. Co.,
1o Beav. 1; March v. Eastern R.R.
Co., 40 N. H. 567; Ernest v. Nicholls,
6 H. L. Cas. gor; Simpson v. West-
minster Palace Hotel Co., 8 H. L. Cas.
717; Dodge v. Woolsey, 18 How. 331,
341.

§ Simpson v. Westminster Palace
Hotel Co., 8 H. L, C, 712.

1 Pratt v. Pratt, 33 Conn. 446.

°8 B. Mon. (Ky.) 140, 145.
§ 628 STOCKHOLDERS. 573

prove an offer to return it.1 That the defrauded subscriber
may sue for money had and received, is expressly held in
Grangers’ Insurance Company v. Turner.* Justice Bleck-
ley said: ‘“ The declaration is, in its legal effect, for money
had and received to the plaintiff's use. It proceeds ona
rescission or repudiation of the contract of subscription, for
fraud, Get that contract out of the way, and there is no
obstacle to recovering the money back.”

$ 628. Purchasing stock for purpose of suit—Much con-
troversy has arisen as to the rights of a litigating stock-
holder who purchased his stock while the transactions of
which he complains were zz ferz. In Williams v. Western
Union Telegraph Cqmpany,? it was expressly found by the
court that the stock was bought for the purpose of bring-
ing suit upon it. Yet this was held not to be an answer to
the plaintiff's complaint * in the lower court, while the New
York Court of Appeals expressly reserved the point. In
Young v. Drake® the court say: “It is enough that the
plaintiff was a stockholder when the action was brought.
If he purchased his stock after the alleged fraud was com-
mitted, that did not condone the fraud. The plaintiff
acquired all the rights of the person of whom he purchased.” ®
In Winsor v. Bailey,’ the court, in deciding that a purchaser
of stock could attack past transfers, say that to rule differ-
ently “would seem to involve the singular consequence
that the transfer of stock in a corporation extinguishes the
right to inquire into the previous fraudulent conduct of its
officers, whereby its funds have been ‘misappropriated. ....
The transfer of the stock conveyed to them not only the
ownership of the shares and the right to the future dividends

 

1 Miller v. Barber, 66 N. Y. 558. 5 8 Hun (N. Y.) 61, 64.
? 61 Ga. 566. 6 See Ramsey v. Gould, 57 Barb. (N.
393 N. Y. 162, Y.) 398 ; Bloxam v. Metropolitan R’way _

45, p. Frothingham v. Broadway Co., L. R.3 Ch. 337; Elkins v. Camden
& Seventh Ave. R.R.Co., 9 Civ. Pro, & A.R.R. Co., 36 N. J. Eq. 5.
(N. Y.) 315. 755N. H. 218, 221, 222.
574 STOCKHOLDERS. § 629

thereon, but also placed them on an equal footing with the
other stockholders in respect to the right to call the officers
and agents of the corporation to an account for their fraudu-
lent conduct.” Such would seem to be the strict rule of
law applicable to such a case, but as a court of equity is
frequently resorted to for relief, a disposition prevails on
the part of this latter court not to aid a litigant who pur-
chases stock for the purpose of the suit, and the United
States Supreme Court seem determined to suppress this
class of litigation.’

§ 629. Liability—By what law governed.—As regards both
statutory and common law liabilities of stockholders, the
law of the place where the corporation is domiciled con-
trols. Devens, J., said: ‘“‘ That the statutes of a State do
not operate extra-territorially, Aroprzo vigore, will be con-
ceded. How far they should be enforced beyond the lim-
its of the State which has enacted them must depend on
several considerations ; as whether any wrong or injury will
be done to the citizens of the State in which they are
sought to be enforced, whether the policy of its own laws
will be contravened or impaired, and whether its courts are
capable of doing complete justice to those liable to be

 

1 See Kingman v. Rome, Watertown
& O. R.R. Co., 30 Hun (N. Y.) 73;
Frothingham v. Broadway & Seventh
Ave. R.R. Co., 9 Civ. Pro. (N. Y.) 315;
Hawes v. Oakland, 104 U.S. 461 ; Rob-
son v. Dodds, L. R. 8 Eq. 301. In the
ease of Du Pont v. Northern Pacific
R.R. Co. (18 Fed. Rep. 467), Wallace,
J» said: “A court of equity will not
be swift to grant the stringent relief
of a preliminary injunction to an
officious plaintiff, who seems to have
acquired his interests as a stockholder
with a view of assailing transactions in
the corporate affairs of which existing,
stockholders do not seem to have. com-
plained.” The Supreme Court of. the

United States enacted rule 94 as fol-
lows: “Every bill brought by one or
more stockholders in a corporation,
against the corporation and other
parties, founded on rights which may
properly be asserted by the corpora-
tion, must be verified by oath, and must
contain an allegation that the plaintiff
was a shareholder at the time of the
transaction of which he complains, or
that his share had devolved on him
since, by operation of law, and that the
suit is not a collusive one to confer on
acourt of the United States jurisdic-
tion of a case of which it would not
otherwise have cognizance,” Promul-
gated Jan, 23, 1882.
§§$ 630, 631 STOCKHOLDERS. oe 575
affected by their decrees.” Enforcing this principle’ it was
held that as, in Massachusetts, in the absence of an express
promise to pay for shares, none was created by the mere
subscription or agreement to take them, the power to assess
and sell out the shares was a sufficient remedy.? And the
courts of that State would refuse to enforce a liability
against one of its own citizens greater than would have been
incurred had the subscription been for shares of stock in a

Massachusetts corporation.

§ 630. Bona fide purchaser.—A party may acquire a per-
fect title to stock even where there was a question of au-
thority as to the transfer. Thus in Hubbell v. Meigs * the
court say: “It is unnecessary to determine whether the
corporation was authorized by its charter to sell its stock at
less than par, or whether, in so selling, its officers did not
violate their duty. The plaintiff was a d0xa fide purchaser,
and, being such, acquired a valid title to the stock trans-
ferred to him.”

§ 631. Statute of limitations, etc—As we have said, the
statute of limitations begins to run on a subscription for
stock only after a call has been made and is due.* In Sco-
vill v. Thayer ® the court say: “ Before there is any obliga-
tion upon the stockholder to pay without an assessment
and call by the company, there must be some order of a
court of competent jurisdiction, or, at the very least, some

 

1 New Haven Horse Nail Co. v. Lin-
den Spring Co., 142 Mass. 349, 353;
S.C. 6 East. Rep. 663. See Hutchins
v. New Eng. Coal Mining Co., 4 Allen
(Mass.) 580; Jones v. Sisson, 6 Gray
(Mass.) 288; Penobscot & Kennebec
R.R. Co. v. Bartlett, 12 Gray (Mass.)
244,

. 2 New Haven Horse Nail Co. v. Lin-
den Spring Co., 142 Mass. 354. Citing
Andover & Medford Turnpike Co, v.
Gould, 6 Mass. 40; Andover & M.

Turnpike Co. v. Hay, 7 Mass. 102;
Franklin Glass Co. v. White, 14 Mass,
286; Ripley v. Sampson, 10 Pick.
(Mass.) 371; Mech. Foundry & M. Co.
v. Hall, 121 Mass, 272; Katama Land
Co. v. Jernegan, 126 Mass. 155.

3 50N. Y. 489.

4 Glenn v. Williams, 60 Md. 93; Bal-
timore & H. Turnpike Co. v. Barnes,
6 H. & J. (Md.) 57; Curry v. Wood-
ward, 53 Ala. 376.

‘5 705 U.S. 155.
576 “J \) STOCKHOLDERS. § 631

authorized demand upon him for payment. And it is clear
the statute of limitations does not begin to run in his favor
until such order or demand.” In some of the cases it is
intimated, and in others asserted, that when an insolvent
corporation suspends business, assigns its property, and goes
into liquidation, the liability of stockholders for unpaid
subscriptions becomes fixed, and the statute of limitations
begins to run in their favor.!' In a recent case Mr. Justice
Miller said :* “The mistake sought to be corrected, which
is made the foundation of the present suit, occurred in 1853.
This suit was brought in 1882, after the lapse of nearly
thirty years, during all of which time the action might have
been brought, so far as relates to the correction of the
alleged mistake in the deed. During seven or eight years
of this time the corporation was in full existence and opera-
tion; it had the means to prosecute this suit and had an
opportunity of knowing, or at least its principal members
must have known, all the facts which are now brought to
the consideration of the court, and even up to the time
when this suit was commenced there was a director surviv-
ing who had never been discharged or resigned. There was
no reason, if stockholders were proper persons to bring this
action, why proceedings should not have been begun by them
upon the practical dissolution of the company in 1862, after
which time, as the complainants allege, no corporate organ-
ization was kept up, no work or business done, and no at-
tempt made by any of the directors to act upon any of the
rights of the corporation or to exercise their authority in
the conduct of its affairs. If we allow some deduction for
the period of the war, which closed in 1865, there still re-

 

1 Compare Glenn v. Dorsheimer, 23 son, 95 U. S. 628; Gilfillan v. Union
Fed. Rep. 695; S.C. 24 Fed. Rep. 536; Canal Co., 109 U. S. 401; Terry v.
Harmon v. Page, 62 Cal. 448; Payne Tubman, g2 U. S. 156.

v. Bullard, 23 Miss. 88; Allibone v. * Taylor v. Holmes, 127 U. S. 493.
Hager, 46 Pa. St. 48; Terry v. Ander-
§ 631 STOCKHOLDERS, 577

mains the long delay between that time and the bringing
of this suit in 1882, a period of about seventeen years. This
lapse of time requires some better account in regard to the
reasons why this suit was not earlier instituted than is given
in the present bill.”

37
CHAPTER XXVIII.

RELATION OF OFFICERS AND DIRECTORS TO THE CORPO-

 

RATION,
§ 632. Corporation and officers. § 642. Common directors.
633. Relation of officers to the cor-| 643. Election to avoid within reason-
poration, able time.
634. Contracts between directors and | 644. Recovering profits from direct-
the corporation. ors.
635. Certain illustrations. 645. Condonation of officer’s fraud.
, 636. Secret profits. 646. Possession of treasurer.
637. Bribes and gifts. 647. Personal liability of officers.
638. Agreement to resign, etc. 648. Compensation of officers.
639. Liability of promoters. 649. Power of directors to act.
640. Contracts voidable and not} 650. Trustees ex maleficto—Fraud-
void. ; ulent dissolution.
641. Officers selling property to cor-| 651. Power to expel members.
poration. 652. Ousting directors.

§ 632. Corporation and officers.—The validity of the acts
of corporate officers, directors, and trustees, or the effect
of corporate acts inspired by them, are so frequently
brought in question in dissolution or insolvency proceed-
ings affecting the association, that the necessity of further
briefly considering the prominent legal characteristics of
the relationship existing between corporations and officers
is apparent. Frequently the acts of the corporate officers
and trustees precipitate the legal proceedings taken for
closing up the corporation; and the liquidator or receiver
is often called upon in seeking assets, or uncovering the
creditor’s trust fund, to trace back the career of the corpo-
ration, and attack transactions had between it and its offi-
cers, or entered into by it under improper official sanction.
The reader should carefully keep in mind, in judging of
§ 633 OFFICERS, DIRECTORS, AND TRUSTEES.

579

the acts of corporate officials, that “in the government of
corporations much must be left to the judgment and dis-
cretion of the directory, and much must be credited to the
fallibility of human judgment.”! A corporation, as we
have said, necessarily acts through officers and agents.
Where an officer has general authority to enter into con-
tracts, unless the power is withdrawn, he has authority to
release and terminate such contracts.? Mr. Justice Miller
said: “ We concur with the court below that on the facts

. the release was a valid release. Its execution was
of that class of business which, under the by-laws of the
corporation and the course of business between these
parties, had been confided to the president and superin-
tendent, both of which offices were held by Mr. Jones.
The direction given by Mr. Jones to the treasurer, Mr,
Thomas, both of whom were also directors in the corpo-
ration, was within the line of his authority. He had under
this same authority, without any express resolution or rati-
fication of the board of directors, made the contract on
which this suit is brought; and it would seem that, not
being under seal, a simple contract concerning the ordinary
business of the company, the same power which enabled
him to make it was sufficient to enable him to release it,
unless the power had been withdrawn.” ?

§ 633. Relation of officers to the corporation.—The rela-
tion of officers and trustees to the corporation, its stock-
holders and creditors, is acknowledged to be fiduciary.*

 

1Tuscaloosa Mfg. Co. v. Cox, 68
Ala. 71, 75.

2Indianapolis Rolling Mill v. St.
Louis, F. S. & W. R.R. Co., 120 U. S.
256. Directors and shareholders as a
rule have no power to bind the corpo-
ration or its assets to pay usury. The
Planters’ Warehouse Co. v. Johnson,
62 Ga, 308.

8 Indianapolis Rolling Mill v. St.

Louis, F. S. & W.R.R,. Co., 120 U. S.
259. '

4Vance v. Phoenix Ins. Co., 4 Lea
(Tenn.) 388; Union Pacific Railroad
Co. v. Credit Mobilier, 135 Mass. 376;
Shea v. Mabry, 1 Lea (Tenn.) 342;
Duncomb v. New York, H. & N. R.R.
Co., 84 N. Y. 199; Port v. Russell, 36
Ind. 60; S.C. 1o Am. Rep. 5; Bent v.
Priest, 86 Mo. 482; Parker v. Nicker-
580 OFFICERS, DIRECTORS, AND TRUSTEES. § 633

This rule is so firmly embedded in our corporation law that
it seems superfluous to restate it, yet cases are not wanting
in which its spirit has been evaded. In Shea v. Mabry’?
the court very appropriately observe: “ Directors are not
mere figure-heads of a corporation. They are trustees for
the company, for the stockholders, for the creditors, and
for the State. They must not only use good faith, but also
care, attention and circumspection in the affairs of the cor-
poration, and particularly in the safe keeping and disburse-
ment of funds: committed to their custody and control.
They must see that these funds are appropriated as in-
tended to the purposes of the trust, and if they misappro-
priate them or allow others to divert them for these pur-
poses, they must answer for it to their cestuz gue trust.”
In Twin-Lick Oil Company v. Marbury? the court say:
‘That a director of a joint stock corporation occupies one
of those fiduciary relations where his dealings with the sub-
ject-matter of his trust or agency, and with the beneficiary
or party whose interest is confided to his care, is viewed
with jealousy by the courts, and may be set aside on slight
‘grounds, is a doctrine founded on the soundest morality,
. and which has received the clearest recognition in this court
and in others.”* The rule is “ founded upon the known
weakness of human nature, and the peril of permitting any
sort of collision between the personal interests of the.
individual and his duties as trustee, in his fiduciary charac-
ter.”* Many of the authorities speak of directors as trus-

 

son, 112 Mass. 195; York & N.M. * Citing Koehler v. Black River Falls
Railway Co. v. Hudson, 19 Eng. L, & Iron Co., 2 Black 715; Drury v. Cross,
Eq. 365; European & N.A.Ry. Co. v. 7 Wall. 299; Great Luxembourg Ry.
Poor, 59 Me. 277; Wardell v. Railroad Co. v. Magnay, 25 Beav. 586; The
.Co., 103 U. S, 651; Koehler v. Black Cumberland Coal & Iron Co. v. Sher-
River Falls Iron Co., 2 Black 715; man, 30 Barb. (N. Y.) 553; Hoffman
Hoyle v. Plattsburgh & M. R.R. Co., Steam Coal Co. v. Cumberland Coal &
54N. Y. 314. Tron Co., 16 Md. 456.

11 Lea (Tenn.) 342. *Duncomb v. N. Y., H. & N. RR.

* gr U.S. 588, Co., 84 N. Y. 199, citing Davoue vy.
§ 633 OFFICERS, DIRECTORS, AND TRUSTEES. 581
tees for the corporation and shareholders,’ and even for
creditors as regards corporate assets.” Other cases regard
the directors as agents.* Again, in Gardiner v. Pollard,‘
Robertson, J., said: ‘‘ There may be a confidential relation
subsisting between a stockholder and a director, creating a
certain duty by the latter to the former, or certain rights in
the former, which give the former a right to prevent or sue
for malfeasance of the latter. But I think it will be found
that neither ‘¢rus¢ee’ nor ‘agent’ expresses such relation,
and that bailee of the capital of the corporation to perform
specific duties therewith, comes much more near to it.” Pro-
fessor Pomeroy says :° “ Directors and managing officers, in
addition to their functions as mere agents, occupy a double
position of partial trust; they are guasz or sub modo trus-
tees for the corporation with respect to the corporate prop-
erty, and they are guasz or sub modo trustees for the stock-
holders with respect to their shares of the stock.” The ap-
plication of these different legal terms to corporate officers
results in part from the distinction between remedies at
law and in equity. If the officers are to be considered
as trustees, then it would seem that equity would have
jurisdiction, But, as elsewhere shown, the trustees or

2

 

Fanning, 2 Johns. Ch. (N. Y.) 260,
See Lytle v. Beveridge, 58 N. Y. 606;
Torrey v. Bank of Orleans, 9 Paige (N.
Y.) 649; Moore v. Moore, 5 N. Y. 256;
Wait on Fraud. Conv. and Void and
Voidable Acts, §470; Wardell v. Rail-
road Co., 103 U. S. 658.

1 Imperial Mercantile Credit Ass’n
v. Coleman, L. R. 6 H. L. 189; Zz ve
Cameron’s Coalbrook, etc. Ry. Co., 18
Beav. 339; Poole, Jackson & Whyte’s
Case, L. R.g Ch. Div. 322; Bank of
St. Mary’s v. St. John, 25 Ala. 611;
Koehler v. Black River Falls Iron Co.,
2 Black 721; European & N. A.Ry.Co.v.
Poor, §9 Me. 277; Scott v. Depeyster,

1 Edw. Ch. (N. Y.) 542; Butts v..
Wood, 37 N. Y. 317.

? Bliss v. Matteson, 45 N. Y. 22;
Van Cott v. Van Brunt, 2 Abb, N.C.
(N. Y.) 283; Richards v. New Hamp-
shire Ins. Co., 43 N. H. 263; Lyman
v. Bonney, 118 Mass. 222,

’ Ferguson v. Wilson, L. R. 2 Ch:
77; Ryan v. Leavenworth, A. & N. W.
Ry. Co., 21 Kans. 365; Allen v. Curtis,
26 Conn. 456; Overend & Gurney Co,
v. Gibb, L. R. 5 H. L. 480; Spering’s
Appeal, 71 Pa, St. 11; S.C. 10 Am:
Rep. 684.

4 10 Bosw. (N. Y.) 691.

>» 3 Pom. Eq. Jur., § 1090.
582 OFFICERS, DIRECTORS, AND TRUSTEES, § 634
directors may be treated as the agents of the corpora-

tion.?

$ 634. Contracts between directors and the corporation.—
The officers of a corporation will not be permitted to be-
come pecuniarily interested in the contracts of the corpora-
tion.” Thus a contract entered into by a manufacturer for
the supply of iron furnishings to a railway company of
which he was a director at the date of the contract, cannot
be enforced against the company.®? The Lord Chancellor
said in Aberdeen Railway Company v. Blaikie :* “A cor-
porate body can only act by agents, and it is, of course, the
duty of those agents so to act as best to promote the inter-
ests of the corporation whose affairs they are conducting.
Such agents have duties to discharge of a fiduciary nature
towards their principal. And it is a rule of universal ap-
plication, that no one, having such duties to discharge,

shall be allowed to enter into

engagements in which he has,

 

1 See Hun v, Cary, 82.N. Y.79. In
the course of the opinion, Earl, J., said:
“This case was moved for trial at a
Circuit Court, and before the jury was
impaneled, the defendants claimed
that the case was improperly in the
circuit, and that it should be tried at
Special Term; and the court ordered
that the trial proceed, and at the close
of the evidence, the defendants moved
that the complaint be dismissed, on the
ground that the action was not a proper
one to be tried before a jury, and should
be tried before the equity branch of the
court. The motion was denied, and
these rulings are now alleged for error.
The receiver in this case represents
the bank, and may maintain any action
the bank could have maintained. The
trustees may be treated as agents of
the bank. (/# re German Mining Co.,
27 Eng. Law & Eq, 158; Belknap v.
Davis, 19 Me. 455; Bedford R.R. Co.

_v. Bowser, 48 Pa. St. 29; Butts v.

Wood, 38 Barb. (N. Y.) 181; Austin
v. Daniels, 4 Denio (N. Y.) 299; Ohio
& M.R.R. Co. v. McPherson, 35 Mo.
13); and for any mzsfeasance or non-
Jeasance, causing damage to the bank,
they were responsible to it, upon the
same principle that any agent is for
like cause responsible to his principal.
It has never been doubted that a prin-
cipal may sue his agent in an action at
law for any damages caused by culpa-
ble mdsfeasance or non-feasance in the
business of the agency. The only re-
lief claimed in this complaint was a
money judgment, and we think it was
sane tried as an action at law. No
equitable rights were to be adjusted,
and there was no occasion to appeal to
‘an equitable forum.”

® Port v. Russell, 36 Ind. 60; Ss. Cc. 10
Am. Rep. 5.

*The Aberdeen Railway Co, v.
Blaikie, 1 Macq, Sc. App. 461, 471.

«Macq. Sc. App. 471.
§ 635

or can have, a personal interest conflicting, or which pos-
sibly may conflict, with the interests of those whom he is
bound to protect. So strictly is this principle adhered to,
that no question is allowed to be raised as to the fairness
or unfairness of a contract so entered into. It obviously
is, or may be, impossible to demonstrate how far, in any par-
ticular case, the terms of such a contract have been the best
for the interest of the cestud gue trust which it was possible
to obtain. It may sometimes happen that the terms on
which a trustee has dealt, or attempted to deal, with the
estate or interests of those for whom he is a trustee, have
been as good as could have been obtained from any other
person ; they may even at the time have been better. But
still so inflexible is the rule that no inquiry on that sub-

OFFICERS, DIRECTORS, AND TRUSTEES, 583

ject is permitted.” ?

§ 635. Certain illustrations—The fiduciary position held
by the president of a corporation will not admit of his

speculating with its assets for his own’ benefit.’

In one

 

1g, p, Michoud v. Girod, 4 How.
§03; Cumberland Coal & Iron Co. v.
Sherman, 30 Barb. (N. Y.) 553; Hoff-
man Steam Coal Co. v. Cumberland
Coal & Iron Co., 16 Md. 456; Hay-
wood v. Lincoln Lumber Co., 64 Wis.
639; Whichcote v. Lawrence, 3 Ves.
740; Gardner v. Ogden, 22 N. Y. 332;
Butts v. Wood, 37 N. Y. 317, and cases
cited; Union Nat. Bank v. ‘Douglass,
1 McCrary 86. In a recent case in
Wisconsin, Haywood v. The Lincoln
Lumber ‘Co., 64 Wis. 647, the court
say: “But there is another principle
equally unquestionable which renders
the mortgage in suit void. The direct-
ors and officers made the mortgage, or
directly caused it to be made, to them-
selves, They occupied a fiduciary re-
lation to the corporation, its stockhold-
ers, and its creditors, and they had no
right to use such relation and their

official position for ‘their own benefit,
to the injury of others in equal right.
This principle was applied to the tak-
ing of a mortgage by the directors on
the property of the corporation to secure
their ‘liability as sureties upon a note of
the corporation, in Corbett v. Wood-
ward, 5 Sawy. 403, which is a strong
case; and very similar is the case of
Koehler v. Black River Falls Iron Co.,
2 Black 715.” But the reader is cau-
tioned against imposing implicit -reli-
ance upon these general statements, for
where an officer of a corporation loans
money to it openly and in good faith,
and the fairness of the transaction can-
not be questioned, it certainly would
seem that such officer was entitled to
hold and enforce his security. See
Duncomb v. N. Y., H. & N. R.R. Co.,
84 N. Y. 199.

2 Brewster v. Stratman, 4 Mo. App,42.
584 OFFICERS, DIRECTORS, AND TRUSTEES, § 635

case’ a director had purchased, at a judicial sale, the rail-
road belonging to his corporation. It was decided, upon
the principle just stated, that the corporation had a right to
have its road surrendered to it upon placing the director zz
statu quo. In Port v. Russell? an injunction was granted
against the payment of money by a gravel road company to
a construction company of which a director of the former was
a member. In Lingle v. National Ins. Company,’ the presi-
dent had purchased a judgment claim of $4,500 against his
corporation, paying therefor the sum of $675. When held
to individual responsibility as a. stockholder for debts of
the corporation he claimed the right to set off the whole
amount of the judgment as a debt due to him. But the
court decided that by reason of the trust relation he was
entitled to a credit for only $675, the amount paid. So in
McAllen v. Woodcock,’ it was ruled that where, under
execution against a corporation, its land was purchased by
one who was a stockholder and treasurer of the company,
the purchase must be regarded as having been made for
the benefit of the association, and that the title thus
acquired could not be considered as hostile thereto. Where
a director who was also a stockholder of an indebted corpora-
tion, aided in the passage of a resolution by which he, as a
stockholder, appropriated certain bonds which were assets
of the corporation, to his own use, it was held that he was
liable to the creditors, as trustee, for the value of the
bonds.” This language is employed in Illinois: ‘“ The in-
quiry is not whether the contract the trustee has made is
the best that could have been made for the cestud gue trust,
or whether it is fraudulent in fact. So strictly is this
principle adhered to, that no question is allowed to be raised
as to fairness of the contract. The principle has a broader

 

' Covington & Lexington R.R. Co. 4 60 Mo, 174.

v. Bowler, 9 Bush (Ky.) 468. ® Union Nat. Bank v. Douglass, 1
2 36 Ind, 60. McCrary 86.
845 Mo. 109,
§ 636

scope. The law has absolutely inhibited the agent or trus-
tee from placing himself in a position where his own private
interests would naturally tend to make him neglectful of
his obligations to his principal, or where his position would
afford him an opportunity to speculate in the trust property,
Accordingly, it is not indispensable there should be actual
injury before the act of the trustee will be declared void, as
being interdicted by the policy of the law. The cestuz gue
trust has his election to ratify the act of the trustee, and
insist upon all the advantage of it, or disaffirm it zz foto,
as shall be most to his interest.” *

OFFICERS, DIRECTORS, AND TRUSTEES. . 585

$ 636. Secret profits—Directors are not allowed to make
secret profits at the expense of the corporation.” Holding
a fiduciary relation, they cannot be permitted to acquire
interests adverse to such relation.? In a case before the
New York Supreme Court,* the right of a stockholder to
bring an action against the corporation and its directors, to
rescind an unlawful contract, was upheld, it being shown
that the corporation was under the contrdl of the guilty
parties, The complaint charged that the defendants had
filled the board “‘ with their creatures and instruments,”
and were expecting to make profits by improper methods.
Pratt, J., said: “If it was the fact that those defendants
did control the actions of the railroad company, either
through their own acts or those of their associates as di-
rectors thereof, it is plain that, since they also controlled
the construction company, they were simply contracting

 

1 Gilman C. & S. R.R. Co. v. Kelly,
77 Ill. 426, 434.

? European & N. A. Ry. Co. v. Poor,
59 Me. 277; York & N. M. Ry. Co. v.
Hudson, 16 Beav. 485; Ryan v. Leav-
enworth, A. & N. W. Ry. Co., 21 Kans.
365; Parker v. McKenna, L. R. 10 Ch.
96; Redmond v. Dickerson, 9 N. J. Eq.
507; Hichens vy. Congreve, 4 Russ.
564; Great Luxembourg Ry. Co. v.

Magnay, 25 Beav. 586; Farmers’ & M.
Bank -v. Downey, 53 Cal. 466; Parker
v. Nickerson, 112 Mass. 195. Com-
pare Panama & S. P. Tel. Co. v. India
Rubber, G. P. & Tel. Works Co., 32
L. T. N.S. 517.

3 European & N. A. Ry. Co. v. Poor,
59 Me. 278.

4 Currier v. New York, W. S. & B.
R.R. Co., 35 Hun (N., Y.) 357. os
586 -OFFICERS, DIRECTORS, AND TRUSTEES. $ 637
with themselves, and that the railroad company was help-
less in their hands. It requires no argument to demon-
strate that a contract made under such circumstances was
presumptively fraudulent ;! and that the railroad company
might, at its election, treat it as void and repudiate it.”

§ 637. Bribes and gifts.—The general and very salutary
tule is that all moneys paid to, or other valuable considera-
tion received by, officers of a corporation, as commissions,
gifts, or otherwise, may be recovered by it.2 “The law
will not permit them to make a private profit for them-
selves in the discharge of their official duties,”4 As was
said in the New York Court of Appeals: ‘‘ When agents,
and others acting in a fiduciary capacity, understand that
these rules will be rigidly enforced, even without proof of
actual fraud, the honest will keep clear of all dealings fall-
ing within their prohibition, and those dishonestly inclined
will conclude that it is useless to exercise their wits in con-
trivances to evade it. Thus only can these rules be made
useful in pronfoting fair dealing on the part of agents and
trustees, and in preventing frauds.”° It is said in a recent
case in Missouri, that if an ‘“‘agent make gains from the
use of the trust funds or property he must account there-
for,” and, again, that “if the agent accept any benefits in
conducting the business of -his principal, he will hold them
in trust for the principal.” ®

 

1 Citing New York Central Ins, Co.
v. Nat. Protection Ins. Co, 14 N. Y.
85; Duncomb v. N.Y., H. & N. R.R.
Co., 84 N. Y. 190, 198; Story’s Eq.
Jur., §§ 317-320, 321, 322, 323, 346;
Wardell v. Union Pac. R.R. Co., 1 Am,
& Eng. R.R. Cas. 427; S.c. 103 U.S.
651; St. James’ Church v, Church of
Redeemer, 45 Barb. (N. Y.) 356.

* Currier v. New York, W. S. & B.
R.R. Co., 35 Hun (N. Y.) 357. Citing
Gilman C. & S. R.R. Co. v. Kelly,
77 Ill. 426; Thomas v. Brownville, F.
K. & P. Ry. Co, 2 Fed, Rep. 877;

Wardell v. Union Pac. R.R. Co., 4
Dillon 330; Barnes v. Brown, 11 Hun
(N.Y.) 315; S.C. on appeal, 80 N.Y. 535.

3 See Imperial Merc. Credit Ass’n v,
Coleman, L. R. 6 H. L. 189; Bent v.
Priest, 86 Mo. 475; S.C. 1 West. Rep.
749; Farmers’ & M. Bank v. Downey, 53
Cal. 466; Bank of London v. Tyrrell, 5
Jur. N. S. 924; Jacobus v. Munn, 37 N.
J. Eq. 48.

4 Farmers’ & M. Bank vy. Downey, 53
Cal. 466, 468.

* Bain v. Brown, 56 N. Y. 285, 288,

° Bent v. Priest, 86 Mo. 482.
§ 638 OFFICERS, DIRECTORS, AND TRUSTEES. 587

$ 638. Agreement to resign, etc.—Directors cannot make
merchandise of their positions. An agreement by a di-
rector of a corporation to resign his trust for a pecuniary
consideration, and to assist his obligors in electing a suc-
cessor favorable to them, is void.t In one of the cases
cited,” where the scheme originated with certain sharehold-
ers, Clerke, J., observed: ‘“‘This action is brought to com-
pel the specific performance of an agreement by which
some of the defendants stipulated with the plaintiff that
on payment by him of $200,000 for a certain number of
shares of the stock of the Union Pacific Railway Company,
then belonging to them, new directors, to be nominated by
the plaintiff and his co-purchaser Hallett, should be sub-
stituted in the place of all the other directors, except Fre-
mont and Hallett, who also were directors at the time.
That is, the vendors of this stock undertook to change the
board of directors of the company for a consideration, and
to substitute others at the dictation of the plaintiff and his
co-purchaser ; which, of course, can be done legally and
fairly only by the votes of the stockholders; and if done
by the management and contrivance of these defendants,
would be a fraud on the stockholders at large, subserving
the interests of the two paying, and giving to them the
entire control of the company. A contract having this
purpose is an attempt improperly to interfere with the
rights of others, and is clearly contrary to public policy.”
And where the plaintiff entered into a contract with the
defendant, who was president of a bank, to buy of the de-
fendant certain shares of stock therein upon condition that
the plaintiff should be ‘made cashier of the bank, the con-
tract was considered to be against public policy and void.* In

 

1See Fremont v. Stone, 42 Barb. ? Fremont v. Stone, 42 Barb. (N. Y.)
(N. Y.) 169; Havemeyer v. Have- 170,
meyer, 43 N. Y. Sup. Ct. 506; Jones v. 3 Noel v. Drake, 28 Kans. 265.
Scudder, 2 Cin. Sup. Ct. (Ohio) 178;
Noel v. Drake, 28 Kan. 265.
588 OFFICERS, DIRECTORS, AND TRUSTEES. $ 639

the course of the opinion in the case cited, the court said:
“Tn the relation of trust and confidence which Drake occu-
pied as a director and president of the bank, which required
him to look only to the best interests of the bank and its
stockholders, it was improper for him to be influenced by
agreements with or considerations from a stranger to the asso-
ciation in the selection of a cashier, or in the discharge of any
of his other official duties. The appointment of officers by
the directors of a national bank ought not to be made a
‘matter of bargain and sale between applicants and members
of the board.” ?

§ 639. Liability of promoters.—Certain allusions have been
made to the liability of promoters.? A fiduciary character
often attaches to a promoter of a corporate enterprise. In
an important English case, a branch of the famous Emma
Silver Mining Company litigation,‘ Jessel, M. R., said that
a promoter ‘cannot take a secret profit; he must let his
company know what profit he has taken, and deal with
them, so to say, at arm’s length.” Where a party pur-
chased land and assumed to act as a promoter, and claimed
to sell the land to the corporation at the price paid, and it
subsequently transpired that a profit was made by the
promoter, it was said the latter might be compelled to
disgorge.” In McElhenny’s Appeal® this language is
employed: “In order to bring the intestate’s estate into
liability to the company for money received by him in
payment for the land, it must be made to appear that he
occupied some fiduciary relation to it, so that the receipt

 

" Noel v. Drake, 28 Kans. 267. Citing  * Whaley Bridge Calico Printing Co.
Guernsey v. Cook, 120 Mass. 501; v. Green, L. R. 5 Q. B. D. 109,
Noyes v. Marsh, 123 Mass. 286; Mer- 4Emma Silver Mining Co. v. Grant,
chants’ Bank v. State Bank, to Wall. L.R. 11 Ch. Div. 936.
604, 650; St. Joseph & D.C. Railroad = * Simons v. Vulcan Oil & M. Co., 61
Co, v. Ryan, 11 Kan, 602; Haas v. Pa. St. 202, See McElhenny’s Ap-
Fenlon, 8 Kan. 601; Tool Co. v. Nor- peal, 61 Pa. St. 188,
ris, 2 Wall. 45. °61 Pa, St. 188, 193.

2 See § 564.
§§ 640, 641 OFFICERS, DIRECTORS, AND TRUSTEES. 589

of the money, although received by him for his own use,
was, by means of the fraud practiced in his fiduciary rela-
tion, money of the company. It is not damages in a case
like this that equity gives, it is restoration of the thing
wrongfully taken, viz., the money received, or an equal
sum and interest.” .

§ 640. Contracts voidable and not void.—It was considered
in Union Pacific Railroad Company v. Credit Mobilier,? that
the contract of a corporation with its officer was not abso-
lutely and zpso facto void, but was voidable. The corpora-
tion may perhaps disclaim the contract if it chooses to do so.
If, however, it proves to be a profitable one for the corpo-
ration, the latter may hold the contracting officer to its
performance. Though the corporation may, if it so elect,
avoid the contract, the contracting officer cannot of his
own volition escape responsibility. It is not accurate to
Say, in such case, that the contract becomes valid by reason
of the ratification by the corporation. No ratification is
necessary. ‘The contract stands, unless avoided or repu-
diated.? It is not “absolutely void.”

$ 641. Officers selling property to corporation.—It seems
to result from the rule applied to other branches of trans-
actions between officers and the corporation, that where an
officer sells property to the corporation at an advance, he
may be compelled by the corporation to account for the
profit And it is equally clear that directors, composing
a majority of a board, cannot make a binding contract with
themselves as individuals to sell property to the corpora-
tion upon terms to be fixed by them as directors."

 

1135 Mass. 376; Kelleyv. Newbury- 4 The Albion Steel & Wire Co. v. Mar-
port & A.Horse R.R.Co.,141 Mass.496. tin, 24 W. R. 134.

2s, Pp, Jones v. Arkansas Mech. & Coleman v. Second Avenue R.R.
Agr. Co., 38 Ark. 26, Co., 38 N. Y. 201. Compare Butts v.
_ 3 Twin Lick Oil Co. v. Marbury, 91 Wood, 37 N. Y. 317.
U. S. 587.
590 OFFICERS, DIRECTORS, AND TRUSTEES. §§ 642-644

§ 642. Common directors.—It results from principles else-
where set forth that where corporations, having conflict-
ing interests and common directors, enter into a contract
prejudicial to the interests of the stockholders of one of
the corporations, such contract may be avoided.’

§ 643. Election to avoid within reasonable time.—The rule
is well settled that where it is sought to avoid a transaction
by reason of the fiduciary relations of an interested party to
the corporation, the right of avoidance must be exercised
within a reasonadle time after the facts are known, or could,
with due diligence, have been ascertained? “ This,” says
Miller, J., ‘‘ has never been held to be any determined num-
ber of days or years as applied to every case, like the statute
of limitations, but must be decided in each case upon all
the elements of it which affect that question, These are
generally the presence or absence of the parties at the place
of the transaction, their knowledge or ignorance of the sale
and of the facts which render it voidable, the permanent or
fluctuating character of the subject-matter of the transac-
tion as affecting its value, and the actual rise or fall of the
property in value during the period within which this option
might have been exercised.” ®

$ 644. Recovering profits from directors.—As a general rule
a trustee or agent cannot purchase on his own account what
he sells on account of another, nor purchase on account of
another what he sells on his own account. He cannot
unite in himself the opposite characters of buyer and seller.
Thus where directors purchased a steamboat in their indi-

 

1 Metropolitan Elevated Ry. Co. v. Badger, 2 Wall. 87; Harwood v, Rail-
Manhattan Ry. Co.,15 Am. & Eng. road Co.,17 Wall. 78; Marsh v. Whit-
R.R. Cas. 2, and cases cited in opinion more, 21 Wall. 178; Vigers v. Pike, 8
and note ; S.C. 14 Abb. N.C. (N.Y.) 103. Cl. & F. 650; Wentworth v. Lloyd, 32

* Twin Lick Oil Co. v. Marbury, 91 Beav. 467; Follansbe v. Kilbreth, 17 II.
U. S.. 587. 522; Clegg v. Edmonson, 8 De G. M.

® Twin Lick Oil Co. v. Marbury, 91 & G.787; Prendergast v. Turton, 1 Y.
U. S. 587, 591. Compare Badger vy. & C.N.R. 98.
$ 645 OFFICERS, DIRECTORS, AND TRUSTEES. 591

vidual capacity and then bought it as directors for the cor-
poration at a large advance upon its cost, it was held that
the profits thus made inured in equity to the benefit of the
company, and the receivers of the corporation were entitled
to recover these profits’ In Bent v. Priest,? Thompson,
J., said: “It may, we think, be stated as a universal appli-
cation of this rule, that whenever a director of a corpora-
tion proposes to its shareholders or to his co-directors, a
contract, or, acting as such director, makes, ass¢nts to, or
ratifies a contract for the corporation, from which he him-
self is to derive a secret profit, that profit belongs to the
company, and he will be compelled, in a court of equity, to
account for it and to surrender it up to the company.”

§ 645. Condonation of officer’s fraud.—A corporation, as we
have shown, cannot, as a rule, gratuitously condone the
fraud of an officer or release the rights of the corporation
in that regard, otherwise than by the unanimous assent of
the stockholders.* The cases tending to establish a rule con-
trary to that enunciated,* are ably reviewed by the Chief
Justice of Rhode Island,® who reaches the following con-
clusion: “The jurisdiction does not appear to be so firmly
settled and defined in England as in this country, but we
do not believe any English judge has ever decided that a
president or director, who fraudulently converts or embez-
zles corporate funds, cannot be sued in equity by a stock-
holder, when the corporation wilfully neglects or refuses to
bring the suit. Indeed, to hold that a corporation could
gratuitously condone or release such a fraud, by anything
short of unanimous consent, would be monstrous; for it

 

1 Parker v. Nickerson, 112 Mass, 196, * Hazard v. Durant, 11 R.I. 195, 207.
See Michoud v. Girod, 4 How, 503; 4 Gray v. Lewis, L. R. 8 Ch, App.
York & North Midland Ry. Co. v, 1051; J# re London & Mercantile
Hudson, 16 Beav. 485; Bentley y,Cra- Discount Co., L. R. 1 Eq. 277. See
ven, 18 Beav. 75; Bent v. Priest, 10 Atwool v. Merryweather, L. R. 5 Eq,
Mo. App. 557, and cases cited hy 464, note; Foss v. Harbottle, 2 Hare
Thompson, J. 461; Mozley v. Alston, 1 Phillips 790.

2 yo Mo, App. 557. 5 Hazard v. Durant, 11 R. I. 206.
592 OFFICERS, DIRECTORS, AND TRUSTEES. §§ 646-648
would be in effect to hold that a president or director, who
can control a majority vote in the corporation, may rob or
despoil it with impunity.”

$ 646. Possession of treasurer.—A treasurer of a corpora-
tion is a mere depositary of its money, having no title to it
or control over it or duty in relation to it, other than that of
safe keeping, and has no discretion in paying out or dispos-
ing of the money, but in these respects is governed and
controlled‘ by the corporation, which is the real owner.
The treasurer is an agent, and his possession is that of his
principal.

$ 647. Personal liability of officers—The question of the
personal liability of officers or directors of corporations for
the lack of skill or diligence in the discharge of their duties is
elsewhere considered.” We may observe here that they are
bound to show good faith and exercise reasonable diligence
in the performance of their duties, and are answerable for
an omission to exercise that care which every man of ordi-
nary prudence bestows upon his own affairs. They are not,
as already shown, liable for damages resulting from mis-
takes or errors of judgment.®

§ 648. Compensation of officers—The rule is that an offi-
cer of a corporation, who performs the usual and ordinary
duties of his office as defined by the charter or by-laws,
cannot recover compensation for such services, except by
virtue of a special contract forcompensation.* In Pew v.

 

1 Taylor v. Taylor, 74 Me. 585; Pis-
cataqua Fire & Marine Insurance Co.
v. Hill, 60 Me. 183; Sprague v. Steam
Nav. Co., 52 Me. 592.

? See Chap. XXVI.

3 Vance v. Phoenix Ins. Co., 4 Lea
(Tenn.) 388; Turquand v. Marshall,
L. R. 4 Ch. App. 386; Godbold v,
Branch Bank at Mobile, 11 Ala. 191;
Spering’s Appeal, 71 Pa. St. 11; Scott
v. Depeyster, 1 Edw. Ch. (N. Y.) 513;

Hodges v. New England Screw Co., 1
R. I. 312; 8.c.3 R. Ig.

4 Citizens’ National Bank v. Elliott,
55 Iowa 104; S.C. 39 Am. Rep. 167.
See New York & N. H. R.R. Co. v.
Ketchum, 27 Conn. 180; Loan Ass’n
v. Stonemetz, 29 Pa. St. 534; Merrick
v. Peru Coal Co., 61 Ill. 472; Cheeney
v. Lafayette, B. & M. Ry. Co., 68 ‘Ill,
570; 8. Cc. 18 Am. Rep, 584; Holder v.
Lafayette, B. & M. Ry. Co., 71 Ill. 106;
$ 648 OFFICERS, DIRECTORS, AND TRUSTEES. 593

First National Bank of Gloucester,! the plaintiff was the
president and one of the directors of the defendant bank,
and had rendered valuable service to it in superintending
the repairs and reconstruction of the bank building. There
was no express contract to pay for the services. The court
held that the bank was not liable to pay anything for the
services beyond the usual salary of the plaintiff. The opin-
ion proceeds: ‘‘ A bank or other corporation may be bound
by an implied contract in the same manner as an individual
may. But, in any case, the mere fact that valuable services
are rendered for the benefit of a party, does not make him
liable upon an implied promise to pay for them. It often
happens that persons render services for others which all
parties understand to be gratuitous. Thus, directors of
banks and of many other corporations usually receive no
compensation. In such cases, however valuable the services
may be, the law does not raise an implied contract to pay
by the party who receives the benefit of them. To render
such party liable as a debtor under an implied promise,
it must be shown, not only that the services were valuable,
but also that they were rendered under such circumstances
as to raise the fair presumption that the parties intended
and understood that they were to be paid for; or, at least,
that the circumstances were such that a reasonable man in
the same situation with the person who receives and is
benefited by them would and ought to understand that
compensation was to be paid for them.”* ‘The rule is,
not only that directors are not entitled to compensation
for their services in the absence of any agreement on the
part of the corporation to pay for the same, but, on the
contrary, such services are presumed to be rendered gratu-
itously, and they must consequently look either to a statute

 

s. C. 22 Am. Rep. 89; Kilpatrick v. * 130 Mass. 391, 395.
Penrose Ferry Bridge Co., 49 Pa. St. ? Citing Sawyer v. Pawners’ Bank, 6
121. Compare Kelsey v. Sargent, 40 Allen (Mass.) 207.
Hun (N. Y.) 150. :
38 :
594 OFFICERS, DIRECTORS, AND TRUSTEES. § 649

or to a contract for the right to receive compensation.”*
The corporation may, however, vote compensation for ser-
vices to be rendered, but not for services already per-
formed.* Complications will arise where the vote of the
director who is to receive the compensation was counted?
or the action was taken in bad faith.*

§ 649. Powers of directors to act.—The directors of a cor-
poration can only act asa board. This is in accordance
with the general rule that the governing body of a corpora-
tion, as such, are the agents of the corporation only as a
board, and not individually.’ “The affairs of a corporate
body can be transacted only at a corporate meeting. Its
legislative and discretionary powers can be exercised only
by the coming together of the members who compose it,
and its purposes or will can be expressed only by a vote
embodied in some distinct and definite form.”® Ina mu-
nicipal corporation case in New Jersey, this language is
employed: ‘‘ The common council is a body or board, and
must act, and can only act, as such; that it must act when
assembled at stated or special meetings, and organized with
a president to conduct, and a clerk to record, its proceed-

 

1 Smith v. Putnam, 61 N. H. 634.
Citing American Cent. Ry. Co. v. Miles,
52 Ill. 174; Rockford, R. I. & St. L.
R.R. Co. v. Sage, 65 Ill. 328; Holder
v. Lafayette, B. & M. Railway Co., 71
Ill. 106; Gridley v. Lafayette, B. & M.
Railway Co., 71 Ill. 200;- Hall v. Ver-
mont & Mass, R.R. Co., 28 Vt. 4o1,
409; Clark v. San Francisco, 53 Cal.
306 ; Kilpatrick v. Penrose Ferry Bridge
Co., 49 Pa. St. 118; New York & N,
H. Railroad Co. v. Ketchum, 27 Conn.
170; Maux Ferry Gravel Road Com-
pany v. Branegan, 4o Ind. 361; Pew v.
First Nat. Bank of Gloucester,130 Mass,
391; Santa Clara Mining Ass’n v. Mere-
dith, 49 Md. 389; Dunston v. Imperial
Gas Light & Coke Co.,3 Barn. & Ad.125.

* Compare Ogden v. Murray, 39 N.
Y. 202; Bennett v. St. Louis Car Roof-
ing Co., 19 Mo. App. 349.

* Butts v. Wood, 37 N. Y. 317.

* Compare Blatchford v. Ross, 54
Barb. (N. Y.) 42; Sellers v, Phoenix
Iron Co., 13 Fed. Rep. 20.

5 Baldwin v. Canfield, 26 Minn. 54.
dn re Marseilles Extension Ry. Co.,
L. R. 7 Ch. Ap. 161; Schumm y,
Seymour, 24 N. J. Eq. 143; Hillyer v.
Overman Silver Mining Co., 6 Nev. 51;
Edgerly v. Emerson, 23 N. H. 555;
Bank of Middlebury v. Rutland & W.
R.R. Co., 30 Vt. 159.

* Schumm v. Seymour, 24 N. J. Eq.
143, 153.
§§ 650, 651 OFFICERS, DIRECTORS, AND TRUSTEES, 595

ings. Such body can hardly act in any other manner than
by ordinance or resolution.” *

§ 650. Trustees ex maleficio— Fraudulent dissolution. —
Where parties fraudulently represented that they were the
owners of the entire stock and assets of a corporation, and
thereby secured a decree of a court dissolving the corpora-
tion, and acquired possession of its assets, they were treated
as trustees ex maleficto as respects bona fide stockholders.’

§ 651. Power to expel members.—A corporation authorized
by its charter to expel members in the manner prescribed
by its by-laws, may expel a member for failing to perform
a contract void by the statute of frauds, where the by-laws
provide for expulsion for non-fulfilment of a contract
whether written or verbal? When the charter of a corpo-
ration is silent upon the subject of expulsion, or grants the
power in general terms, there are but three legal causes for
disfranchisement : 1. Offences of an infamous character in-
dictable at common law; 2. Offences against the corpora-
tors duty to the corporation, as a member of it; 3. Of-
fences compounded of the two.*

In a case which arose in Texas, the plaintiff was expelled
from a social club without notice. The club was incorpo-
rated, but had no stock nor property. The by-laws did not
call for notice. It was held that the courts could give him
no relief. But a member of a social club, who has paid a
large sum for admission, cannot be expelled for disorderly
conduct which does not affect the interests of the corpora-
tion. It may be noted in this connection that mandamus

 

‘Dey v. The Mayor, etc., of Jersey Chamber of Commerce, 20 Wis. 71;
City, 19 N. J. Eq. 416. People v. N. Y.Commercial Ass’n, 18

2 Bailey’s Appeal, 96 Pa, St. 253. Abb. Pr. (N. Y.) 279. See People v.

3 Dickenson v. The Chamber of Chicago Board of Trade, 45 Ill. 112.
Commerce, 29 Wis. 45; S. C.9 Am. 5 Manning v. San Antonio Club, 63
Rep. 544. Texas 166; S.C. 51 Am. Rep. 639.

4 People v. Medical Society of Erie | °Evans v. Philadelphia Club, 50 Pa.
County, 24 Barb. (N. Y.) 571; State v. St. 107.
596 OFFICERS, DIRECTORS, AND TRUSTEES.’ § 652

is the appropriate writ to effect the restoration of a member
of a private corporation, who has been irregularly removed
from membership.!

§ 652. Ousting directors.—Irregular elections are voidable
only and not void, and the acts of officers acting under
color of an election are binding so long as they retain their
offices.” The legality of their election cannot be brought
collaterally in question, but proceedings must be instituted
for the purpose of trying it, and of evicting the officers if
not properly entitled to fill the offices which they have as-
sumed to exercise.’

 

1 Sibley v. Carteret Club of Eliza- | * Hughes v. Parker, 20 N. H. 58.
beth, 40 N. J. Law 295; High on Ex- 5’ Nashua Fire Insurance Co. v.
traordinary Rems., § 294. Moore, 55 N. H. 54.
CHAPTER XXIX.

PREFERENCES.

§ 657. Claimants for materials furnished
and for labor.

658. State preferences.

659. Drafts, checks, and proceeds of
consignments.

660. Attorney’s fees.

661. Claim of agent.

§ 653. Preferences by insolvents.
654. Corporate preferences,

655. No preference of death claims in
insurance cases.

656. Depositor or claimant of sal-
ary.

§ 653. Preferences by insolvents.—T hat an insolvent debtor
may, in the absence of a bankrupt act, make preferences
among his creditors,’ is a principle of law quite universally
accepted. The great object of our Federal Bankrupt Act,
so far as creditors were concerned, was to secure an equality
of distribution of the bankrupt’s assets. The act contained
provisions under which the assignee could set aside trans-
actions had within four or six months prior to the bank-
ruptcy, which defeated or tended to defeat such an equal
distribution of the bankrupt’s estate? “We have often
declared,” says Mr. Justice Harlan, “that the pvo rata
distribution of the property of the bankrupt was the
main purpose of the bankrupt statute.”*® A preference,
we may observe, is upheld in part upon the theory of

rewarding vigilant creditors.

The right of a debtor to

 

1 Wait on Fraudulent Conveyances,
§ 390; Smith v. Craft, 11 Bissell 347 ;
Giddings v. Sears, 115 Mass, 505;
Atlantic Nat. Bank v. Tavener, 130
Mass, 407; Ferguson v. Spear, 65 Me.
279; Forrester v. Moore, 77 Mo. 651;
Totten v. Brady, 54 Md.170; Preusser
v.. Henshaw, 49 lowa 41; Spaulding
vy. Strang, 37 N. Y. 135; Murphy. v.

Briggs, 89 N. Y. 451; Frazer v,
Thatcher, 49 Texas 26; Holbird y.
Anderson, 5 T. R. 235; Coats v. Don-
nell, 94 N. Y. 178; Jacobs v. Remsen,
36 N.Y. 668.

*See Mayer v. Hellman, g1 U. S.
501; Reed v. McIntyre, 98 U. S. 512.

® Reed v. McIntyre, 98 U. S. 512.
Citing Buchanan y, Smith,16 Wall. 297.
598 PREFERENCES. § 654

devote his whole estate to the satisfaction of the claims
of particular creditors results, as Chief Justice Marshall
declares, “from that absolute ownership which every
man claims over that which is his own.”' Preferences
made by an insolvent debtor amongst his creditors are, as
a rule, obnoxious, inequitable and unjust. The insolvent
too frequently loses sight of or neglects the interests of his
general creditors, and considers only his own future and the
welfare of his immediate friends and relations, whose legal
claims against him are often of a problematical character.
Demands of but slight legal or moral weight frequently
masquerade as the consideration for preferential transfers
of valuable assets. The insolvent’s power of disposition
over the creditor’s trust fund frequently proves so great
a temptation that the strict rules of business integrity are
overlooked. The preference is, moreover, all the more
readily extended in many cases in the hope and expecta-
tion, not always illusive, that the family ties or intimate re-
lationship existing between the insolvent and the preferred.
creditor may inspire leniency in the latter, and prompt him
to aid the struggling insolvent by secretly securing the
benefit of the preference to him, or rewarding him in some
indirect form.

$ 654. Corporate preferences.—Elsewhere we have depre-
cated the right, which is recognized in a number of cases,”
of insolvent corporations to make preferential assign-
ments. It would seem to be an idle waste of words to
designate the capital and assets of a corporation as a trust
fund for the benefit and security of creditors in the event
of dissolution® or insolvency, if one of the first principles

 

1 Brashear v. West, 7 Peters 614, 563; Catlin v. The Eagle Bank, 6
618; Reed v. McIntyre, 98 U. S. 510; Conn. 233; Arthur v. The Commercial
Mayer v. Hellman, 91 U. S. 500. & R.R. Bank of Vicksburg, 17 Miss.

*Coats v. Donnell, 94 N. Y. 178; 394. See Chap, VIII.

Savings Bank of New Haven v. Bates, 3See Upton v. Tribilcock, 91 U. S,
.8 Conn, 505; Ringo v. Biscoe,13 Ark, 45.
§ 654

of the law of trusts, equality of distribution, could be
openly violated, and the effects of the bankrupt company
apportioned among a favored few. Finch, J., said, in
Coats v. Donnell :' “ Regarding the transaction, discon-
nected from the equities which surround it, as a simple
preference of one creditor of the corporation, we do not
understand that such preference is unlawful. The right of
a failing debtor to prefer one creditor to another in the
distribution of his property, while it has been often re-
gretted, is recognized both in courts of law and equity.®
A corporation possesses in this respect the same right as
an individual. It may execute a mortgage, or give a lien
which shall operate as a preference, unless restrained by
its charter or by statute. The Revised Statutes prohibit
preferences by insolvent corporations.* But the prohibition
applies to domestic and not to foreign corporations,”
Preferences among the creditors of insolvent persons are
deemed to be obnoxious; but it is scarcely an exagger-
ation to characterize the power of creating preferences
among the creditors of a corporation as a travesty upon
justice. The courts and the legislatures are combining to
defeat corporate preferences. In New York, as elsewhere
shown, it is unlawful for any incorporated company to
make any transfer in contemplation of insolvency ;° and
though there has been a tendency more or less marked to
defeat the operation of the statute in particular cases,° the

PREFERENCES, | 599

 

194N. Y. 178, 4 Citing 1 R. S. 593, §9.

* Citing 1 Story Eq. § 370; 2 Kent’s
_Com. 532; Wilkes v. Ferris, 5 Johns.
(N. Y.) 335; Murray v. Riggs, 15
Johns. (N. Y.) 571; Jacobs v. Remsen,
36 N. Y. 668.

3 Citing Jz re Patent File Co., L.
R. 6 Ch. App. 83; Catlin v. Eagle
Bank, 6 Conn. 233; Dana v. Bank of
United States, 5 W. & S. (Pa.) 233; 2
Kent's Com. 315, and wote; Angell &
Ames on Corps., § 187.

51 R.S. 605, §1; Robinson v. Bank.
of Attica, 21 N. Y. 407; Sibell v. Rem-
sen, 33 N. Y.95; Harris v. Thomp-.
son, 15 Barb. (N. Y.) 62; Brouwer v.
Harbeck, 9 N. Y. 594.

® Dutcher v. Importers’ & Traders”
Nat. Bank, 59 N. Y. 5, 11; Marine
Bank v. Clements, 31 N. Y. 33; Phil-.
lips v. Campbell, 43 N.Y. 272; Coats v.,
Donnell, 94.N. Y. 178; Paulding v. The
Chrome Steel Company, 94 N. Y. 339..
600 PREFERENCES. §§ 655, 656

legislation has been productive of most salutary results.
In Pennsylvania, as we shall see, the officers and directors
of an insolvent corporation cannot obtain a preference over
the general creditors by getting a judgment by default and
issuing execution thereon.?

§ 655. No preference of death claims in insurance cases.—
Let us notice a few special cases where preferences have
been sought. Death claims, maturing before the dissolu-
tion of an insurance company, are not entitled to prefer-
ence over the holders of unmatured policies.» There is
nothing in the nature of a life insurance contract that gives
a matured claim preference over others that have not ma-
tured. Earl, J., observed: ‘One who has paid his money
to carry a policy to maturity has no better right or greater
equity than another who has paid his money to carry a
policy toward maturity. The holder of a running policy
has paid his money not to make a fund to pay death
claimamts, but for insurance upon his own life.”* The
court, it seems, has the power to order a revaluation of
claims against the company, in cases where the insured
died during the period of liquidation.* The distinction must
be here noticed as to mutual insurance companies, which
provide for an assessment upon living members to satisfy
death claims. The condition of insolvency is not destruc-
tive of the obligation of the members to contribute.

§ 656. Depositor or claimant of salary—A depositor in an
insolvent bank has no preference over an ordinary creditor ;®

 

> Hopkins & Johnson’s Appeal, 90
Pa, St. 69.

2 People v. Security Life Ins, & An-
nuity Co., 78 N. Y. 114, 129; Matter
of Security Life Ins. & Annuity Co., 11
Hun (N. Y.) 96; Lowne v. American
Fire Ins. Co., 6 Paige (N. Y.) 483;
De Peyster v. The American Fire Ins.
Co., 6 Paige (N. Y.) 487.

8 People v. Security Life Ins. & An-
nuity Co., 78 N. Y. 114, 129. Compare

Att’y General v. Guardian Mut. Life
Ins. Co., 82 N.Y. 336.

4Matter of Att’y General v, The
Continental Life Ins, Co. 88 N. Y.
77.

*Vanatta v. New Jersey Mutual Life
Ins. Co., 31 N. J. Eq. 15; S. P. Com-
monwealth v. Mass, Mut. Fire Ins. Co.,
112 Mass. 116; S. C. 119 Mass. 45.

6 People v.: Mechanics’ & Traders’
Sav. Inst., 92 N. Y.7. “

>
$ 657 PREFERENCES. 601

nor has an officer of a bank any preferential claim for his
salary.!. Where an insolvent corporation was indebted to
its officers, and the latter executed notes of the corporation
in their own favor and issued execution thereon, it was held
in Pennsylvania that this conduct of the officers was a fraud
in law which afforded no preference over general creditors
in the distribution.?

§ 657. Claimants for materials furnished and for labor.—
Claimants for materials furnished an insolvent railroad
company are not entitled to payment out of the fund in
court arising from a sale of the corporate property at the
instance of mortgagee bondholders, until the bonds are
paid. Such claimants have no specific lien upon the prop-
erty. Even a promise of payment by the receiver does not
change their case; they can only take the surplus after
specific liens have been discharged.? In the course of the
opinion, Drummond, J., said: “ What equitable lien had
these petitioners on that fund? None. Why? Because
those who had prior liens came in and swept it away, and
more than that, have not, perhaps, been half paid. It is
precisely like the case of a man who furnishes to the owner
of a farm the means of carrying it on; but there is another
party who has a lien upon that farm, and it is sold in order
that the party who has the prior lien may be paid. Now,
the fact that the mechanic or laborer has furnished the
means of carrying on the farm would not authorize him to
come into a court of equity and cut off the prior lien which
exists on the farm and prevent it from being paid. These
parties ought to be paid. They have a just claim against
this road. But it is against an insolvent corporation, and
they ask parties who have a prior right and lien to pay

 

‘1 Bruyn vy. Receiver of Middle Dis- |? Hopkins and Johnson’s Appeal, 90
trict Bank, 1 Paige (N. Y.) 584; Mat- Pa. St. 69.

ter of Franklin Bank, 1 Paige (N. Y.) * Denniston v. Chicago, A. & St. L.
249. R.R. Co., 4 Biss. 414.
602 PREFERENCES. § 657°
them because those with whom they have dealt cannot do
so.” #

Statutes giving liens and preferences to laborers and me-
chanics for work and labor are in force in many States and
Territories, and are to be liberally construed.? But a charter
rendering stockholders liable for debts due ‘‘their laborers
and operatives,” does not include a claim due a consulting
engineer.’ Soa contractor is not included within the words
“laborers and servants”;* nor is the secretary of a manu-
facturing corporation included in the general statute which
makes stockholders liable for debts owing to ‘their labor-
ers, servants, and apprentices.”> Under a statute in Utah.
a person who was employed to oversee mines and per-
formed some manual labor, was considered entitled to a lien
for wages due.® In the course of the opinion, Mr. Justice
Woods said: ‘‘ We have examined all the cases cited by the
plaintiff in error. None of them seem to be inconsistent
with the views we have expressed. They decide that an
architect and superintendent of a building; that a person
employed to cook for men engaged in constructing a reser-
voir ; that acontractor for the building of a railroad or the
erection of a house; that the assistant chief engineer of a
railroad company; that agents employed to disburse money
and pay off the hands who are building a house, are not,
under laws similar to the statute of Utah, entitled to a lien,
for their services.”” The sums due attorneys for profes-
sional services are not ‘‘wages.”® The word “wages” has

 

1 Denniston v. Chicago, A. & St. L.
R.R. Co., 4 Biss. 414, 416, ;

? See Davis v. Alvord, 94 U.S. 545;
Mining Co. v. Cullins, 104 U. S. 176.

3 Ericsson v. Brown, 38 Barb. (N. Y.)

™ Mining Co. v. Cullins, 104 U. S.
176, 178, Citing Foushee v. Grigsby,
12 Bush (Ky.) 75; McCormick v. Los
Angeles City Water Co., 40 Cal. 185;
Aikin v. Wasson, 24 N. Y. 482; Blakey
v. Blakey, 27 Mo. 39; Caldwell v.

a Aikin v. Wasson, 24 N, Y. 482.

5 Coffin v. Reynolds, 37 N. Y. 640.
Compare Gurney v. Atlantic & G. W.
Ry. Co., 58 N. Y. 358.

6 Mining Company v..Cullins, ro4 U.'

S. 176,

Bower, 17 Mo. 564; Brockway v. Innes,
39 Mich. 47; Peck v. Miller, 39 Mich.
594.

* People v. Remington, 45 Hun (Nu
Y.) 338.
§$§ 658-661

PREFERENCES. .

603

a less extensive meaning, and embraces a smaller class of

credits than “earnings.”?

The president of a railroad

cannot be said to be a laborer or employé.?
§ 658. State preferences.—The State of New Jersey does

not possess the crown’s prerogative to have its debts paid in
preference to the debts of other creditors.’

§ 659. Drafts, checks, and

proceeds of consignments.—

Moneys collected on a draft by an insolvent bank acting as
collecting agent cannot be recovered in full where the ear-

marks or means of identity are gone.‘
check does not create a lien upon the fund.®

An unpresented
But the pro-

ceeds of consigned goods, when kept separate, may be
claimed by the owner as against the receiver.®

§ 660. Attorney’s fees.—A

claim for attorney’s fees,

earned a year and a half before the appointment of a
receiver for an insolvent railroad company, is not entitled

to a preference."

But, as we have seen,® a decree appoint-

ing a receiver and awarding priority to claims for “labor in
operating the road,” will include the proper compensation

of counsel for the receiver.®

§ 661. Claim of agent—Where an insolvent life insurance
company is enjoined from the further prosecution of busi-
‘ness, and a receiver appointed, an agent employed for a
specified term has no claim upon the fund for a breach of
the contract by reason of the discontinuance of the employ-

ment.”

 

1 See Jenks v. Dyer, 102 Mass. 235;
Somers v. Keliher, 115 Mass. 165.

2 South & North Ala. R.R. Co. v.
Falkner, 49 Ala. 115.

* Freeholders of Middlesex Co. v.
State Bank at New Brunswick, 30 N.
J. Eq. 311.

4Illinois Trust & Savings Bank v.
Smith, 21-Blatchf. 275; Otis v. Gross,
96 Ill. 612. See People v, Merchants’
& Mechanics’ Bank, 78 N. Y. 269.

® Attorney General v. Continental

Life Ins. Co., 71 N. Y. 325. See But-
ler v. Sprague, 66 N. Y. 392.

° Francklyn v. Sprague, 10 Hun (N.
Y.) 589.

’ Blair v. St. Louis, Hannibal & K.
R.R. Co., 23 Fed. Rep. 521.

* See § 293.

* Bayliss v. La Fayette, M. & B. Ry.
Co., 9 Biss. go.

” People v. Globe Mutual Life Ins.
Co., 91 N. ¥. 174; Eddy v. Co-opera-
tive Dress Ass’n, 3 Civ. Pro.(N.Y.) 442.
604 PREFERENCES. § 661

Statutory préferences of different kinds exist in some of
the States, It will be assumed that the practitioner 1s
familiar with these local enactments. It would scarcely
seem serviceable in a treatise of this character to collate
such statutes. The most frequent subjects of dispute are
preferential claims for labor and supplies, and the statutes
governing demands of this character are not uniform in the
various States.
CHAPTER XXX.

SURPLUS ASSETS—PRESENTATION OF CLAIMS—DIVIDENDS,

 

§ 662. Surplus assets on dissolution. §671. Application of receiver as to

663. Remedy of creditors. distribution.

664. Assets of charitable corpora-| 672. Title to dividends.
tion. 673. Dividend wrongfully withheld—

665. Claims allowable by receiver. Form of remedy.

666. Effect of repeal of charter—Di- | 674. Legislative transfer of dividend.
vision of assets. 675. Participation in dividend by di-

667. Assets of foreign corporation, rector guilty of fraud.

668. Rights of stockholder—Equality | 676. Dividend to life tenant or re-
of distribution. mainderman.

669. Extending time for presenting | 677. Dividends on preferred stock,
claims. 678. Multiplying evidences of debt.

670. Barring claims not proved. ‘| 679. Purchasing claims,

§ 662. Surplus assets on dissolution On the dissolution
of a corporation the surplus assets manifestly belong to the
stockholders,’ and are generally turned over or paid to
them by the liquidating officer. Justice Campbell said:
“The tendency of the discussions and judgments of the
Court of Chancery in Great Britain and of the courts of
this country, is to concede the existence of a distinct and
positive right of property in the individuals composing the
corporation, in its capital and business, which is subject in
the main to the management and control of the corpora-
tion itself ; but that cases may arise where the corporators
may assert not only their own rights, but the rights of the
corporate body. And no reason can be given why the dis-
solution of a corporation, whether by judicial sentence or
otherwise, whose ‘capital was contributed by shareholders

 

1.Lum v. Robertson, 6 Wall. 277; Bacon v. Robertson, 18 How. 480. See
Chaps. XVII, XVIII.
606 SURPLUS ASSETS. §§ 663, 664

for a lawful and perhaps laudable enterprise, with the con-
sent of the legislature, should suspend the operation of
these principles, or hinder the effective interference of the
Court of Chancery for the preservation of individual rights
of property in such a case.” In Warren v. King’ the
court said: ‘Claims of stockholders, as such, on the corpus
of the property of the company in which they are stock-
holders, do not arise until the debts of the company are
paid. Until then the shares confer rights merely as regards
profits and voting power.”

§ 663. Remedy of creditors. — Liquidation, as we have
seen, is generally effected through a receivership.2? In New
York, where a receiver has been appointed of an insolvent
corporation in compulsory proceedings for its dissolution,
any creditor seeking relief must apply to the court in the
district in which the appointment was made, and in the ac-
tion in which the appointment was had. Andrews, J.,
said: ‘If the receiver can be called upon to account by
any creditor in any district of the State, and to litigate
with him, in a distinct proceeding, the question of his right
to payment out of the fund, and that, too, as in this case,
without notice to other creditors, it would produce great
inconvenience and entail great and useless expense, and
would be likely in many cases to prejudice other claim-
ants.”* We have already discussed the general subject of
creditors’ remedies.®

$ 664. Assets of charitable corporation—While the assets
of a moneyed corporation revert to stockholders after the
claims of creditors are satisfied, yet this rule does not nec-
essarily govern in cases of charitable corporations. Hence,
where the funds of a lodge were accumulated “for the

 

1 Bacon v. Robertson, 18 How. 480, 4 Rinn v. The Astor Fire Ins. Co.,
486. 59 N.Y. 143, 147.
2 108 U. S. 397. 5 See Chaps. II., IIT., §§ 156, 157.
See Chaps. 1X., X., XL, XII.
§§ 665, 666 SURPLUS ASSETS. 607

good of the craft, or for the relief of indigent and dis-
tressed worthy Masons, their widows and orphans,” and
the lodge dissolved, it was held that the members could not
divide the money among themselves for their private use.’

§ 665. Claims allowable by receiver.—The subject of pro-
ceedings by or against receivers has been considered.? We
may further note here that, as a general rule, the receiver
of a corporation should not allow any claim to share in the
assets when it could not have been enforced against the cor-
poration either at law or in equity. In this respect the re-
ceivers act as guardians of the rights of all parties inter-
ested in the fund, and they have no right to allow a claim
which is not a proper charge upon the fund to share with-
out the consent of all who are interested in having such
claim rejected.*

$ 666. Effect of repeal of charter—Division of assets.—The
repeal of a charter does not of itself violate or impair the
obligation of any contract which the corporation has entered
into. But, as we have shown, the legislature cannot establish
rules in regard to the management and disposition of the
assets of the corporation, under which the avails shall be di-
verted from or divided unfairly and unequally among the
creditors, and thus impair the obligation of contracts; nor
has it the power to provide that the portion of the avails
which belong to the stockholders shall be sequestered and
diverted from the owners, to the injury of vested rights.‘
In Curran v. State of Arkansas® the court said: “In our
judgment, a law distributing the property of an insolvent
trading or banking corporation among its stockholders, or
giving it to strangers, or seizing it to the use of the State,

 

' Duke v. Fuller, 9 N. H. 536; Ss. c. 3 Attorney General v. Life & Fire
32 Am. Dec. 392. Compare People v. Ins. Co., 4 Paige (N. Y.) 224.
College of California, 38 Cal. 166. See | 4 Lothrop v. Stedman, 42 Conn. 591 ;
§ 392. S.C. 13 Blatchf. 143.

? See Chap. XI. 5 15 How. 312.
608 SURPLUS ASSETS. §§ 667, 668

would as clearly impair the obligation of its contracts as a
law giving to the heirs the effects of a deceased natural per-
son, to the exclusion of his creditors, would impair the ob-
ligation of his contracts.”

§ 667. Assets of foreign corporation,—As we have already
seen,’ where a fund forming part of the assets of an insol-
vent (dissolved) foreign corporation is found in a State, upon
which a citizen of the State has an equitable lien, the home
courts will detain and appropriate such fund or so much of
it as may be necessary to satisfy the lien, although the per-
sons holding the fund may be accountable to a foreign ju-
risdiction with respect to it.2 We have already shown?
that the courts will not decree the forfeiture of the fran-
chise of a foreign corporation,‘ or attempt to dissolve it, or
assume general control of its assets.» Foreign receivers
will be recognized by comity.®

§ 668. Rights of stockholders—Equality of distribution.—
Prima facte all stockholders at any particular period are
equally interested in the property and business of a corpo-
ration. They assume the same liabilities, are entitled to
the same rights, and are equal owners of the property.
When, therefore, the directors undertake to distribute
among the stockholders any portion of the funds or prop-
erty of a corporation, whether it be called profits or not,
all stockholders are entitled to an equal share in the fund,
proportionate to their stock, whether they have been
stockholders for a longer or shorter period. Unless the
charter gives to the directors power to discriminate between

 

1 See Chap. XVI. ® See § 189; Bagley v. Atlantic, M.
? Tinkham v.Borst,31 Barb.(N.Y.)407, & O. R.R. Co., 86 Pa. St. 291; Runk
3 See § 340. * v. St. John, 29 Barb. (N. Y.) 585; Ly-
4 Importing & Exporting Co. of Ga.: coming Fire Ins. Co. v. Wright, 55 Vt.
v. Locke, 50 Ala. 335. 526; McAlpin v. Jones, ro La. Ann.
® Wilkins v. Thorne, 60 Md. 258. 552; Ellis v. Boston, H.& E.R.R.Co.,
See Murray v. Vanderbilt, 39 Barb. 107 Mass. 1.
(N. Y.) 140.
§§ 669, 670 PRESENTATION OF CLAIMS. 609

stockholders in the distribution of profits, they are all en-
titled to share therein.’ In a New Jersey case this lan-
guage may be found: ‘‘It is clearly, as a general thing, the
duty of the corporation to give to each stockholder an
equable share of such dividends as are declared, and it has
been an established doctrine of the courts that most of the
duties imposed upon corporations by law, raise implied
promises which will sustain, when broken, the action of
assumpstt.”*

$ 669. Extending time for presenting claims.—The court
may extend the time for creditors to present their claims
to a receiver.? This power results from the general control
which a court has over its own orders, judgments, and de-
crees. This language is used in the New York Court of
Appeals :* ‘It is well settled that a creditor, upon a proper
case made by petition, may be permitted to come in and prove
his debt at any time while the fund or any part thereof is:
under the control of the court, notwithstanding the time
limited by the master for the creditors to come in and prove
their claims had expired,’ or, as is elsewhere said, ‘the neg-
lect or omission of one will not preclude his right to be
afterwards let in, provided the other creditors are placed
in no worse condition than if all had come in at the same
time,’* and the same rule has been applied in proceedings
against corporations.”*

§ 670. Barring claims not proved.—Where notice to cred-
itors to exhibit their claims has been duly given and pub-
lished by the receiver of an insolvent insurance company

 

1Jones v. Terre Haute & R. R.R. § Citing Brooks v. Gibbons, 4 Paige
Co., 29 Barb. (N. Y.) 357; aff'd 57N, (N. Y.) 374.

Y. 196. ® Citing Pratt v. Rathbun, 7 Paige
® Jackson’s Admrs. v. Newark Plank- (N. Y.) 269; Warner v. Hoffinan, 4.
road Co., 31 N. J. Law 278. Edw. Ch. (N. Y.) 393.
3 People v. Security Life Ins, & Ann. 1 Citing Judson v. The Rossie Galena
Co., 79 N. Y. 267. Co., 9 Paige (N. Y.) 598; Matter of
4 Ibid. 267, 271. City Bank of Buffalo,10 Paige (N. Y.)378,.

39
610 DIVIDENDS. $§ 671, 672

as required by law, claims not exhibited within the time
specified in the notice are precluded from sharing in the
assets,’ unless, as we have said, the court sees fit to subse-
quently let them in to share.*

§ 671. Application of receiver as to distribution.—The re-
ceiver, as has been observed, is ‘‘the hand” or agent of the
court, and he may apply to it at any time for instructions
in regard to any matter touching the fund in his custody,°
and more especially when there is danger that it may be
unfairly distributed. It is the duty of the receiver to see
that each creditor has an equal opportunity to enforce his
claim, and he should not advocate the cause of one claimant
as against another. He is, as we have shown, bound to
give them all reasonable aid.*

§ 672. Title to dividends.—Controversies over dividends
frequently arise between corporate liquidators and stock-
holders. Dividends, generally speaking, are the funds paid
from the profits of a corporation to its stockholders.®
Until formally declared, a stockholder has no right to
claim a dividend’ In New York, Lake Erie & Western
Railroad Company v. Nickals,? Mr. Justice Harlan said :
“A declaration of profits, as, in itself, and without fur-
ther action by the directors, entitling shareholders to
dividends, is unknown in the law or in the practice of
corporations. Dividends are ‘declared’ by some formal
act of the corporation—the question whether there are

 

™People v. Security Life Ins. & An- Co. 8 R. I. 310, 333; Clarkson v.

nuity Co., 78 N. Y. 114. Clarkson, 18 Barb. (N. Y.) 646, 657;
* Ibid. 79 N. Y. 267. Williston v. Michigan Southern & N. I.
3 See Chaps. IX., X., XI. R.R. Co., 13 Allen (Mass.) 400, 404.
4 People v. Security Life Ins.& Ann. | * Compare Boardman v. Lake Shore
Co., 79 N. Y. 271; People v. Security & M.S. Ry. Co., 84 N. Y. 157; Thomp-
Life Ins. Co., 71 N. Y. 222. son v. Erie Ry. Co., 45 N. Y. 468;

5 See Commonwealth v. Erie & Pitts- Chaffee v. Rutland Railroad Co., 55
burgh Railroad Co., 10 Phila. (Pa.) 465, Vt. 110,
466 ; Lockhart v. Van Alstyne, 31 Mich. "119 U.S. 306.
76; Taft v. Hartford, P. & F. R.R.
DIVIDENDS. 611

§ 672
or are not profits being settled entirely by the accounts
of the company as kept by subordinate officers, not
by the “mere statement of directors as to what appears
upon its books.” “There is no debt until the dividend
is declared.”’ The moment a dividend is declared it
becomes the property of the individual shareholders.?
This was fully recognized in Le Roy v. Globe Insurance
Company,®? where, although the company became insol-
vent, it was held that the money appropriated and set
apart for distribution among the stockholders by way of
dividend, became a trust in the hands of the corporation,
to which the stockholders as individuals had acquired vested
rights ; and they consequently were entitled to the fund in
preference to the creditors of the corporation ; and in Kane
v. Bloodgood,* where the chancellor held an action at law,
or for money had and received, would lié by the stock-
holder against the corporation for the recovery of a
dividend ;° though it seems the suit for a dividend should
be preceded by a demand for its payment.© Where the
fund to pay the dividend is deposited with a banking firm
that becomes insolvent, the stockholder has a lien which
will follow the funds in the hands of a receiver, and he may
apply upon petition for the payment of such dividend, and
is not obliged to bring an action.*. Dividends paid from
profits, or while the corporation was perfectly solvent, can-

not be pursued by créditors.

But a dividend declared and

paid when the corporation was insolvent, or contemplating

 

1 Chaffee v. Rutland Railroad Co.,
55 Vt. 127.

*Van Dyck v. McQuade, 86 N. Y.
38; Beers v. Bridgeport Spring Co., 42
Conn. 17; King v. Paterson & Hudson
River R.R. Co., 29 N. J. Law 82.

3 2 Edw. Ch. (N. Y.) 657.

47 Johns, Ch. (N. Y.) go.

5 See West Chester & P. R.R. Co. v.
Jackson, 77 Pa. St. 321; Jones v. Terre

Haute & R. R.R. Co., 57 N. Y. 196;
Jackson’s Admrs. v. Newark Plank-
road Co., 31 N. J. L. 277.

° Hagar v. Union Nat. Bank, 63 Me.
509; Scott v. Central Railroad & Bank-
ing Co. 52 Barb. (N. Y.)..45. See
Philadelphia, W. & B. R.R. Co. v,
Cowell, 28 Pa. St. 329.

‘Matter of Le Blanc, 14 Hun (N,
Y.) 8; aff'd 75 N. Y. 598.
612

DIVIDENDS.

§ 672

e'

insolvency, would be in the nature of a conveyance in fraud
of creditors, which could be overturned by a creditor's bill."
In other words, dividends must be paid out of net profits,”

and not out of capital.’

The dividend belongs to the party

 

1 See Hastings v. Drew, 76 N.Y. 9;
Bartlett v. Drew, 57 N. Y. 587; Will-
iams v, Boice, 38 N. J. Eq. 364; Heman
v. Britton, 88 Mo. 549; National Trust
Co. v. Miller, 33 N. J. Eq. 155; Curran
v. State, 15 How. 304; Sturges v. Van-
derbilt, 73 N. Y. 384.

2Elkins v. Camden & A. R.R. Co.,
36 N. J. Eq. 233; Hughes v. Vermont
Copper Mining Co., 72 N. Y. 207;
Pittsburgh & C, R.R. Co. v. County of
Allegheny, 63 Pa. St. 126.

3 In re Exchange Banking Co., Flit-
croft’s Case, L. R. 21 Ch. D. 519.
A national bank cannot, after reduc-
ing the amount of its capital stock,
retain as a surplus for other pur-
poses any portion of the money which
it received for the stock that is re-
tired, but must return it to the stock-
holders. Van Hoesen, J., said: “If
the defendant had determined to dis-
continue business and wind up its af-
fairs, there is no doubt that the share-
holders would be entitled to a distribu-
tion of whatever assets of the corpora-
tion might remain after its debts had
been paid. If, instead of surrendering
all its corporate powers, a corporation,
by reducing its capital stock, relin-
quishes a portion of them, it seems to
me that the shareholders may properly
claim a distribution of the money which
the corporate body has no longer the
right to use as capital. The abandon-
ment by a corporation of all its corpo-
rate rights gives the stockholders a
right to the distribution of all the net
assets. Why should not an abandon-
ment of a portion of those rights give
the stockholders a right of distribution
pro tanto? Of course, if the capital
stock has been impaired, the amount to

be returned to the stockholders must
be diminished. It is said that the
capital of the defendant has not been
impaired, but that the directors deem
it advantageous to retain as a surplus
one-half of the amount which was sub-
scribed and paid for the stock which
has been called in. The reason as-
signed is not, in my opinion, any justifi-
cation for withholding from the plaintiff
his share of the money that was paid
in exchange for the stock that is re-
tired. That money was paid as capi-
tal, and if it be no longer needed for
that purpose, and if it be not required
for the payment of debts, it has accom-
plished the end for which it was sub-
scribed, and it ought to be returned to
the shareholders. The bank has gone
out of existence as a corporation with a
capital of $500,000. Under a modified
charter, it commences a new life witha
capital of $300,000. So far as the $200,-
ooo of reduced stock is concerned, the
corporation must be considered as hav-
ing surrendered its charter and wound
up its business. This being so, there is
no doubt as to the duty it owes to the
stockholders who own the retired stock,
The able counsel for the defendant in-
sists that it is discretionary with the di-
rectors either to return the money to
the shareholders, or to retain it as a
surplus; and that by retaining it the
bank does the plaintiff no injury, inas-
much as his shares will increase in mar-
ket value as they diminish in number,
and he will own one two-hundredth
part of the new capital stock, just as he
owned one two-hundredth part of the
old capital stock. It is true that his
proportion of the capital stock will
relatively be as great as before the re-
DIVIDENDS, 613

§ 673
who held the stock at the time the dividend was declared ;1
and the corporation in paying out the dividends may, as a
general rule, rely upon its records in determining the ques-
tion of ownership of the stock. As a general rule, the
question of the propriety of declaring a dividend rests in
the sound discretion of the directors,? though it seems that
a neglect to exercise the power, or an abuse of it, may be
controlled by the court,* and discrimination may be pre-

vented,®

Dividends are generally payable in cash,® though

it seems scrip dividends are allowable,” especially if sanc-
tioned or inaugurated by stockholders.®

§ 673. Dividend wrongfully withheld—Form of remedy.—An
alleged stockholder claiming that his right to participate in
a dividend has been wrongfully denied by a corporation,

 

' duction ;.but it is altogether matter of
conjecture as to the future market
value of a share of the reduced stock.
The return of the reduced capital to
the shareholders is not, however, a sub-
ject for the exercise of a director’s dis-
cretion.” Seeley v. New York Nat.
Exch. Bank, 8 Daly (N. Y.) 402; affi’d
78N. Y. 608.

' Brundage v. Brundage, 65 Barb.
(N. Y.) 397; Richardson v. Richard-
son, 75 Me. 570; Jermain v. Lake
Shore & M.S. Ry. Co., 91 N. Y. 483;
Bright v. Lord, 51. Ind. 272; Central
R.R. & Banking Co. v. Papot, 59 Ga.
342; March v. Eastern R.R. Co., 43
N. H. 515.

* Brisbane v. Delaware, L. .& W.
Railroad Co., 25 Hun (N. Y.) 438; S.C.
94 N. Y. 204; Cleveland & M. Rail-
road Co, v. Robbins, 35 O. S. 483.

3 Jackson’s Admrs. v. Newark Plank-
road Co., 31 N. J. Law 277; Will-
iams v. Western Union Tel. Co., 93
N. Y. 162; Coyote G. & S. M. Co. v.
Ruble, 8 Ore. 284; Luling v. Atlantic
Mut. Ins. Co., 45 Barb. (N. Y.) 510.
Compare Pratt v. Pratt, 33 Conn. 446;

Park v. Grant Locomotive Works, 40
N. J. Eq. 114; Richardson v. Vermont
& Mass. R.R. Co., 44 Vt.613; Chaffee
v. Rutland R.R. Co., 55 Vt. r1o.

4 Jermain v. Lake Shore & M.S. Ry.
Co., 91 N. Y. 483; Boardman v. Lake
Shore & M.S. Ry. Co., 84 N.Y. 167 5
Park v. Grant Locomotive Works, 40
N. J. Eq. 114; March v. Eastern R.R.
Co., 43 N. H. 515.

’ Hale v. Republican River Bridge
Co., 8 Kans. 466; Jackson’s Admrs. v.
Newark Plankroad Co., 31 N. J. Law
277; Luling v. Atlantic Mut. Ins. Co.,
45 Barb. (N. Y.) 510; Jones v. Terre
Haute & R. R.R. Co., 57 N. Y. 196.

6 Ehle v. Chittenango Bank, 24 N. Y.
548; Scott v. Central R.R. & Banking
Co., 52 Barb. (N. Y.) 45; Williams v.
Western Union Tel. Co., 93 N. Y. 162,
192.

1 Terry v. Eagle Lock Co., 47 Conn.
141; Jones v. Morrison, 31 Minn. 140 ;
Gibbons v. Mahon, 4 Mackey (D. C.)
130; Rand -v. Hubbell, 115 Mass,
461.

® Terry v. Eagle Lock Co., 47 Conn.
IAI, 164.
614 § 674

DIVIDENDS,
cannot, in the first instance, maintain an action for money
had and received against another stockholder who partici-
pated in the dividend.! There is no privity between the
parties. The remedy of a person so situated is against the
company, and he cannot resort to a common-law action
against the persons to whom the company paid the divi-
dends until the rights of a creditor are established against
the corporation and the legal remedies against it exhausted.’
If the claimant had been an admitted stockholder, and the
dividend declared on his stock had been paid to a third
party for distribution, a trust would arise, and the fund
could be followed.’

Unless some special statutory or charter right exists, an
action cannot be maintained by a stockholder against a
corporation to compel it to declare and pay a dividend from
accumulated funds. “It is the sole and exclusive duty of
the board of directors to declare dividends amongst the
stockholders whenever, in their judgment, the condition of
the affairs of the corporation renders it expedient, and just
to all concerned. And with the exercise of this duty in
good faith, courts will never interfere, unless to prevent in-
justice.” ®

§ 674. Legislative transfer of dividend.—A statute provid-
ing that all dividends declared by any corporation, which
are not claimed within five years, shall be devoted to a pub-
lic use is unconstitutional.® In Wilkinson v. Leland‘ the

 

1 Peckham v. Van Wagenen, 83 N.
Y. 40; S.C. 38 Am. Rep. 392.

4 Karnes v. Rochester & G. V. R.R.
Co., 4 Abb. Pr. N. S. (N. Y.) 107.

3s, Pp. Butterworth v. Gould, 41 N.

Y. 451; Patrick v. Metcalf, 37 N.Y. 332.

3 See Le Roy v. Globe Ins. Co., 2 Edw.
Ch. (N. Y.) 657; Matter of Le Blanc, 75
N.Y. 598; Ss. c. below, 14 Hun (N.
Y.) 8; Peckham v. Van Wagenen, 83
N. Y. 40; s. c. 38 Am. Rep. 392;
Hurd v. Farmers’ Loan & Trust Co.,
63 How. Pr. (N. Y.) 314.

5 Karnes v. Rochester & G. V. R.R.
Co., 4 Abb. Pr. N.S. (N. Y.) 107, 111.
Citing Luling v. Atlantic Mut. Ins. Co.,
45 Barb. (N. Y.) 5ro.

§ University v. North Carolina R.R.
Co., 76 N.C, 103; S.C. 22 Am. Rep.
671.

12 Pet. 658,
$$ 675, 676 DIVIDENDS, 615
court said: “We know of no case in which a legislative
act to transfer the property of A to B without his con-
sent, has ever been held a constitutional exercise of legis-
lative power in any State in the Union. On the contrary,
it has been constantly resisted as inconsistent with just
principles, by every judicial tribunal in which it has been
attempted to be enforced.” *

§ 675. Participation in dividend by director guilty of fraud.—
In Pennsylvania a director who has participated in a fraud
upon stockholders by paying dividends out of capital will
not be permitted in the distribution of the assets of the in-
solvent corporation to claim as a creditor moneys advanced
to pay such illegal dividends.? As we have seen, directors
may reclaim from stockholders dividends illegally declared
under a misapprehension of the right to declare them.®

§ 676. Dividend to life tenant or remainderman.—When a
corporation declares a dividend upon its stock, payable in
money, the stockholder at the time of such declaration,
whether a life tenant or remainderman, is entitled to it irre-
‘spective of its source or the length of time during which
the money was earned. In Vinton’s Appeal,’ the court
ascertained that the money in controversy was derived, not
from the annual earnings of the corporation, but from a sale_
of a part of its franchise and permanent property, and there-
fore considered it a part of the corpus of the trust estate,
and refused to award it to the life tenant. The rule which

 

1 Terrett v. Taylor, 9 Cranch 43.

2 Kisterbock’s Appeal, 51 Pa. St. 483.

3 Lexington Life, F. & M. Ins. Co. v.
Page, 17 B, Mon. (Ky.) 412. Compare
‘Williams v. Boice, 38 N. J. Eq. 364;
Stringer’s Case, L. R. 4 Ch. App. 475;
“Rance’s Case, L. R. 6 Ch. App. 104.

4 Richardson v. Richardson, 75 Me.
_§70; S.C. 46 Am. Rep. 428 ; Goodwin v.
Hardy, 57 Me. 143; Millen v. Guerrard,
67 Ga. 284; Ss. C. 44 Am. Rep. 720.
See Jermain v. Lake Shore & M. S.

Ry. Co., 91 N. Y. 483; J re Barton’s
Trust, L. R. 5 Eq. 238; Bates v. Mac-
kinley, 31 Beav. 280;.Goldsmith v. Swift,
25 Hun (N. Y.) 201; Vinton’s Appeal,
99 Pa. St. 434; S.C. 44 Am. Rep. 116;
Hagar v. Union Nat. Bank, 63 Me.
509. But compare Gifford v. Thomp-
son, 115 Mass. 478.

° gg Pa. St. 440.

6s. Pp. Earp’s Appeal, 28 Pa. St. 368;
Wiltbank’s Appeal, 64 Pa. St. 257;
Moss’s Appeal, 83 Pa. St. 264.
616 DIVIDENDS. § 676

regards cash dividends however large, as income, and stock
dividends however made, as capital, was considered by Chief
Justice Chapman? as a very simple and convenient one.
The Supreme Court of Pennsylvania, however, declared
this to be a bungling rule of law that at one time would
give what was indisputably income to the remainderman,
and at another what was as clearly capital to the life tenant.
Under this rule corporate earnings might be retained for an
indefinite length of time, and then distributed in the shape
of shares of stock, thereby depriving the life tenant of any
income. The law upon this subject is very clearly stated in
a New Hampshire case: ‘“‘ The purchaser of a share of stock
in a corporation takes the share with all its incidents, and
among these is the right to receive all future dividends,
that is, its proportionate share of all profits not then divided ;
and as we understand the law and the usage of such cor-
porations, it is wholly immaterial at what time and from
what sources these profits have been earned ; they are inci-
dent to the share to which a purchaser becomes at once en-
‘titled, provided he remains a member of the corporation
until a dividend is made.”? In England the rule seems to

 

1 Minot v, Paine, 99 Mass. ror.

* March v. Eastern R.R. Co., 43 N.
H. 520, Gray, C. J., has said: ‘Money
earned by a corporation is corporate
property, and not the separate property
of the stockholders, unless and until dis-
tributed among them by the corpora-
tion. In the absence of any restraining
statute, the corporation may treat it and
deal with it, either as an increase of its
property or as profits of its business.
So long as the corporation holds it as
part of the corporate property, it is
capital of the corporation, and the in-
terest therein, represented by each
share, is capital and not income of that
share, as between the tenant for life
and remainderman, legal or equitable,
thereof. When a distribution of such

earnings is made by the corporation
among its shareholders, the question
whether such distribution is an appor-
tionment of additional stock, or a di-
vision of profits, depends upon the sub-
stance and intent of the action of the
corporation, as shown by its votes. It
would be impracticable for the courts,
in determining the comparative rights
of different persons in a particular
share of stock, to go behind the votes
of the corporation and its directors,
and investigate the accounts and affairs
of the corporation, in order to ascer-
tain how the corporation acquired the
funds out of which the dividend was de-
clared. (Minot v. Paine, 99 Mass. ror.)
The English judges, though varying in
opinion upon the effect of particular
§ 676

DIVIDENDS,

617

be that regular dividends go to the life tenant, and extra-
ordinary dividends, whether declared in cash or stock, be-

long to the remainderman.'

The reader must search else-

where for a complete discussion of the many curious phases
of this controversy over dividends between life tenants and

 

votes declaring extraordinary dividends,
have all agreed that the determination
of each case must turn upon the legal
construction of the vote of the corpora-
tion. In the earliest cases on the sub-
ject, Lord Loughborough and Lord
Eldon, each sitting as chancellor, as
well as the House of Lords acting upon
their joint advice, declined to enter upon
an inquiry to ascertain when each part
of the profits had arisen, or in the
words of Lord Loughborough, ‘hunt
it back.’ (Brander v. Brander, 4 Ves.
800, 801; Irving v. Houstoun, 4 Pat-
on’s H. L. Cas. 521, 531; Paris v.
Paris, 10 Ves. 185, 190; Barclay v.
Wainewright, 14 Ves. 66, 78.) In
Price v. Anderson, 15 Sim. 473, 477,
Vice Chancellor Shadwell said: ‘The
question must be determined by the
mode in which the company have
dealt with their profits.” And in one
of the latest cases Vice-Chancellor
Wood (since Lord Chancellor Hather-
ley) expressed the same rule more fully,
as follows: ‘As long as the company
have the profit of the half year in their
hands, it is for them to say what they
will do with it, subject, of course, to
the rules and regulations of the com-
The dividend to which a
tenant for life is entitled is the dividend
which the company chooses to declare.

Where the company, by a ma-
jority of their votes, have said that they
will not divide this money, but turn it all
into capital, capital it must be from that
time.’ (Jz re Barton’s Trust, L. R. §
Eq. 243-245, 248.) By the law of this
Commonwealth, as declared by this
court, a dividend made in new stock is

ordinarily to be deemed capital. Thus
when the vote of the corporation is to
distribute to each stockholder a cer-
tain number of additional shares in the
corporation in proportion to the amount
of shares already held by him, the shares
so distributed are received by the stock-
holder as capital and not as income,
although the means of making the divi-
dend are derived from the net earnings
of the corporation. (Minot v. Paine, 99
Mass. 101.) And when a corporation
votes to increase its capital stock and
to allow the holders of the old shares
to subscribe for the new ones fro rata,
and that any new shares not so taken
shall be sold by the directors and the
premiums realized by the sale paid over
to the parties entitled to the right of
subscribing for the shares, the sum re-
ceived by the directors upon such a sale
is capital to the stockholder. (Atkins
v. Albree, 12 Allen 359).” Rand v.
Hubbell, 115 Mass. 461, 474; S.C. 15
Am. Rep. 134.

1 See Hooper v. Rossiter, 1 McClel.
527; Bates v. Mackinley, 31 Beav. 280;
Paris v. Paris, 10 Ves. 185 ; /# re Bar-
ton’s Trust, L. R. 5 Eq. 238. Compare
Petition of Brown, 14 R. I. 371; S.C.
51 Am. Rep. 397. In Hooper v. Ros-
siter, 1 McClel. 527, 536, the Lord Chief
Baron said: “It seems clear .... that
wherever the addition was made clearly
and distinctly as a dividend only, the
tenant for life was to have it; but
wherever it was not clearly given as.
a dividend, it was considered as an
accretion of capital, divisible amongst

the proprietors.”
618 DIVIDENDS. §§ 677-679

remaindermen. In Matter of Kernochan,’ recently before
the New York Court of Appeals, it was decided that a divi-
dend when declared, became at once principal, though pay-
able at a future date; that an extra dividend declared from
earnings accumulated prior to the creation of the life estate
belonged to the life tenant, and that the value of options
or privileges to which the stockholders became entitled did
not belong to the life tenant.

§ 677. Dividends on preferred stock.—Preferred stock is
not absolutely entitled to a dividend, even though there be
“net earnings” from which the dividend might be paid.
The net earnings may be applied to improvements.?, And
dividends on preferred stock can only be paid out of actual
profits.®

§ 678. Multiplying evidences of debt.— In concluding we
may note that a debtor’s liability to his creditor, where
other creditors are concerned, is not increased by enlarging
the number of his promises to pay the same debt in what-
ever form he may make them. To hold otherwise would
be to enable the debtor to incumber his assets by a new
method, greatly to the prejudice of all other creditors.

§ 679. Purchasing claims.—A director of an insolvent
company will not be permitted to buy up its debentures at
a discount and prove them against the company as a cred-
itor for the full amount.®

Our attempt to bring the practical phases of the law
governing insolvent corporations to the attention of the
practitioner, closes with this chapter. It is not possible to

 

1104 N. Y. 618, 108 U. S. 389; Pittsburgh & C. R.R.

* New York, Lake Erie & W. R.R. Co. v. Allegheny County, 63 Pa. St. 126.
Co. v. Nickals, 119 U. S. 296; S.C. 1 ‘Third National Bank v. Eastern
Rail. & Corp. L. J. 8. Railroad Co., 122 Mass. 240.

3 Painesville & H. R.R. Co. v. King, * Ex parte Larking, L. R. 4 Ch. Div.
17 0. S. 534; Chaffee v. Rutland 566. See Ch, XXVIII.
R.R. Co., 55 Vt. 110; Warren v. King, °
CONCLUSION. 619

speak words of commendation concerning the condition
of our corporation case law, while our statute law regulat-
ing corporate associations is, in many respects, execrable.
That we have repeatedly pointed out conflicting lines of
cases will be conceded. Authorities which control in one
State of the Union are often not recognized in other States.
We have indulged in numerous criticisms concerning some
of the cases governing the liquidation of insolvent associa-
tions. But it is believed that the practitioner will not be
misled by these comments, That certain harmful tenden-
cies exist in the phases of the law here discussed will be
admitted, but we cannot discern how the troubled waters
can ever be quieted if the influx of carelessly framed stat-
utes regulating the subject is to continue.
INDEX.

[The figures refer to the sectzons,]

ABANDONMENT, of franchise, question of intention, 350.
of franchise and property, 398.
what is, 398.
of stock, what is not, 575..
of corporation, excuses filing of report, 585. |
nonuser, not conclusive of, 350,

ABATEMENT of suits, not effected by receivership, 248.
by dissolution, 379.
by expiration of charter, 379.
proceedings iz rem, 379.

ABBREVIATION, of corporate name, 25.
not support guo warranio, 25.

ABSENCE, of statutory authority, appointment of receiver, 174.
of corporation from State, ground of forfeiture, 411.
of books from State, 411, 514, 530.

ABUSE, of power, not a dissolution, 363, 364.
of corporate powers, 399-420.
See FORFEITURE,
and misconduct of officers, removal, 363.
and mismanagement, remedy for, 52.

ABUSES in issuing receiver's certificates, 281, 281 1.
in tolerating preferences, 162, 653, 654.

ACCEPTANCE, of private charter, 16, 17.
of charter, may be presumed, 16.
not essential to resignation, 181,
surrender without, not valid, 360.
of charter, proved from books, 526.

ACCESSIONS, covered by railroad mortgage, 263.

ACCIDENT, not ground of forfeiture, 408, 414.
or mistake, not authorize forfeiture, 408, 414.
622 INDEX. Si mer sa

ACCOUNTING, by officers, for secret profits, 570.
for breach of trust, 570.
by promoters, 564.

See Direcrors, REMEDIES,
ACCOUNTABLE to court, receiver is, 205.

ACTS, when presumptive proof of other acts, ro.
of receiver, corporation not liable for, 36.
of corporation, bind receiver, 208.
of corporation, how proved, ro.
prohibited to corporation, liability for doing, 472.
corporate, presumptions affecting, To, 490.
of board of directors, 491, 649.
of corporatien by its board, 649.
of agent, ratification of, 494.
of agent, proof of, 494.
of adverse possession, 502.
enjoined by stockholders, 625.
not enjoined, 626.
of corporation beyond its powers, 625.
recorded in books, evidence, 526.

ACTION, for dividend, defence to, 558.
transitory, brought i in any jurisdiction, 565.
of guo warranto, defense to, 557.
of mandamus, 60, 61.
cause of, non-survival, 6o1.
against directors, 52, 54.
for deceit, selling worthless stock, 627.
form of, for dividend, 673.
to declare dividend, not maintainable, 673.
of assumpsit by corporation, 52.

See ACTIONS, REMEDIES.

ACQUIESCENCE, of public, cannot legalize private corporation, 19,
in irregular appointment of receiver, 198. «
in transfer of corporate assets, 551.
in prohibited acts, 553.
of stockholders, 62 3.

See RATIFICATION, LACHES.

ACT, of the law, vests receiver with title, 19g.
of legislature, corporations ended by, 337, 351.
of legislature, dissolution by, 351.
of dissolution, character of, 355.
of the parties, dissolution by, not generally effected, 358.
of foreign corporations, 318-335.
of sovereign power, creation of corporation is, 15.

See AGENTS, DIRECTORS, CasHIER, PRESIDENT, TorTs, ULTRA ViRES,
ACTIONS by and against corporations, 38, 4o.

must be brought in corporate name, 25, 225.
by de facto corporation, 22, 38.
Th
Dot INDEX. 623

ACTIONS—continued.

at law by corporations, 4o.
against corporations, 40, 104, 105.
rules that govern, 40, 122.
at law, not maintainable by creditor for subscription, 49. '
at law, not maintainable, when, 53.
to set aside receiver’s sale, 56,

ix by corporations against trustees, 72.
continuance of, by receiver, 235.

t against receivers, 236. ae)

‘14 abated by dissolution, 379. a

for forfeiture, 400.
effect of consolidation on, 448.

See Suit, REMEDIES.
ACTUAL PROFITS, dividends declared out of, 227, 672, 677.

ADMINISTRATOR OF DECEDENT, necessary party, when, 114.
proceedings affecting estate should bind, 114.

ADMISSION, of corporate existence, 484.
effect of plea of general issue, 484.
by contracting with it, 484.
by corporate agent, 495.

ADOPTION of seal by corporation, 488. “
of corporate name, 25.

ADVERSE POSSESSION, title acquired by, 154, 502.
-when set up as defense, 154.
evidence of, 502.
corporation may acquire title by, 502,
acts of, 502. q

AFFAIRS OF FOREIGN CORPORATION, not regulated, 320.
no control over, 320,

See FOREIGN CORPORATION.
AFTER-ACQUIRED PROPERTY, covered by railroad mortgage, 263.

AGENCY THEORY, applied to unincorporated bodies, 465.
unauthorized act binds agent, 465.

AGENT, or trustee, holding stock as, 579.
when personally liable, 579.
claim of, for breach of contract, 661.

AGENTS, liability of corporations for acts of, 7, 494.
unauthorized contract may be repudiated, 7 7.
corporations necessarily act by, 13, 160, 494.
service of process upon, 38, 61, 62, 63.
of bank, trustees'are, 89.
directors are, 7, 157, 160, 494, 560, 632.
declarations affecting corporation, 495.
knowledge of, affecting corporation, 496.
fer
624 INDEX. oa

AGENTS—continued.
evidence of authority of, 494.
authority not presumed, 494.
right to act, how shown, 494.
hold benefits in trust, 637.
See AUTHORITY.

trustees treated as agents of bank, 593.
corporation acts through, 71, 632.

AGREEMENT, of compromise, when binding, 456.
of compromise, variation of, parties released, 456.
to resign, effect of, 638.
resignation agreement, when void, 638.

AGGREGATE, CORPORATION, 20.
nature of, 20,
never dies, 20.

AIDING FOREIGN RECEIVER, comity, 333.
substitution of, as complainant, 333.

ALIENATION, of property by corporation, 26.
of corporate franchise, 301.
of land by deed under seal, 488,

ALLEGING appointment of receiver, 125.
must be in traversable form, 125.

See PLEADING, RECEIVER,
dissolution, what recitals not sufficient, 130.

ALLOWING back claims on appointment of receiver, 29r.
unsecured prior claims, 292.
claims by receiver, rule as to, 665.

ALTERATION, of arrangements, effect on subscription, 439.
of charter, releases subscriber, 439, 576, 613.
when not release of subscription, 576.
when fundamental, effect of, 576.
reserved right of repeal, 17, 405.
limits on power of, 405.
of grant in State constitution, 4o5.
or repeal of charter, power as to, 17, 405.
must be reasonable, 405.
power of, is wholly legislative, 353.
AMALGAMATION and consolidation, 422.
how term employed in England, 422.
See CONSOLIDATION,
the process of, 422.
Mr. Brice’s views as to, 422.
AMENDMENT OF CHARTER, is legislative power, 17, 353, 405.
must be reasonable in character, 4o5.
limitations upon power, 17, 353, 405,
See ALTERATION.
The figures refer INDEX, 62 5

to the sections.

ANALOGY of corporation to copartnership, 27, 464-477.
of corporate and individual rights, 7, 9, 10, 490.

ANCILLARY to legal proceeding, receivership is, 170, 275.
ANNUAL REPORT, failure to file, excusing, 585.
ANNULMENT PROCEEDINGS, receiver appointed in, 200,

ANSWER by party not sued, 121.
when demurrable, 131.
denial of equities by, effect of, 193.

APPEAL, stockholder cannot carry up corporation case, 72.
receiver cannot take, when, 224.
when receiver entitled to, 230, 251.

APPEARANCE, by corporation, when receiver will be appointed, 188..
of corporation by attorney, 38.
by foreign corporation, 188.

APPLICATION, by receiver, for instructions, 204,
of proceeds of receiver’s certificates, 287.
for receiver in sequestration, notice, 312.
of receiver as to distribution, 671.

APPOINTMENT, of agents, 494.
See AGENTS,

of receiver, alleging, 125.
ground for, 169-198.
not made ex parte, 176.
insolvency as ground of, 183.
when not made, .192.
laches affecting, 198.
does not effect dissolution, 203, 264, 339, 372.
delicate exercise of authority, 252
on petition of corporation, 259.
general effect of, 264.
conditions annexed to appointment, 289.

See RECEIVER,

ARBITRATION, corporation may enter into, 38.
form of submission not important, 38.

ARTIFICIAL PERSONS, why corporations are called, 6, 13.
corporations aggregate are, 20.

ASSAULT, corporation liable for, 7

ASSENT, of corporation, presumed as to bringing suit, ro.
of stockholders to assignment, 160.
to reorganization, must be promptly given, 453.
stockholders must conform to scheme of reorganization 453.
surrender and exchange of securities, 453.
to acceptance of private charter, i
to consolidation, 425, 426.

40

x
626 INDEX The figures refer

to the sections.

ASSERTION OF CREDITORS’ RIGHTS, 156,
how creditors may proceed, 78, 86, 95, 156.
what creditors cannot do, 157.
when court will not interfere, 97) 157.

ASSESSMENT, receiver may levy, 218,
receiver may recover in foreign State, 218.
equity may make call, 218, 617.
motives for making, 499-
wisdom of, not questioned, 499.
or call, liability for, 582, 615, 617.
must be levied by proper authorities, 615.
generally proceeds from board, 617.
when corporation is insolvent, "61 5:

See Cine:

ASSETS, carrying out of State, restrained, 42.
"waste of, suit for, 72, 62 5.
what is capital stock, 141.
a trust fund, origin of doctrine, 142.
partnership, analogy of, 143.
Professor Pomeroy’s views, 144.
trust fund after insolvency, 145.
scope of the rule, 146.
of charitable organization, 147.
property liable for debts, 150.
trade-mark, 151.
what are not, 152.
property in foreign jurisdiction, 153.
creditors may pursue, 156.
of corporation, receiver vested with, 199.
of foreign corporation, distribution, 319.
of foreign corporation, not interfered with, 188, 340.
power of legislature over, 405.
of consolidating bodies, 433.
of corporation, restraining unlawful waste of, 625.
president cannot speculate with, 635.
surplus on dissolution, 662.
of charitable corporation, 664.
funds of a lodge, 664.
claims allowed by receiver, 665,
real estate, on dissolution, "384.
division of, repeal of charter, 666.
of foreign corporation, 667.
equality of distribution, 668.
proving claims against, ” 669.
barring claims not proved, 670.
application of receiver for distribution, 671.

: See Property, Execution, REcEIvER, STOCK,
ASSIGNEE, corporation may vote for, 38,

may sue for breach of trust, 52.
holds property in trust, 158.
ig !
Mien INDEX, 627

ASSIGNEE—continued. :
fraud of stockholders, as affecting, 163.
power to sell on credit, 165.
remedy of, 52, 167.
of foreign corporation may sue, when, 189.
personal liability of, 242.
may impeach fraudulent acts, 562.
when cannot enforce personal liability, 569.

ASSIGNMENTS, by corporation, 158-168, 328.
elements of, 158.
power of corporation to make, 159.
assent of stockholders, 160.
transfers in contemplation of insolvency, 161.
preferential, denounced, 162.
fraud affecting sale by assignee, 163.
fraudulent, evidence of, 164.
directing completion of enterprise, 166,
sales on credit, 165.
remedy of assignee, 167.
effect on corporation, 168.
do not effect dissolution, 356.
in foreign jurisdiction, 328,

See ASSIGNEE.

ASSUMING corporate capacity, effect of, 27.
unincorporated companies as copartnerships, 464, 465, 469.

ASSUMPSIT by corporation, 52.

ASSUMPTION of obligations by consolidated body, 434.
none in reorganization cases, 451, 454.

AT LARGE, CREDITOR, cannot interfere with corporation, 34, 86, ror.
cannot proceed for dissolution, tot, 375-
cannot remove trustee, 1ot.
cannot sue officers for negligence, ror.

ATTACHMENT may be levied against property in hands of corpora-
tion, 43.
jurisdiction acquired by, 62.
against stock and property of foreign corporation, 322.
general purpose of, 322.
receiver, may move to vacate, go.
by home creditors, 234.
of stock, 304.
statutes "concerning, 304.

See EXECUTION.

ATTACKING de facto organization, 22, 485.
reorganization, 463.
disinclination to disturb reorganization, 463.
consolidation, 440, 441.
defective incorporations, 29; 464-477.
Th refer
628 INDEX. fe ene

ATTEMPTED CONDONATION by corporation, 572.
ineffectual without stockholders’ consent, 572.
repudiation of certificate that stock was paid up, 618.

ATTORNEY, corporation may appear by, 38.
foreign corporation appearing by, 188,
right to participate in inspection, 506.

ATTORNEY’S FEES, not wages, 657.
not preferred in railroad cases, 660.
allowance of, to counsel for receiver, 660.

ATTORNEY-GENERAL, cannot maintain bill to redress private wrong,
66.
in New York, service of notice on, 388.
duty to bring forfeiture suit, 66, 4or.
mandamus against, 416,
discretion vested in, as to suit, 416.
permission to bring suit by, 4or.

AUTHENTICITY of corporate seal, evidence of, 488.

AUTHORITY, of receiver to sue, 224.
of State to sue, 400,
for consolidation must be legislative, 423.
how bestowed, 423.
of agent, evidence of, 494.
of agent, not presumed, 494.
of officers of corporation, 632.

See AGENTS, DIRECTORS,

to form corporation, 15.

of attorney-general to sue, 66, 401, 416.
of directors to make assignment, 160,
of creditors to follow assets, 156.

AUTHORIZED corporate acts bind receiver, 208.
liens cannot be disturbed, 208.

AUXILIARIES of foreign corporation, 331.
policy of law with reference to, 331.

AVOIDANCE, of ultra vires act, reimbursement, 547.
of transaction, creditor member must be reimbursed, 9s.
of‘voidable act, effect of delay, 551, 552, 553.

See ULTRA VIRES, RATIFICATION.

BACK, claims, allowing by court in its discretion, 291.
pay, corporation cannot vote, 648.

BANK, presumption concerning acts of officers, ro,
insolvency of, 28, 161,
temporary suspension of, 28.
trustees are agents of, 89, 593.
transfer by, in contemplation of insolvency, 161.
national, State receiver of, 195.
national, how wound up, 393.
ee” INDEX. 629

BANK-—continued.
receiver of, may sue, 225.
not dissolved by resolution, 358.

See NATIONAL Bank, SavINcs BANK,

book, entries by deceased persons, 531.
book of deposit is evidence, 531.

book used against depositor, 531.

cashier, notice to, is notice to bank, 496,
cashier is agent of bank, 496 2.
president, notice to, 496.

See INSOLVENCY, DissOLUTION, WINDING UP.
BANK OF GENOA, when formed, 5.

BANK BOOKS, entries in, as evidence, 531.
See Books.

BANKRUPTCY, effect of, 36.

not defense to suit, 36.

discharge of subscriber, not a bar, 536.

effect of proving debt in, 543.

debt may be prosecuted after, 543.

will bankruptcy excuse recovery of judgment, 562.

BARRING claims not proved, 670.
time for presenting exteuded, 669.
nature of the power, 669.

BENEFIT OF TRANSACTION, acceptance of, 547.
reimbursement on avoidance of act, 547.

BENEVOLENT INSTITUTIONS, savings banks are, 89, 592.

BENEVOLENT SOCIETY, dissolution of, 391.
grounds for dissolving, 391.
violent dissensions, 391.
assets of charitable organization, 147.

BEST EVIDENCE, corporate record is, 491.

See EVIDENCE.
BILL, in equity. See Equity.
of discovery, parties defendant in, 108.
when multifarious, 132.
when not multifarious, 133.
containing general charges, demurrable, 192.

BISHOP, is corporation sole, 21.
BLACKSTONE, definition of franchise by, 12.
BLODGETT, J., views of, as to equity jurisdiction over national ee 395-

BOARD, directors only act as, 649.
"affairs of corporation "transacted by, 649.
common council, must act as, 649.
evidence of ordinances and resolutions of, 501.

See DIRECTORS, OFFICERS.
ae INDEX, he fgures refer

BODY CORPORATE, nature of, 5, 6
‘See CORPORATION,

BONA FIDE, possessor, when not interfered with, 254.
transfer to avoid liability, must be, 574.
purchaser of stock, 630.
compromise upheld, 619.
attempt to incorporate, 469 7.

BOND, corporation may execute, 38.
of receiver, filing of, 201.
official, must be filed in New York, 201 z.
of railroad may be seized on execution, 297.

BONDHOLDERS, as plaintiffs in foreclosure, 69.
as complainant, 96.
one may sue, 96.
and stockholders as defendants, 115.
represented by trustee, 115.
as creditors, suit by, 156.
entitled to inspection of receiver’s papers and books, 239.
when income of road belongs to, after decree, 255.
struggle between, ground for receiver, 255.
receiver appointed for, to preserve land grant, 256.
expenses of negotiations, not payable by, receiver, 269,
assent to reorganization, 453+
must conform to reorganization scheme, 453.
right of majority to control, 425, 611,
protected in voluntary reorganization, 463.
power of Canadian Parliament over securities, 452.

BOOKS, inspection of, secured by mandamus, 60, 516.
of receiver, inspection by bondholders and creditors, 239.
of corporation, inspection, evidence, 503-532.
comments upon right of i inspection, 503.
dangers incident to inspection, 503.
stockholder’s right of inspection, 504.
restrictions upon stockholder’s rights, 504.
right of directors to examine, 505.
fellow-director cannot be excluded, 505.
solicitor or plaintiff may see, 506.
no inspection by strangers, 507.
examination by accountant, 507.
what books may be examined, 508-512, 525.
stock transfer book, 509.
manner of i inspecting, 513:
sealing up irrelevant portions, 510,
motive for i inspection, 514.
effect of false entries, 511.
when inspection denied, 515.
remedy for denial of inspection, 60, 516-518.
discovery in equity, 518.
notice to produce, 519.
controversy as basis of inspection, 521.
Th
ieee INDEX. 631

BOOKS—continued.
in custody of succeeding corporation, 522
examination before trial, 523.
moving papers for examination, 524.
minute books, 525.
corporate books as evidence, 527.
what can be proved from, 526.
not evidence against strangers, 528.
in foreign State, 411, 514, 530.
bank book entries, 531.
not conclusive, 532.

BRANCH LINE, receiver empowered to construct, 266.
leasing additional road by receiver, 267.

BREACH, of contract, suit for by corporation, 4o.
. 4 of trust, restrained in equity, 41.
of trust, for receiver to loan money, 221.
of trust, directors liable for, 570, 586.

BRIBES AND GIFTS, recovery of, 637.
officers must not receive, 637.
agent holds in trust, 637.

BRITISH PARLIAMENT, power of, omnipotent, 15.
Canadian Parliament, power over securities, 452.

BUBBLE CORPORATIONS, liability connected with, 5, 605.

BUILDING OF RAILWAY, equity should not attempt, 252, 252 2.
stock and bonds issued to facilitate, 609. |

BURDEN OF PROOF, in suit against director, 595.
rests upon plaintiff, 595.

BUSINESS, obstruction to handling, in corporate name, 4.
4 continuation of, by receiver, 214, 215.
when receiver not allowed to continue, 216.
cessation of, not a dissolution, 364.
right to discontinue, 368.
corporation cannot change against will-of stockholder, 421.
unauthorized, carrying on, 623.
railroad cannot improve river, 623. * -
iron company, cannot embark in mill business, 623.

BY-LAWS, power of corporation to enact, 501 7
must be reasonable, 501 2.
must conform to charter, 501 2.
judicial notice not taken of, 501.
inspection of, allowed, 508.

CALLS, on stock, chancellor may make, 218, 617.
ordered by receiver, 218,
amount of, proved from corporate books, 526.
agreement limiting liability on, when avoided, 582.
implied promise to pay, 582.
after valid transfer, 582,
632 INDEX, ee

CALLS--continued,
stockholders’ liability for, 582.
by court of equity, 615, 616, 617.
future, transfer of shares, 616.
limitations with reference to, 631.

CANADA, Parliament of, power over securities, 452.

CANCELLATION, of subscription, rule as to, 573.
creditors and stockholders ‘protected, 573°
of stock, liability for, 605.
CAPITAL, of corporations, how employed, 4.
when exhausted, sale of assets, 26.
private corporation, trustee as to, 41.
stock, what it is, 141.
is fund with which corporation does business, 141.
dividends not declared out of, 672.

CAPITAL STOCK, certificate of payment of, 565.
trustees cannot squander, 571.
nature of, 141.

CARE, ORDINARY, officers must exercise, "504, 595-
failure to use, 594, 595.

CARE OF FUNDS, investment by receiver, 221.
mingling, 221.

CARRIER, receiver's liability as, 240,

liable to suit for negligence, 240,
earnings of road liable for loss, 240.

CASES, illustrating receivership abuses, 281 7.
showing individual liability, 595.

CASH, property exchanged not for, 148, 583.
dividends generally payable in, 672.

CASHIER, notice to, is notice to bank, 496.
is agent of bank, 496 x.

CAUSE OF ACTION, non-survival of, 6or.
ex delicto, dies with person, 601.
See ACTION, REMEDIES.
CAUSES OF ACTION, joinder of, 134.
when improperly joined, 132, 134.
CAUSES OF CORPORATE INSOLVENCY, 4.
speculative nature of corporate enterprise, 4,

CERTIFICATE, of payment of capital stock, 565.
failure to file, nature of liability, 565.
not essential to make party stockholder, 603.
of stock, what it is, 605.
of stock, not negotiable paper, 605.
of stock, prima facie evidence of title, 605.
cue INDEX. 633

CERTIFICATES, issued by receiver, 274-293.
expenditures by mortgagee in possession, 278.
right to issue recognized, 279.
criticisms on asserted power, 280, 281.
power to make repairs, 282.

» to prevent forfeiture, 283,
order for, notice, 284.
circumstances equivalent to notice, 284.
debts of statutory receiver, 285.
money borrowed to operate road, 286,
application of the fund, 287.
non-negotiable, 288.

CESSATION OF ACTIVE BUSINESS, not a dissolution, 364.
right to discontinue, 368.
continuing at a loss, 368.

CESTUI QUE TRUST, may institute suit, 622.
may ratify or disaffirm unauthorized act, 635.
depositor in position of, 89.
trustee must act for benefit of, 595.

CHANCERY, court of. See Equiry.
receiver cannot sue in, on legal demand, 231.
jurisdiction of, over corporations, 41, 319.
breach of trust restrained by, 41.
may annul forfeiture of shares, 41.
may restrain directors, 41, 42.

See REMEDIES,
CHANGE, in charter, releases subscription, 439, 576, 613.
in business not allowed, 421.
in corporate scheme, 405, 576.
power to effect, is legislative, 353.
reserved right of repeal, 17, 405.

See ALTERATION,
CHANGE OF NAME, should be pleaded, 123.

does not involve change of identity, 2
decree for, cannot be collaterally questioned, 25,

CHANGES IN THE LAW, affecting corporations, 9.

CHARACTER OF ACT of dissolution, 355.
is the act of the members, 355.

CHARITABLE CORPORATION, assets of, 147, 664.
property held for public, 147.
funds of a lodge, 664.

CHARITABLE ORGANIZATION, dissolution, 392.
power to dissolve, 392.
real estate acquired by gift reverts to donors, 392.

CHARITIES, savings banks are, 592.
634 INDEX. sink rile

CHARTER, private, acceptance of, 16, 17, 526.
acceptance proved from books, 526,
carried where corporation goes, 14.
not protected, but contract in it, 17.
what provisions not repealable, 17,
reservation of right of repeal, 17.
no action after expiration of, 94.
receivership on repeal of, 184.
granted by two States, 329, 341.
title upon expiration of, 347.
repeal of, 17, 351.
revocation of, is a dissolution, 352.
legislature may alter or amend, 353.
surrender without acceptance, ineffectual, 360.
no judgment after repeal of, 380.
repeal and alteration of, 405.
forfeiture of, 399-420.
of railroad, forfeiture of, 412.
alteration of, effect on subscription, 613.

See FRANCHISE.

CHARTER OF PRIVATE CORPORATION, evidence to prove, 480.
read from government publications, 480.

CHECK, non-payment of, evidence of insolvency, 28,
unpresented, does not create lien, 659.

CIRCUMSTANCES, equivalent to notice, issuing certificates, 284.
showing adverse possession, 502.

CITIZENSHIP, of members, status of corporation not dependent upon,

334.
corporations treated as persons, 7 7.

CITY, remedy against, 112, 300.
execution against property of, 112, 300.
liability of citizens for debts of, 112.

CIVIL LAW, process of sequestration in, 308.
CIVIL LAW CORPORATIONS, how created, 15.

CLAIMS, created by promoters, 71.
allowing back, 291.
claims for labor, what embraced, 293.
uniting of, 80.
resisting, by receiver, 213.
not affected by removal of receiver, 246.
allowed by receiver, 665.
extending time for presenting, 669.
not proved, may be barred, 670.
purchasing at discount, 679.

CLASSIFICATION OF CORPORATIONS, public and private, 16, 17.
corporation by prescription, 19.
corporation aggregate, 20.
corporation sole, 21.
de facto corporations, 22.
to the sections,

The figures refer INDEX. 63 5

* CLUBS, nature of, 464, 464 2.

liability connected with, 464, 464 7.
expelling member, 651.

notice to members, 651.

mandamus to restore members, 651.

COLLATERAL ACTION, forfeiture not had in, 399, 403.

COLLATERAL ATTACK, receiver's appointment not subject to, 245.
charter of bank not "subject to, 393.
office of directors not subject to, 652.
cannot be made on decree changing corporate name, 25.

COLLATERAL SECURITY, liability on stock held as, 577.
held by creditor member, 95.

COLLEGE BOOKS, used to prove granting of degree, 526.

COLLUSION, receiver may set aside judgment procured by, 227.
onus of proving against officers, 595.

COLLUSIVE FORFEITURE of stock, 612.
may be set aside, 612.

COLLUSIVE RECEIVERSHIP, will be vacated, 247.
theory concerning, 247.

COMITY, foreign corporation may sue by, 39, 93, 234, 318.
aiding foreign receiver by, 333.
foreign corporation doing business by, 93.

COMMENTS, upon the right of inspection, 503.
concerning stockholders, 602.
about receivers’ certificates, 280, 281,
about unincorporated associations, 477.
about trusts, 478.

COMMITTEE, suing in corporate name, gr.
of creditors, personal liability of, 243.
are not partners, 243.

COMMON CARRIER, receiver's liability as, 240.
earnings of road applied to losses by, 240,

COMMON COUNCIL, must act as body, 649.
act by ordinance or resolution, 649.

COMMON DIRECTORS, contract avoided, 642.

COMMON LAW, corporations, 19, 483.
actions against corporations, 40.
forfeiture must be had in court of law, 339.
failure of remedy at, equity intervenes, 381.

COMPACTS, private corporations are, 17.
COMPANIES, unincorporated, as copartnerships, 27, 464.
636 INDEX. ea

COMPENSATION, and expenses of receiver, 223.
of officers as affecting liability, 596.
of officers, contract for, 648.
directors presumed to serve without, 648,

COMPETITION, expenditures by receiver to prevent, disallowed, 269.
destroying, use of money restrained, 42.

COMPLAINANTS, who may be, 65-96.
observations as to, 65.
people or government as, 66, 67.
sovereign States, 68.
in foreclosure, 69,
trustees as, 69.
in dissolution proceedings, 70, 375+
promoter’s claims, 71, 639.
corporations, 38, 39, 40, 72.
stockholders, 73, 74, 75, 98, 99-
reimbursement of, 76.
judgment creditors, 78.
suing for unpaid subscriptions, 78.
joinder of, 79, 80.
one. suing for all, 82.
against stockholders, 83, 84,
enforcing statutory liability, 85.
general creditor no receiver, 36.
existing and subsequent creditors, 87.
volunteer, 88.
depositors, 89.
creditors, 156, 157.
receiver as, 90, 227.
action by receiver, 227, 314.
sequestration receivers as, 314.
in forfeiture action, 66, 400.
committee, 91.
foreign corporation, 39, 93.
foreign receiver, 333.
after expiration of charter, 94.
creditor member, 95.
bondholder, 96.
enforcing personal liability, 560, 562-601.
status of complainants, 97-103.
exhausting remedy against corporation, 97.
suit by stockholder, 73, 74, 75, 98, 99.
sufficiency of request, 99.
creditor or member suing in place of receiver, 100,
creditor at large, 101.
guarantor, 102,
proof of insolvency, judgment, 103.

. See REMEDIES, ACTIONS, PLEADING, FORECLOSURE, DEFENDANTS,
ParRTIES,
Th
nie INDEX. 637

COMPLETING CONTRACTS, of insolvent corporation, 214, 266.
action of receiver in, 214.
to build railroad, 256.

COMPLIANCE, with condition of subscription must be shown, 608.
conditional subscription is continuing proposition, 608,

COMPROMISE, by directors, of litigation; 38.
of claims, power of receiver to make, 212.
agreements, reorganization, 456.
bona fide, upheld, 619.
by consolidated company, 433.
COMPTROLLER OF THE CURRENCY, power to appoint receiver,
195.
jurisdiction not exclusive, 195.

CONCERNING DEFENSES, 533.
outline of, 533-559.

CONCLUSIONS, concerning: copartnership liability, 477.
concerning receivers’ certificates, 280, 281.

CONCURRENT REMEDIES, of creditors, 48.
of defrauded subscriber, 614.
CONDEMNING. PROPERTY, 26, 426, 442.
See EMINENT Domaln,
CONDITIONAL SUBSCRIPTIONS, rules that govern, 608,
are continuing propositions, 608.

CONDITIONS, annexed to appointment of receiver, 289.
upon which corporate franchises are granted, 399.
non-performance of, ground of forfeiture, 409.

CONDONATION, of officer's fraud, 571, 645.
unanimous consent to, 645.

CONFIDENTIAL RELATION, between stockholder and director, 633.
between trustees and depositors, 89, 592.
between agent and principal, 637.
between promoters and corporation, 564.

CONFLICT, over possession, when not ground for receiver, 192.
between receivers, 190.

CONFLICTING receivers, jurisdiction as to, 190.
jurisdiction, priority of appointment of receivers, 261.
CONGRESS, incidental power of, to create corporations, 15 7.
See NATIONAL Banks,

CONNECTICUT, right of receiver to sue, 225.
receiver of foreign corporation in, 234.

CONSENT, of parties, receivership not revocable by, 177.
receiver not granted on, in improper cases, 192.
of stockholders to consolidation, 425.
to reorganization, 453.
638 INDEX. Tne

CONSOLIDATED COMPANY, officers as defendants, 119.
receiver of, 262, 443.
sale of property, 436.
power of State as to, 423.
a new corporation, 430,
title to assets, 433.
judgment against, 437.
insolvency of, 444.
domicil of, 445.

CONSOLIDATED RAILROAD, sale of, 436.
receiver of, 262, 443.

CONSOLIDATION, restrained by injunction, 42.
dissolution by, 371, 430.
of corporations, 421-449.
motives for, definition, 421.
amalgamation and consolidation, 422.
right to effect, power of the State, 423.
encouragement to effect, 424.
consent of stockholders to, 425.
protecting dissenting stockholders, 426,
no lien in favor of original shareholders, 427.
succession and consolidation distinguished, 428.
what corporations may effect, 429.
consolidated company a new. corporation, 430.
effect of, on property and debts, 431.
liability to amount of property received, 432.
title to assets and franchises, 433.
assumption of obligations, 434.
effect of, upon liens, 435.
sale of consolidated road, 436.
judgment against consolidated company, 437.
consolidated company not a purchaser without notice, 438.
effect on subscriptions, 439.
right to question, 440.
setting aside, 441.
eminent domain.as applied to stocks and franchises, 442.
receiver of consolidated corporations, 443.
insolvency of consolidated company, 444.
domicil of, 445.
immunity from taxation, 446,
pleading, 447.
as affecting pending actions, 448.
removal of suits to Federal courts, 449.

CONSTITUTION OF CORPORATION, See CHarter.

CONSTRUCTION, statutory, regulating sequestration, 182.
of dissolution statutes, 342.
of charters of corporation, 482.
forced construction not allowed, 482.
of statutes creating personal liability, 566,
Thi ,
ion INDEX. 639

CONTEMPLATION OF INSOLVENCY, transfers avoided, 161.

CONTEMPT, proceedings will lie against receiver, 205, 205 2.
of court, suing receiver without permission, 170, 237.
to interfere with running of trains, 238.
to infringe letters patent, 238.
to levy on property held by receiver, 298.
sequestration as process of, 308.
to disclose result of inspection, when, 503.
to break seals of books, when, 510.

CONTINUED EXISTENCE OF CORPORATION presumed, to.
CONTINUING LOSING ENTERPRISE, 367, 368.

CONTRACT, corporation may repudiate when unauthorized, 7 7.
of insolvent corporation, completing, 214.
in charter not repealable, 17.
of de facto body, binding, 22. ,
obligations survive dissolution, 382.
not avoided by consolidated body, 438.
written, cannot be varied, 606.
with officer, voidable and not void, 640.
power to make, Io, 26, 649.
corporate seal not essential to, To.
of promoters, 71, 564.
receiver completing, 214, 266.

See SUBSCRIPTION.

CONTRACT CREDITOR, cannot secure receiver, 86."
must recover judgment, 34, 97, 156.

CONTRACTOR, not a laborer or servant, 657.

CONTRACTS, and torts, distinction as to liability, 8,
outstanding, will not prevent dissolution, 336.
limits of power to make, 26, 649.
of subscription, fraud in, 619.
termination of, by officers, 632.
between corporation and directors, 634.
of promoters, 71, 564.
See CONTRACT.

CONTRIBUTION, when stockholder may enforce, 569.
principle of, 569.

CONTROL, of court, receiver is under, 170. « +
of court over suits, 230, aoe
of court, abuse of ‘receiver's powers prevented, 230,
of corporation, majority governs, 359, 452, 609, 611, 626.

CONTROVERSIES affecting internal management, 325, 335, 340.
must be determined in home jurisdiction, 335, 340.

CONTROVERSY, as ground for inspection, 521.
CONVERSION, suit by receiver for, 224.
640 INDEX. ee

CONVEYANCE, power of corporation to make, 26.
of entire property, effect of, 368.
corporate seal must be used, when, 488.

COOLEY, J., views as to legislative forfeiture, 404.
COPARTNERSHIP LIABILITY, 27, 464-477, 563.
COPARTNERSHIPS, defective incorporations as, 464-477.

COPY of order appointing receiver, evidence, 497.
of corporate papers after notice to produce, 500.

CORPORATE BODY, is a fiction, 9.
presumptions affecting, 10, 490,
evidence affecting, 479-502.
for what liable, 7,
acts by a board, 649.
public and private, 17.
personal liability of members, 560-6o1.

CORPORATE BOOKS, inspection, evidence, 503-532.
comments upon the right of i inspection, 503.
stockholder’s right to inspection, 504.
right of directors to examine, 505.
examination by solicitor or plaintiff, 506,
no inspection by strangers, 507.
what books may be examined, 508.
inspection of stock transfer book, ‘509.
sealing up irrelevant portions, 510,
effect of false entries, 511.
making memorandum from books, 512.
manner of making inspection, 513.
motive for inspection, 514.
inspection denied, 515.
remedy by mandamus, 516,
granting mandamus discretionary, 517,
inspection by discovery in equity, 518.

notice to produce, 5r9.
disobedience of statute, 520,
controversy as basis of application, 521.
in custody of succeeding corporation, 522,
examination before trial, 23.
moving papers, 524.
minute books, 525.
what can be proved from, 526,
as evidence, general rule, 527.
not evidence against strangers, 528.
proving corporate proceedings by parol, 529.
in foreign State, 530.
entries in bank books, 531.
books not conclusive, 532.

CORPORATE CAPACITIES. See Powers, Directors,

CORPORATE EXISTENCE, estoppel, 476.
admission of, 484.
The figures refer INDEX. 64 i

to the sections.

CORPORATE INSOLVEN CY, causes of, 4.
phases of, 28-36.
open and notorious, 30.
presumptions concerning, 33.
effect of, 34.

CORPORATE, powers and liabilities, 7.
authority, source of, 15.
name, rights as to, 25, 38.
insolvency, causes of, 4.
effect of, 34.
what constitutes, 28.
does not work dissolution, 356.
existence, averment of, 122.
franchises, executions against, 300, 3or.
act, voluntary dissolution is not, 355.
powers, rules of construction, 482.
power to sell property, 26.
remedies, 37-64.
power to arbitrate, 38.
power to make by-laws, sor z.
power to litigate, 65-96, 104-121.
See ULTRA VirES, PowErs, DIRECTORS.

CORPORATE PREFERENCES, 162, 654.
theory as to, 654.
statutes to prohibit, 654.
allowed and disallowed, 655-661.
Seé PREFERENCES,

CORPORATE REORGANIZATION, 450-463.
right to effect, 450.
confusion concerning, 450.
through foreclosure, 451.
assent to, 453.
curing defective, 458.
of national bank, 459.
attacking, 463. |

CORPORATION, aggregate, 20.
sole, nature of, 21.
domicil of, 14, 323, 445, 561.
de facto, 22, 476, 483, 485.
creation of, source of power, 15.
grounds for dissolution, 70, 337.
is a person, 7 7.
liability of, for torts, 7, 8.
liable for assault, 7.
for false imprisonment, 7.
for libel, 7.
for infringing patent, 7.
for trespass, 7.
‘for obstructing trade, 7.

41
642 INDEX.

CORPORATION—continued.

power of, to hold real estate, 154, 328.
when necessary Cefendant, 105.
pleading, refusal of, to prosecute, 127.
remedies against, exhausting, 97, 100, 621.
and directors, contracts between, 634, 635.
public and private, 16, 17.
jus disponendi of, 26.
as complainant, 65-96.
status of, in litigation, 97-103.
as defendant, 104-121.
pleadings in cases of, 122-140.
liability of, to promoters, 71, 564.
not incorporated for illegal purpose, 15 7.
name of, 25.
change of name of, 25.
name acquired by usage, 25.
agents act for, 13, 160, 494.
declarations affecting, 495.
Inay act outside of State, 318-335.

_ power to make by-laws, 501 7.
power to consolidate, 421-449.
power to reorganize, 450-463.
defective, liability, 464-477.
inspecting books of, 503-532.
defenses affecting, 533-559.
stockholders of, 602-631.
dissolution of, 336-398.
law, reasons for condition of municipal, 1,

CORPORATIONS, financial misfortunes affecting, 1.

history and definition of, 5, 6.
nature of, restated, 11.
presumptions affecting, 10, 487.
assignments by, 158-168.

effect of assignment on, 168.

may act as receivers, 171.

in character of receiver, 196.
executions affecting, 294-307.
foreign rights of, 318-335.
chartered in different States, 341.
forfeiture proceedings must be against, 402.
consolidation of, 421-449.

that may consolidate, 429.

as copartnerships, 27, 464-478.

by prescription or at common law, 19.
invisibility of, 13.

existence of, derived from State, 15,
public and private, 17.

quast, 24.

legislative recognition of, 19.
actions by and against, 38, 4o.

The figures refer
to the sections.
Th e
perverted INDEX. 643

CORPORATIONS —continued.
may appear by attorney, 38.
may arbitrate, 38.
may sue for damages, 4o.
ordinary rules of pleading govern, 40, 122.
injunction against, 42.
liable to garnishment, 43-
must sue for injuries to property, 52.
may secure a mandamus, 60.
sue for wasted assets, 72.

CORPORATORS liable as partners, 27, 464-477.
COSTS awarded against receiver, 231.

COUNTER-CLAIM OR SET-OFF, against receiver, 550.
questions as to, 549.

COUNTY, creditor's bill against, 111.
members of, when liable for debts, 560.

COUPONS, when severed, are independent claims, 156.

COURT, receiver is officer of, 170.
has care of property in receiver's hands, 170.
municipal corporation not dissolved by, 390.

COURTS cannot review exercise of legislative power, 15.

COVENANTS, official, no personal liability on, 206,
of lease, not ended by dissolution, 383.

CRASSA NEGLIGENTIA, imprudence amounting to, 595.

CREATION of corporations, source of the power, 15.
two or more may be combined, 15, 421.
of receiver of corporation, 199.
of relationship of stockholder, 603.

CREATURE, of the law, corporation is, 5.
of statute, personal liability, 560.

CREDIT, power of assignee to sell on, 165.
may be given for stock by corporation, 603.

CREDITOR, lien of, enforced in equity, 41.
by judgment, suing for subscription, 78.
volunteer is not, 88.
must reduce demand to judgment, 97.
status of, 97-103.
assertion of rights of, 156.
what he cannot do, 157.
protecting home, 327.
member, right to sue, 95.
at large, rights of, 34, 86, ror, 375.
er
644 INDEX. Teen

CREDITORS, power of legislature to restrain, 36.
cannot sue at law for subscription, 49.
remedies against receiver, 56.
may proceed in equity to annul sale, 56.
by judgment may sue for subscription, 78.
enforcing statutory liability, 85.
general, cannot secure receiver, 86.
status of, judgment, 97-103.
suing in place of receiver, too.
at large, cannot interfere with corporation, ror.
bill against county, 111,
may invoke trust-fund rule, 142.

follow corporate property, 156.
attack transfers, 156.
sell property on execution, 156.
overthrow ultra vires contract, 156.
pursue delinquent shareholders, 156
enjoin preferential payments, 156.
receiver represents, 156.
when creditors cannot interfere, 157.
cannot prevent forfeiture, 157.
right of, to a receiver, 180.
remedies against receivers, 239,
home, protecting, 327.
contract with reference to dissolution, 336,
right to apply for dissolution, 375.
lien of, 386.
transfer fraudulent as to, 461.
may unite to purchase, 462.
enforcement of personal liability by, 562.
personal liability is to, 569.
directors as trustees for, 570.
release of subscribers not good against, 613.
remedy of, against receiver, 663.
time for presenting claims extended, 669.
claims of, may be barred, 670. :
shut out by foreclosure, 545.

See Depositors, BONDHOLDERS.

CRITICISMS, on power to issue receivers’ certificates, 280, 281.
on dissolution proceedings in New York, 343.
upon preferences, 162, 653, 654.

CROWN, corporations creatures of, 450.
prerogative as to preferences, 658.

CURING DEFECTIVE ORGANIZATION, 458,
legislative recognition, 19.

CUSTODIA LEGIS, funds in hands of receiver, 170.
CUSTODIAN OF PROPERTY, receiver is, 275.
The figures refer INDEX. 645

to the sections.

DAMAGES, exemplary or punitive, liability of corporation for, 7.
corporations may sue for, 40.
when action for, will not lie, 55.
when too remote, 55.
when stockholders cannot sue for, 73.
receiver appointed to collect, 260.
directors liable for, 586, 587.

DANFORTH, J., views as to forfeitures, 408.
DAY IN COURT, corporation entitled to, 105.
DEATH CLAIMS, not preferred in insurance cases, 655.

DEATH, of members, as affecting dissolution, 337.
dissolution by, 337, 369.
effect on stock corporation, 369.
of trustee, penalty not enforceable, 601, 601 2.

DEBENTURES, issued by receiver, first lien, 256.
DEBT, merger of, when not accomplished, 599.

DEBTS, legislature cannot release, 156.
of statutory receiver, 285.
property of corporation liable for, 294.
effect of dissolution on, 381.
of municipal corporation fall on successor, 390.
amendment of charter will not avoid, 390.
effect of consolidation on, 431.
personal liability for, 560-601.

DECEIT, directors may be sued for, 586, 587.
action for selling worthless stock, 627.

DECLARATION, of forfeiture by legislature, 404.
views of Cooley, Sharswood, and Black, 404.

DECLARATIONS affecting corporations, 495.
when binding, 495.
of director, effect of, 495.
of president, 495 7.

DECLARATORY OF COMMON LAW, statutes, 567.
DECREASE OF CAPITAL STOCK, rights of parties, 672, 672 2.

DECREE, vests title in receiver, 199.
receiver appointed after, 255.
waste restrained after, 255.
rights settled by, 389.

DEED, presumption concerning, 488, 490.
of corporation, must bear seal, 488.

‘+s DE FACTO CORPORATIONS, 22, 476, 483, 485.
acts of, valid, 22.
action by, 22, 38.
officers, what are, 23.
associations, proof of, when sufficient, 476, 483, 485.
officers, presumption’ as to, 486.
Ye efer
646 INDEX. tas,

DEFAULT, in payment of interest not justify receivership, 252.
receiver prior to, ground for, 257.
of subscriber, no defense, 584.

DEFEATING SUBSCRIPTION, 540.
what not a defense, 540.
fraud of directors, 540.
conditional subscription, 608.

DEFECTIVE INCORPORATIONS, as copartnerships, 464-478.
unincorporated companies as copartnerships, 464.
the agency theory, 465.
two innocent parties, 466.
rule in England as to promoters, 467.
grounds of individual liability, 468.
partnership theory, New York and other cases, 469.
interest acquired after attempted incorporation, 470.
withdrawing protection of the statute, 471.
liability for acts prohibited to the corporation, 472.
corporations as copartnerships in foreign jurisdictions, 473.
the Massachusetts cases, 474.
denial of partnership liability, 475.
estoppel as to corporate existence, 476.
certain conclusions, 477.
trusts, 478.

DEFECTS, in corporate formation, 22, 485.
which do not invalidate acts, 22,

DEFENDANTS, in suits against directors, 54, 106.
who may be made, 104, 105.
corporations, when necessary, Io5.
directors as, 106.
in forfeiture and insolvency proceedings, 107, 402,
-in bill of discovery, 108.
corporation after appointment of receiver, 109.
joining stockholders, 110.
bill against county, 111.
insolvent city, 112.
trustees of foreign corporation, 113.
administrator of decedent, 114.
stockholders and bondholders, 115.
creditors in dissolution proceedings, 116,
in foreclosure, 117.
unsecured creditors in foreclosure, 118.
officers of consolidated corporation, TIQ.
interpleading third parties, 120.
answer by party not sued, 121.

See PARTIES, COMPLAINANTS, REMEDIES.
DEFENSE, receivership or bankruptcy, 36.

DEFENSES, in corporation litigations, 533-559.
observations concerning, 533.
when corporate non-existence may be shown, 534.
Th
pao INDEX, 647

DEFENSES—continued.
insolvency no defense to subscription, 535.
bankruptcy discharge, 536.
opposing insolvency proceedings, 537.
insufficient defense to winding-up proceedings, 538.
of payment to claim for personal liability, 539.
defeating subscription, 540.
fraud on subscriber, 541.
release by corporation, 542.
effect of proving debt in bankruptcy, 543.
threatened forfeiture when no defense, 544.
effect of foreclosure sale, 545.
wrongful acts of officers, 546.
reimbursement on avoidance of w/tra vires act, 547.
vendor's lien, 548.
set-off, 540.
counter-claim against receiver, 550.
acquiescence in transfer of corporate assets, 551.
laches in raising objection, 552.
acquiescence in prohibited acts, 553.
receivership no defense, 554.
usury, 555.
situs of notes, 556.
in guo warranto, 557.
of action for dividend, 558.
effect of sequestration, 559.
subscriber's default, 584.
success of wrongful act, when not, 77.
fraud in procuring subscription, 619.

DEFINITION, of corporation generally, 5, 6.
of corporation aggregate, 20.
of corporation sole, 21.
of shares of stock, 604.
of capital stock, 141.
of assignment, 158.
of consolidation, 421.
of guasi corporation, 24,
of private statute, 480.

DEFRAUDED SUBSCRIBER'S remedies, 614.
has five forms of relief, 614.

DEFUNCT CORPORATION, receivership of, 185.
DELEGATION OF AUTHORITY to agents, 494.
DELINQUENT SHAREHOLDERS, creditors may pursue, 78, 156.

DEMAND, for inspection, must precede mandamus, 516.
that suit be instituted, 97, 99, 100.

DEMURRABLE, when answer is, 131.
when bill is, 132.
bill containing general charges is, 192.
648 INDEX. the Pe naee

DEMURRER, when properly overruled, 133.

DENIAL of equities by answer, effect, 193.
of partnership liability, 475.
of inspection of books, 515.

DEPOSITING MONEY, by receiver, 221.
mingling funds, 221.

DEPOSITORS, status of, 89, 592.
are creditors of the bank, 89, 592.
occupy double relation, 592.
not entitled to preference, 656.
receiver may sue for, 593.
appointment of receiver for, 89.
bank books used against, 531.

DIFFICULTIES of selecting remedies, 37.
DILIGENCE, officers must exercise, 594, 595, 647.

DILLON, J., definition of corporation by, 5.
views as to dissolving public corporation, 390.

DIRECTORS, are agents of corporation, 13.
office of, not vacated by appointment of receiver, 36.
power to control litigation, 38.
may compromise suits, 38.
may be restrained in equity, 41, 587.
election of, right to test, 51.
remedies against, 41, 52.
liquidator or assignee may sue, 52.
injunction against, 54.
restored by mandamus, 60,
as defendants, 106.
may share with creditors, 156.
purchase of claim at discount, 156.
resignation of, to secure receiver, 181.
selling property after insolvency, 183.
receiver acts in place of, 266.
cannot dissolve corporation by resolution, 358.
power of, affecting dissolution, 361.
misconduct and neglect of, 363, 364.
cannot authorize consolidation, 421.
power of, to modify lease, 426.
proving election of, 491.
proving vote of, 491.
are the agents of the corporation, 494, 560, 633.
declarations of, 495.
notice to, affecting corporation, 496.
right to examine books, 505.
personal liability of, 560-601.
as trustees for stockholders and creditors, 570, 633.
liable for breach of trust, 570.
must account for secret profits, 570.
The figures vefer INDEX. 649

to the sections.

DIRECTORS—-continued.
cannot release subscribers, 571, 613.
hold-over officers, liability, 581.
liability of, for fraud, 586, 587.
wrongful acts of, enjoined, 587.
of national banks, 590.
of savings banks, 592-596.
notice to, as a board, 496 2.
cannot cancel subscription, 613.

. relation of, to corporation, 632-652.

must act.in good faith, 633.
and the corporation, contracts between, 634.
selling property to corporation, 641.
contracts with corporation voidable, 640.
common, 642.
agreement to resign, .638.
bribes and gifts to, 637.
secret profits, 636.  -
recovering profits from, 644.
condonation of fraud, 645.
ousting, 652.
compensation of, 648.
presumed to serve gratuitously, 648.
only act as board, 649...
excluded from receiving dividend, 675.

See OFFICERS, PERSONAL LiaBiniry, TRUSTEE.

DISCHARGE, of receivers, rule as to, 222, 317.
of receiver, on payment of mortgage, 273.
of subscriber, in bankruptcy, 536.
of liability pro tanto, 580.

DISCONTINUING, business ground ¢ of forfeiture, 408.
losing enterprise, 367, 368.

DISCOUNTING paper at usurious rates, ground of forfeiture, 408.

DISCOVERY, bill of, parties defendant, 108, 518.
joining officers, 108.
in equity, inspection by, 518.

DISCRETION, as to granting mandamus, 60, 517

how to be exercised, 60.
as to appointment of receiver, 178, 254.

DISCRETIONARY, adjudging forfeiture is generally, 408.
granting mandamus, 517.
declaration of dividend, 672.

DISCRETIONARY POWERS, of receivers, 211, 229.
as to removal of receivers, 246,
as to appointment of receivers, 178, 254.
of attorney- general, 416.

DISCRIMINATION, not allowed between subscribers, 571.
concerning dividend, 672,
: he refer
650 INDEX. — ie aneek

DISCUSSION, limits of, stated, 2.

' DISFRANCHISEMENT, legal causes for, stated, 651.
offences of infamous character, 651.

offences against corporate duty, 651.

offences compounded of the two, 651.

DISINTERESTED PERSON, receiver should be, 170.

DISPOSING OF CORPORATE PROPERTY, not a dissolution, 356,
372.

DISQUALIFICATIONS OF RECEIVER, 171, 194.
who will not be appointed, 171, 194.

DISSENTING STOCKHOLDERS, cannot be forced to accept other
stock, 26, 425, 426.
protecting, 426, 609.

DISSENSIONS, as ground for receiver, 173.
as basis of dissolution, 391.

DISSOLUTION, and winding up, 336, 398, 399.
See FORFEITURE.

liability of corporation to, 336.
restrained in equity, 42, 376.
proceedings, complainants in, 70.
creditor or stockholder may bring, 70,
grounds for, 70.
creditors may come in, 116.
alleging in pleading, 130.
of charitable corporation, assets of, 147.
appointment of receiver, 186,
statutory receiver on, 187.
title on, 202,
appointment of receiver does not affect, 203, 264.
sequestration does not effect, 317.
effect of foreign, 326, 340.
termination of corporate existence, 337.
forfeiture and repeal of charter, 338.
no equity jurisdiction independent of statute, 339.
proceedings in foreign jurisdiction, 340.
when chartered in different States, 341.
construction of statutes, 342.
practice and proceduré in New York, 343.
English winding-up act, 344.
by expiration of charter, 345.
term of duration, 346.
title on expiration of charter, 347.
effect of repeal on property rights, 348.
reversion for nonuser, 349.
abandonment, 350.
by act of legislature, 351.
repeal of charter is, 352.
nature of power of repeal, 353.
Th \ F
alco” INDEX. 651

DISSOLUTION—continued.
no repeal by implication, 354.
character of act of, 355.
insolvency does not work, 356.
test of insolvency, 357.
by act of the parties, 358.
power of majority, 359.
not effected without acceptance, 360.
power of directors affecting, 361.
resignation of officers, 362.
misconduct of officers, 363.
neglect to exercise powers, 364.
illegal action, 365.
suspension of business, 366.
continuing losing enterprise, 367.
right to discontinue business, 368.
by death of members, 369.
exclusive ownership in one person, 370.
by consolidation, 371.
what does not effect, 372. 4
enjoining exercise of corporate functions, 373.
wrongs complained of remedied, 374.
not decreed in foreign jurisdiction, 337.
by forfeiture, 399.
fraudulent, trustees ex maleficio, 650.
surplus assets on, 662.
of lodge, assets, 664.
proceedings to secure, and effect of, 375-398.
who may apply for, 375.
enjoining proceedings for, 376.
injunction pending, 377.
collusive judgment of, 378.
abates actions, 379.
no judgment, after repeal of charter, 380.
effect of, on debts, 381.
contract obligations survive, 382.
effect on leases, 383.
real property on, 384.
no transfer of stock after, 385.
creditor’s lien, 386,
power and duty of trustees, 387.
receiver on, 388.
rights settled by decree, 389.
of municipal corporations, 390.
of benevolent society, 391.
charitable organization, 392.
national bank, 393.
joint stock company, 394.
effect of military order, 395.
presumed surrender of franchise, 396.
when effected, 397. _,
abandonment, 398,
652 INDEX. ah ag As hl

DISTINGUISHING feature of corporation, 5.

DISTRIBUTION, creditors may come in on, .116.
under order, receiver protected, 231.
of moneys in sequestration, 316.
of assets of foreign corporation, 319.
of surplus assets, 662.
of charitable funds, 662.

DIVIDED RESPONSIBILITY, cause of corporate insolvency, 4

DIVIDEND, parties to suit about, 119.
improperly declared, receiver may sue for, 227.
defense to action for, 558.
enjoining payment of, 587.
DIVIDENDS, rules as to, 672-677.
must be equal, 668, 672.
title to, 672.
from what derived, 672.
who entitled to, 672.
right to declare, 672.
payable in cash, 672.
when in scrip, 672,
wrongfully withheld, 673.
legislative transfer of, 674.
to guilty director, 675.
to life tenant, 676.
to remainder-man, 676.
on preferred stock, 677.

DIVISION OF ASSETS, See Assets.
repeal of charter, 666,
application concerning, 671.
on dissolution, 662.

DOCTRINE OF HUN v. CARY discussed, 593.

DOMICIL, of a corporation, 14, 323, 445.
comments concerning, of Porter, J., 14.
parties contract with reference to law of, 14.
of railroad corporation, 14.
corporation may have two, 323, 445.
of consolidated company, jurisdiction i in different States, 445.
personal liability governed by, 56r.

DRAFT, on broken bank, claim not preferred, 659.
DRUNKEN STOCKHOLDER. transfer by, set aside, 616 7.
DURATION OF RECEIVERSHIP, temporary, 275.
DUTCH EAST INDIA COMPANY, when formed, 5.
DUTIES devolving on consolidated company, 430.

DUTY, of receiver, 204, 266.
may apply to court for instruction, 204.
of railroad receiver, 266.
Th
ieee INDEX. 653

DUTY—continued.
to manage railroad, 266.
of trustees on dissolution, 387.
of directors to declare dividends, 673.

See DIRECTORS, OFFICERS,

EARNINGS OF ROAD, chargeable with goods lost by receiver, 240.
may be applied to improvements, 677.
preferred stock not always entitled to, 677.
applied to expenses, 290.

EFFECT, of insolvency, 34.

of denial of equities by answer, 193.

of repeal on property rights, 348.

of dissolution on leases, 383. = -

of military order, 395.

of bankruptcy, 36.

of dissolution on debts, 381.

of assignment on corporation, 168.

of receivership, 170, 203, 264.

of judgment as regards receiver, 250,

of foreign dissolution, 326.

of resignation of officers, 362,

of conveyance of entire property, 368,

of consolidation on property and debts, 431.

of consolidation on subscriptions, 439.

of proving debt in bankruptcy, 543.

of judgment against corporation, 599.

of repeal of penal statute, 600,

of transfer to irresponsible party, 574.
to fictitious person, 575.

EJECTMENT, foreign corporation may maintain, 318.
forfeiture question not tried in, 403.

ELECTION, of directors, after insolvency, 35, 219.

right of stockholders to test, 51.

tax-payer may question, 5T.

mandamus to compel holding of, 60.

of officers after receivership, 219,

of directors after receivership, 219.
omission to hold not a dissolution, 372.
proof of, 491.

to avoid voidable contract, 643.
must be within reasonable time, 643.

ELEMENTS of an assignment, 158.'

EMINENT DOMAIN, right of, not readily transferred, 26.
injury from, corporation liable, 40.
as applied to stock, 426, 442.
property not taken "for private use, 18.
right of, transferred by consolidation, 433.

EMPLOYES and laborers, rules as to payment of, 568, 657,
Mt vr
654 INDEX. see eae aad

ENCOURAGEMENT to effect consolidation, 424.

ENFORCEMENT of personal liability, 562.
who may enforce, 562. .
discussion concerning, 560-601.

ENGINEER, claim of, not preferred, 657.

ENGLAND, rule as to appointing receiver of railroad, 253.
winding-up act, provisions of, 344.
rule in, as to-_promoters, 467.
right in, to inspection of books, 503.

ENJOINING, misconduct of officers, 363.
exercise of corporate functions, 373.
proceedings for dissolution, 376.
wrongful acts of directors, 587.
acts, by stockholders’ suit, 625.
acts not enjoined, 626,

ENTERPRISE, assignment directing completion of, 166.
continuing losing, 367, 368.

ENTIRE PROPERTY, sale of, by corporation, 26, 367, 368.
of public corporation, right to seize, 300.

ENTRIES, in books of corporation, 527.
when not evidence, 527.

See CORPORATE Books.
ENUMERATION OF POWERS, excludes others, 7.

EQUALITY OF DISTRIBUTION, rule of equity, 162, 668.

EQUITABLE, jurisdiction to appoint receivers, is, 169.
relief, insolvency as ground of, 183.

See Equity.
EQUITIES, denial of, by answer, effect, 193.

EQUITY, jurisdiction of, illustrations, 41, 54.
private corporation trustee of capital, 41.
temedy by injunction, 42.
breach of trust restrained, 41.
lien of creditors enforced in, 41.
directors may be restrained, 41, 42.
may compel execution of trusts, 41.
remedies against stockholders, 47.
relief against directors, 42, 54.
jurisdiction in Federal courts, 64.

uniform in Federal courts, 64,
bill in, corporation defendant, 105.
bill when multifarious, 132.
bill when not multifarious, 133.
regards corporate property as trust, 150.
may make calls, 218, 615, 617.
may sequestrate property or income, 299.
Th
pian INDEX. 655

EQUITY—continued.
has not inherent jurisdiction to forfeit franchise, 339.
not forum to determine forfeiture, 400.
remedy in, to stockholder, 624.

See Cais, REMEDIES, COMPLAINANTS, PARTIES, DEFENDANTS, SUITS.

ERECTING BUILDINGS in violation of charter, ground of forfeiture,
408.

ERRONEOUS ORDER must be obeyed, 197.

ERRORS OF JUDGMENT, trustees not liable for, 592.
cases reviewed, 592-595.
views of Sharswood and Kent, 592 2,

ESTABLISHING NOTICE to corporation, 496.
knowledge acquired through agents, 496.

ESTOPPEL, doctrine of, affecting corporations, 7.
as to accepting acts ultra vires, 7.
as to corporate existence, 476.
of stockholders as to corporate business, 623.
after proof de facto of corporation, 476.
by acquiescence in prohibited act, 551, 623.
or by laches, 552.
of junior mortgagees, 545.

EVIDENCE, in action for forfeiture, 415.
of fraud, over-valuation, 609.
of debt, multiplying, 678.
of title, certificates of stock are, 605.
to establish relation of stockholder, 606.
written instrument cannot be varied, 606.
generally, 479-502. ;
of insolvency, 28, 103, 479.
recovery of judgment not test, 28,
of non-payment of check, 28,
stopping payment, 28.
of fraudulent assignment, 164.
affecting corporations, 479. ;
charter of private corporation, 480.
general laws, 481.
construction of charters, 482.
of incorporation, 483.
admission of corporate existence, 484.
de facto corporation, 485.
de facto officers, 486.
presumptions as to corporate existence, 487,
corporate seal, 488.
signatures, 489.
presumptions affecting corporate acts, 490.
proving election and vote of directors, 491.
roof of membership, 492.
establishing subscription, 493
656 INDEX. ee

EVIDENCE—continued.
of authority of agent, 494.
declarations affecting corporations, 495.
establishing notice to corporations, 496.
of receiver's appointment, 497.
good faith and value, 498.
Investigation as to motives, 499.
notice to produce, 500.
ordinances and resolutions, 5or.
of adverse possession, 502.

EXAMINATION BEFORE TRIAL, in New York, 523.

moving papers, 524.

contents of affidavit and order, 524.
EXAMINATION OF CORPORATE BOOKS (see Inspection, Cor-

PORATE BOOKS), 503-532.

stockholders’ right, 504.

right of directors, 505.

solicitor or plaintiff, 506.

not allowed to strangers, 507.

what books may be examined, 508, 510, 525.

sealing up irrelevant portions, 510.

motive for, 514.

remedy for, 516-518.

corporate books as evidence, 527.

books in foreign State, 530.

entries in bank books, 531.

EXCLUSIVE OWNERSHIP in one person, effect of, 370.
does not dissolve corporation, 370. *
does not abate suits, 370 7.

EXCUSING FAILURE to file report, 585.
effect of abandonment, 585.

EX DELICTO, promoter liable, 564.
corporation is responsible, 7.

EXECUTIO EST FINIS ET FRUCTUS LEGIS, 294.

EXECUTION, creditor may seize property on, 156.
equitable, receivership is, 170.
creditor, suing for subscriptions, 78.

EXECUTIONS, against public corporations, 63, 300.
comments concerning, 294-307.
against private corporations, 295.
real estate, 296.
property in custody of receiver, 298.
property liable to, 297.
property subject to mortgage, 299.
against corporate franchises, 301.
what passes under sale of franchise, 302, 303.
shares of stock, 304.
priority of lien, 305.
7
he figures refer INDEX. 657

to the sections,

EXECUTIONS—continued.
under Pennsylvania practice, 306.
rolling stock, 307.

EXECUTIVE, remedy, mandamus is, 60. |
officers may be authorized to appoint receivers, 172, 184.
authority, no presumption as to its power, 340.

EXECUTORS, stock taken by, 579 2.
EXEMPLARY OR PUNITIVE DAMAGES, liability for, 7.

EXEMPTION, of public property from execution, 63.
of corporation, when lost by consolidation, 446.
from taxation, when continued to consolidated body, 446.

EXEMPTIONS, are personal privileges, 294.
none as applied to corporations, 294.

EXHAUSTING REMEDY, against corporation, 97, 621.
creditor must have judgment, 97.
exceptions to the rule, 97.

EXISTENCE OF CORPORATION, is a fiction, 9.
derived from sovereign power, 15. ~
methods of ending, 337, 399.

EXISTING AND SUBSEQUENT CREDITORS, 87.
rules governing, 87.

EX PARTE, receiver not appointed, 176, 185.

EXPELLING members, power of, 651, 652.
directors, 652.

EXPENDITURES, by mortgagee in possession allowed, 278.
by receiver, 223, 269.

EXPENSES, and compensation of receiver, 223.
met by receiver, 268,
not allowed to receiver, 269.
receiver's certificate used for, 287.
income applied to, 290.

EXPIRATION OF CHARTER, no action after, 94.
judgment after, ineffectual, 94.
dissolves corporation, 337, 345.

title upon, 347.
See DISSOLUTION.

EXPRESS ASSENT, not essential to estoppel, 623.
EXPULSION OF MEMBER, restrained, 42.
mandamus concerning, 60.

EXTRA-TERRITORIAL, power of receivers, 234.
acts of corporations, 318-335.

FACTS, may be pleaded in general form, 122.
contested, as to value, submitted to jury, 498, 583.

42
ae aS TE ican

FAILURE, to act within reasonable time, ground of forfeiture, 410.
to file report, how excused, 585.

FAILURES of business corporations, 1.
causes of, 4,

FALSE, entries in books, effect of, 511.
prospectus, repudiation of subscription, 619.
FALSE IMPRISONMENT, corporation liable for, 7.
FALSE REPRESENTATIONS, when damages too remote, 55.

FALSE SECURITIES, liability for floating, 586.
exaggerated statements allowed, 586.

FANCIFUL QUESTIONS not determined on mandamus, 60, 557-
FEDERAL BANKRUPT ACT, object of, 653.

FEDERAL COURTS, cannot interfere to prevent organization, 25.
suits in, by stockholders, 64.
equity jurisdiction uniform, 64.
suit for patent infringement, 238.
receiver of consolidated road, 262, 443.
removal of suits to, 449.
will notice general laws, 481,
rule as to stock purchased for suit, 628 7.
follow State courts, 481.

FICTION, existence of corporation is, 9.

FICTITIOUS NAME, taking stock in, 575.

FICTITIOUS PERSON, effect of transfer to, 575.
transfer to, a mere nullity, 575.

FIDUCIARY, relation of officers to corporation is, 633-645.
certain illustrations, 635.
contracts voidable, 640.
common directors, 642.

FIDUCIARY DUTIES, violation of, restrained, 42.

See Directors, OFFICERS, AGENTS.
FINANCIAL BUBBLES, early statutes to suppress, 5.
FINANCIAL MISFORTUNES affecting corporations, 1
FINED, corporation may be, 7
FORCED CONSTRUCTION of charter not allowed, 482.
See CONSTRUCTION.
FORCIBLE ENTRY, receiver may bring, in Maine, 225.

FORECLOSURE of mortgage, plaintiffs i in, 69.
where organization is void, 92.
tenant as defendant, 104 7.
liability of corporation after, 109.
defendants in, 117, 118.
when bondholders bound, 117.
The #4
pp ri Ag INDEX. 659

FORECLOSURE—continued.
omitting sovereign State, 117.
unsecured creditors and stockholders cut off by, 118, 455.
discharge of receiver in, 222, 273.
when appeal by receiver does not affect, 251.
discretion as to appointment of receivers, 254.
grounds for receivership in, 254.
title of receiver in, 263.
sale is not a dissolution, 372.
reorganization through, 451.
after consolidation, 436. —

FORECLOSURE SALE, effect of, 545.
excludes stockholders, 545.
shuts out creditors, 455, 545.

FOREIGN CORPORATION, rights of, considered, 318-335.
State may exclude, 14.
may sue by comity, 39, 318.
can enforce payment of loan, 39, 318.
bring ejectment, 39, 318.
prosecute real action, 318.
rules of forum govern, 39.
conditions affecting, 39.
service of process on, 62.
jurisdiction over, 62.
as plaintiff, 93, 318.
trustees of, as parties, 113.
trust-fund rule governs, 145.
general assignment by, 161.
receiver over, 188, 189.
jurisdiction over, 188, 318.
chancery jurisdiction, 319.
stockholders suing, 320.
remedies of resident stockholders, 321.
attachments, 322.
domicil, 323. |
notice of foreign laws, 324.
forfeiture, 325.
effect of foreign dissolution, 326. ,
may be proceeded against, 318.
protecting home creditors, 327.
power of corporation in foreign State, 328.
chartered by two States, 329.
telegraph companies, 330.
local auxiliaries of, 331.
receivership of, 232.
aiding foreign receiver, 333.
citizenship of members, 334.
controversies affecting internal management, 335.
incorporation, no presumption as to, 480.
assets of, 667. :
660 INDEX. oe

FOREIGN DISSOLUTION, effect of, 326.

FOREIGN JURISDICTION, property in, 153.
proceeding zm invitum, effect on property, 153.
dissolution not decreed in, 337.
corporations as copartners in, 473.

FOREIGN LAWS, notice of, 324.
no presumption as to knowledge of, 480.

FOREIGN RECEIVER, recognized by comity, 189, 234, 667.
title and right to sue, 234, 333.
trustees may sue, 189.

aiding, 333.
FOREIGN STATE, books in, 530.
corporations may do business in, 318-335.

FORFEITURE, of shares, suit to annul, 41.
government must enforce, 66, 400.
corporation necessary party in proceeding for, 105, 402.
proceedings, defendants in, 107.
pleading ground of, 124.
not favored or implied, 124, 399-420.
data must be given, 124.
nonfeasance must be wilful, 124, 414.
not decreed at suit of creditor, 157.
receiver to prevent, 256.
not tried in collateral way, 319.
of foreign corporations, 325, 337.
not decreed in foreign jurisdiction, 337.
and repeal of charter, distinction, 338.
dissolution by, only effected by legal proceedings, 399.
of stock, 612. :
complainants in actions for, 66, 400.
proper remedy, 4oo. ~
statutes in New York, got.
proceedings must be against corporation, 402.
not allowed in collateral proceeding, 403.
legislative declaration of, 404.
alteration and repeal of charter, 405,
by terms of franchise, 406.
receivership on bill filed by individual, 407,
grounds of, 408.
non-performance of conditions, 409.
failure to act within reasonable time, 410.
absence from State, 411.
of railroad charter, 412.
insufficient ground for, 413.
accident or mistake not ground of, 414.
evidence in action for, 415.
mandanuus against attorney-general, 416.
judgment of partial ouster, 417.
judgment upon information, 418.
Th
Bie INDEX. 661

FORFEITURE—continued.
effect of judgment, 419.
waiver of, 420.
denied and receivership allowed, 407.
of foreign franchise, not allowed, 340, 667.

FORMALITIES, failure to observe, in creating corporation, 22.
use of seal, 10, 488.
directors must act as a board, 649.

FORMATION OF CORPORATIONS, 15.
source of the power, 15.

FORMS OF REMEDY, against trustees, 593.
affecting corporations, 37-64.
dividend wrongfully withheld, 673.

FORMS OF PROCEDURE, bind receiver, 231.
of submission to arbitration, 38.

FORUM, rules of, govern, 39.

FRANCHISE, what is meant by, 12.
public, power to grant, 18.
confusion as to meaning of, 12.
government may resume, 57.
continued use of, 215.
executions against, 300, 301.
reached by sequestration, 308.
of foreign corporation, forfeiting, 325.
no inherent equity jurisdiction to forfeit, 339.
surrender by act of parties, 358.
presumed surrender of, 396.
abandonment, 398.
abuse of, a public wrong, 400.
of consolidated company, 430.

See CHARTER.

FRANCHISES, of consolidating bodies, 433.
transfer of, 460.

FRATERNITIES, liability of members of, 589.
or benevolent societies, dissolution, 391.

FRAUD, general averment insufficient, 129.
alieging facts constituting, 129.
use of word “corrupt” insufficient, 129.
in issuing property for stock, 148.
of creditors, conveyance made in, 150.
of stockholder, effect on assignee, 163.
vacating judgment of dissolution for, 378.
on subscriber, when no defense, 541.
director liable for, 570, 586.
over-valuation evidence of, 609.
repudiating subscriptions by reason of, 619.
action of deceit for, 627.
re
662 INDEX. The faves refer

FRAUD—continued.
of officer, condonation, 645.
of creditors, dividend declared in, 672.

FRAUDULENT, conduct of agent binds corporation, 9.
sale by receiver set aside in equity, 56.
assignment, evidence, 164.
transfer of shares, 574, 575, 616.
corporations, early appearance of, 5.
receivership will be vacated, 247.
credit for railroad, no immunity, 252.
dissolution, trustees ex maleficio, 650.
transfer to’ new corporation, 461.

FUND (see Trust Funp), 142.
for distribution, 662.
equality of distribution, 668.
FUNDS, investment and care of, by receiver, 221,

receiver must hold for distribution, 221.
should be deposited by receiver, 221.

FUTURE CALLS, transfer of shares, 616.

GARNISHMENT, against corporations, 43,
State cannot be subjected to, 43.
lies against private corporation, 43.
process of, against receiver, 44.
rule as to, in several States, 44.
GENERAL CREDITORS, have no specific lien, 34, 41.
when relief not accorded to, 34, 41.
cannot secure receiver, 86.
cannot interfere with receiver, ror.

GENERAL ISSUE, pleading, 136.
plea admits corporate existence, 136, 484.
rule in Massachusetts, 136.

GENERAL LAW, special charter repealed by, 405.
GENERAL LAWS, judicial notice of, 481.

Federal courts will notice, 481.
GENERAL REPUTATION not competent to show who are officers, 486.
GENERAL RULE, as to corporate books being evidence, 527.

as to corporate assets, 142.

as to presumptions affecting corporations, 10, 490.
GENERAL RULES of pleading govern corporations, 40, 122.
GEORGIA, receiver not subject to garnishment, 44.
GIFTS AND BRIBES, recovery of, 637.

officers liable for, 637.

GOOD FAITH, and value, 498.
question of, is for jury, 498.
when stock is issued for property, 583.
officers must exercise, 633.
The figures vefer INDEX, 663

to the sections,

GOOD-WILL, of newspaper, efforts to preserve, 216.
of corporate name protected, 25.

GOVERNMENT, may resume franchises, 57.
must enforce forfeiture, 66, 400.
may be stockholder, 603
when a stockholder becomes a private citizen, 603.

GRANT, in constitution of State, not subject to repeal by legislature, 405.
of corporate power, 15.
See FRANCHISE, CHARTER.

GROSS OVER-VALUATION, evidence of fraud, 609.

GROUNDS, of forfeiture, pleading, 124, 408.
for appointment of receiver, 169-198, 173.
of equitable relief, 183.
of forfeiture, 408.
of individual liability, 468.
for receivership in foreclosure, 254.
after decree, 255.
to prevent forfeiture, 256.

GROWTH, of corporation law, 1, 9.
harmful tendencies, 679.

GUARANTEE by corporation, when void, 7.
act beyond its power, 7.

GUARANTOR, liability of, 102.
selling collateral before suing, 102.

GUIDANCE, receiver may appeal to court for, 204.
HARASSING RECEIVER will be enjoined, 237.
HIGHWAY, liability of corporation for obstructing, 7.
HISTORY AND DEFINITION of corporations, 5, 6.

HOLDING STOCK, as trustee or agent, 579.
in name of third party, 578.

HOLD-OVER OFFICERS, liability of, 581.

HOME CREDITORS, protecting, 327.

HOSTILE PARTY, stockholder as representative of, 179.
HUN v. CARY, doctrine of, discussed, 592-596.
HYPOTHECATION of stock in name of third party, 578.
IDENTITY of corporation not lost by change of name, 25.

ILLEGAL, action, ground for dissolution, 365.
preferential payments, receiver appointed, 89.

See ULTRA VIRES.
act may be restrained, 42.

transaction, creditors may attack, 156.
act, directors liable for, 570,
664 INDEX. a etal

ILLUSTRATIONS OF DE FACTO CORPORATIONS, 22.
IMMINENT DANGER TO PROPERTY, justifies receiver, 254.

IMMUNITY FROM TAXATION, not a franchise, 12.
of consolidated body, 446.

IMPEACHING DE FACTO ORGANIZATION, 22, 485.
IMPERSONAL, corporations are, 6, 160.

IMPLICATION, corporate name acquired by, 25.
repeal not allowed by, 354.
personal liability not extended by, 560.

IMPLIED, condition of corporate grant, 399.
agreement of railroad mortgagee, 290.
powers, not subject of repeal, 17.
promise to pay for stock, 582.
notice of limitations on agent’s authority, 494.
notice of restrictions of corporate officers, 495.

IMPRISONMENT, false, corporation liable for, 7.
IMPROPER ACTION, protesting against, by officer, 597.
INABILITY TO PAY and insolvency, 31.
INCIDENTALLY, question of forfeiture not tried, 403.

INCOME, applied to expenses, 290.
equity may sequestrate, 299.
dividends declared from, 672, 676, 677.

INCORPORATED COLLEGE, cannot create corporation, 15.
“INCORPORATED RASCALITY” not of recent invention, 5.
INCORPORATION, mistakes that do not destroy, 22.
INCORPORATIONS, See DEFECTIVE INCORPORATIONS, CORPORATIONS.
power to create, 15, 18, 19,
kinds of, 16, 17, 19-22, 24.
INCORPORATORS, personal liability of, 560—6or.
INDEFINITE NUMBER OF CORPORATIONS under one act, 15.
INDIANA, right of receiver to sue, 225.

INDICTED, corporation may be, 7.
for non-performance of duty, 61.

INDIFFERENT PERSON, receiver should be, 170.

INDIVIDUAL LIABILITY, questions of, 3.
enforcement of, 47, 48, 560.
grounds of, 468.
partnership theory, New York and other cases, 469.
of incorporators, stockholders, and officers, 560-601.
See PERSONAL LIABILITY,
nature of, 560.
who may enforce, 562.
The figures refer INDEX. 665

to the sections.

INDIVIDUAL LIABILITY—continued.
, certain classes of debts, 568.
for fraud, 586.
directors of national banks, 590.
for theft, 598.

“IN FAILING CIRCUMSTANCES.” meaning of, 32.

INFANTS, taking stock in name of, 540, 578 7.
subscriptions by, not counted, 540.

INFIDELITY OF OFFICERS, 586, 587, 636, 637, 641.
See DIRECTORS, OFFICERS, PERSONAL LIABILITY.

INFORMALITIES affecting incorporation, 22.
INFORMATION not substitute for guo warranto, 59.
INFRINGING PATENT, corporation liable for, 7.
INHABITANTS may question municipal election, 52.

INJUNCTION, to protect corporate name, 25, 38.
remedy by, 42.
against directors or trustees, 54, 172.
to restrain abuse of powers, 42.
not allowed pending guo warranto, 58.
to prevent violations of duty, 42.
carrying assets out of State, 42.
polluting a stream, 42.
a trespass, 42.
improper expulsion of member, 42.
dissolution, 42.
consolidation, 42.
wasting corporate funds, 42.
officer committing particular wrong, 42.
and receiver, distinction in jurisdiction, 191.
impending annulment action, 200.
pending dissolution, 377.
who not enjoined, 377.

INNOCENCE, imputed to corporate acts, 10.
INNOCENT MISTAKES, trustees not liable for, 592.
IN REM, PROCEEDINGS, when not abated, 379.

INSOLVENCY, what constitutes, 28.
causes of, 4.
interpretations of the term, 29.
open and notorious, 30.
presumptions concerning, 33.
effect of, 34.
does not annihilate corporation, 34.
corporate action after, 35.
popular meaning, 29.
once shown presumed to continue, 33.
proof of judgment, 103, 357.
en NEE Tejera

INSOLVENCV—continued.
proceedings, defendants in, 107.
insufficient affidavit as to, 140.
trust fund after, 145.
as ground of equitable relief, 183.
proceedings, receiver appointed, 259.
does not work dissolution, 356, 372.
may be ground for dissolution, 356.
of consolidated corporations, 444.
no defense to subscription, 535.
proceedings, opposing, 537.
corporate, how shown, 479.
transfer in contemplation of, 161, 654.

INSOLVENT ASSIGNMENT, corporation may make, 159.
preferences in, 162,
when fraudulent, 164, 165.
effect on corporation, 168.

INSOLVENT CITY, remedy against, 112.
liability of private property for debts of, 112.

INSOLVENT CORPORATION, may make assignment, 159, 159 7.
INSOLVENT DEBTOR, may make preferences, 653.

INSOLVENT national bank, title of receiver of, 199.
corporation, completing contract of, 214.

INSPECTION OF BOOKS, mandamus to compel, 60.
See CORPORATE Books, 503-532.

comments upon the right of, 503.
stockholder’s right, 504.

right of director, 505.

by solicitor or plaintiff, 506.

not allowed to stranger, 507.

what books examined, 508-512.
manner of making, 513.

motives for, 514.

when denied, 515.

remedy for, 516, 517, 518.

notice to produce, 519.

controversy as basis of application, 521.
corporate books as evidence, 527-532.
reference ordered, 516.

INSTRUCTIONS, receiver may apply for, 204,
receiver bound to follow, 205.

INSTRUMENT, written, cannot be varied, 606.

INSUFFICIENT, affidavit as to insolvency, 140.
grounds of forfeiture, 413.
voting back pay not sufficient, 413.
obtaining charter in another State, 413.
defense to winding-up proceedings, 538.
The figures refer INDEX. 66 7

to the sections,

INSURANCE CASES, death claims not preferred, 655.
INSURANCE COMPANY, insufficient ground for receiver of, 192.’
INTENTION, abandonment a question of, 350.

INTEREST, default in payment, not justify receiver, 252.

INTERFERENCE, protecting receiver from, 197.
by receiver with litigation, 224.
with receiver, what constitutes, 238.

INTERLOPER, cannot apply for dissolution, 375.

INTERNAL, dissensions as ground for receiver, 173.
affairs of foreign corporation, 188.

INTERPLEADER, corporation miay secure, 38, 135.
of third parties, 120.
of conflicting claimants, 135.

INTERPOLATIONS in corporate books, 511.

INTERPRETATIONS, of term insolvency, 29.
of charters, 482.
of statutes creating personal liability, 566.

INTERSTATE RECEIVER, rules as to railroad in several States, 443.
INTERVENTION OF COURT at request of stockholder, 622.
INVESTIGATION as to motives, 499.

INVESTMENT and care of funds, 221.

INVISIBILITY OF CORPORATIONS, 13.
term improperly applied, 13.

IRREGULAR ORGANIZATION OF CORPORATIONS, 22.
IRRELEVANT PORTIONS OF BOOKS, sealing up, 510.
IRRESPONSIBLE PARTY, effect of transfer to, 574.
IRREVOCABLE NATURE OF RECEIVERSHIP, 177.

ISSUANCE, of receiver's certificatzs, ordering, 284.
of certificates of stock, 605.

See STOCK.
ISSUE, GENERAL, plea of, 136, 484.
ISSUES, in guo warranto, are legal, 57.
ITALY, early home of trading corporations, 5.

JOINDER OF COMPLAINANTS, who may unite, 79.
uniting claims, 80.
one suing for all, 32.
See COMPLAINANTS.

JOINING STOCKHOLDERS as defendants, 110.
omnibus bill, 110. ,
See DEFENDANTS.
668 INDEX. Te fewra ae

JOINT STOCK COMPANY, guasi corporation, 24.
grounds for dissolving, 394.
status of director of, 633.

JUDGMENT, creditor must recover, 97-103.
for money, corporation must be defendant, 105.
creditor, securing receiver of foreign corporation, 188.
for tort, collectible from receiver's assets, 241.
effect of, against receiver, 250.
creditor, may sequestrate corporate property, 309, 311.
to sustain sequestration, 313.
of forfeiture, dissolves corporation, 337.
of court, essential to effect dissolution, 373.
of dissolution, collusive, 378.
suit by receiver to set aside, 227,
of partial ouster, 417.
upon information, 418.
of forfeiture, effect of, 419.
against consolidated company, 437.
effect of, against corporation, 599.

JUDGMENT CREDITOR, right to maintain dissolution action, 375.

JUDGMENT CREDITORS, as complainants, 78.
suing for unpaid subscriptions, 78.
cannot take property from receiver, 199.
sequestration by, 309.

JUDICIAL NOTICE will be taken of general laws, 481.

JUDICIAL PROCEEDING essential to secure forfeiture, 399.
notice, of general laws, 481,

JURISDICTION OF EQUITY, 41.
See EQuITy.

JURISDICTION, over foreign corporations, 39, 62, 319.
to appoint receivers is equitable, 169, 172.
on application for receiver, 172.
as to receivers not inherent in equity, 172.
to dissolve corporation, 172, 339.
foreign receiver, 189.
injunction and receiver, 191.
conflicting, as to appointing receivers, 261,
of chancery, to sequestrate, 310, 311.
to appoint receiver, 311.
of chancery over corporations, 319.
foreign, proceedings in, 340.

See FOREIGN CORPORATIONS, FEDERAL Courts, Equity, ACTIONS,

JURISDICTIONAL DEFECT, failure to procure leave to sue receiver,
237
JURY, question of good faith is for, 498, 609.
trial, in suit against trustees, 593.
must decide question of over-valuation, 609.
Th.
eee INDEX. 669

JUS DISPONENDI of corporations, 26.
See CONTRACTS,

KEEPING BOOKS OUT OF STATE, ground of forfeiture, 408.

KENT'S definition of franchise, 12.
comments concerning liability of trustees, 592 7.

KINDS OF CORPORATIONS, 16, 19, 20, 21, 24.

KING OF ENGLAND, corporation sole, 21.
power to create corporations, 6.
. may revive franchise, 450.
proclamation by, for reconstruction of corporation, 450.

KING’S CONSENT to creation of corporations, 15.

KNOWLEDGE, of directors, effect on corporation, 496.
acquired by agents, 496.
effect of unofficial information, 496.
of stockholder, 496.

KYD, comments of, upon invisibility of corporations, 13.

LABOR CLAIMS, allowance of, 293.
preferences affecting, 568, 657.

LABORERS, preferences to, 568.
what classes protected, 568.
liens and preferences accorded, 657.
engineer, contractor or secretary are not, 657.

LACHES, affecting appointment of receiver, 198.
in raising objection to voidable transaction, 552.
knowledge and delay to constitute, 552.
by stockholder, 552.

LAND, title to, on dissolution, 202. :
presumption as to use intended, ro.
power of corporation to hold, 154.
title by adverse possession, 154, 502.
may be seized on execution, 296.
in foreign State, 319, 328.
See REAL ESTATE.

LAND GRANT, appointment of receiver to preserve, 256.
LAPSE OF TIME, effect of, on voidable acts, 551, 552, 553+

LAW, changes in, affecting corporations, 9.
actions at, affecting corporations, 40.
rules of, control receiver, 232.

LEASE, power of railroad to make, 26, 421.
foreign corporation may take, 328.
of corporate property, not ground for dissolution, 372.
of railroad not a dissolution, 372.
illegal, effect of cancellation, 374.
of corporation, not terminated by dissolution, 383.
6 72 INDEX. The figures refer

to the sections.

LEASE—continued.
power to consolidate does not give right to, 423.
distinction between leasing and consolidating, 423.
consent to, will not justify consolidation, 426.
power of directors to modify, 426.
when stockholder cannot interfere with, 626.

LEASING additional line by receiver, 267.

LEAVE to sue receiver, 237.
revoked if improvidently granted, 237.

,

LEGAL, issues in guo warranto are, 57.
existence of corporation not extinguished by insolvency, 356.
proceedings, dissolution effected by, 399.
proceedings not abated by receivership, 264.
person, corporation is, 7 7.
relations of corporation and promoters, 71, 564.
of corporation and officers, 632-652.
of stockholders and corporation, 610.

LEGISLATIVE RECOGNITION of corporation, 19, 484.

LEGISLATURE, fountain of corporate authority, 15, 353.
recognition of corporations by, 19, 484.
power to restrain creditors, 36.
‘cannot vacate mortgage, 156.
cannot release debt, 156.
must dissolve municipal corporation, 390.
may authorize private parties to sue for forfeiture, 400.
declaring a forfeiture, 404.
corporation created by, 15, 353.
dissolution by act of, 351, 358.
grants amendments to charter, 353.
may authorize consolidation, 421.
how power to consolidate is bestowed, 423.
power of, over securities, 452.
exercising reserved power of repeal, 338, 338 .

LETTERS PATENT, owned by receiver, 238.
contempt to infringe, 238.
unissued as property, 609.

LEVYING ASSESSMENTS, by receiver, 218.
by court of equity, 218, 617.
by board of directors, 617.
See CALLS.

LIABILITY, for torts and for contracts distinguished, 8.
of corporators as partners, 27, 464, 469, 473.
questions of individual, 3, 560.
personal, enforcement of, in equity, 41.
of guarantor, Io2.
of private property for debts of city, 112.
of receiver on official covenants, 206.
for rent by receiver, 207.
Th ‘ =
Diba INDEX. 671

LIABILITY— continued.
personal, of assignee or receiver, 242.
of corporation to dissolution, 336.
for acts prohibited to the corporation, 472-
of consolidated corporation, 432.
to amount of property received, 432.
of incorporators, stockholders, and officers, 560-601.
personal, construction of statutes imposing, 566.
pro tanto discharge from, 580.
of hold-over officers, 581.
of directors for fraud, 586.
of promoters, 564, 639.
of officers, 560, 647.
of members of fraternities, 589.
of savings banks’ officers, 592.
compensation of officers as affecting, 596. -
of officers for theft, 598.
for cancellation of stock, 605.
by what law governed, 629.

LIBEL, corporation liable for, 7.
LIBERTY AND FRANCHISE, synonymous terms, 12.

LIEN, in consolidation cases, 427.
does not exist in favor of original shareholders, 427.
of creditors on corporate assets, 142-157, 386.

LIENS, receiver takes title subject to, 199.

enforcement of, against receiver, 236.

trustees’ power to create, 277.

priority of, 305.

of creditors, 386.

effect of consolidation upon, 435.

for unpaid purchase-money, 435-

unrecorded, good against consolidation, 435.
LIFE OF CORPORATION, dates from when, 480.
LIFE INSURANCE COMPANY, dissolution of, 375.

business of, 623.

cannot take other risks, 623.

death claims not preferred, 655. \

LIFE TENANT, dividend to, 676.
cases concerning rights of, 676.

LIMITATIONS, statute of, 631.
begins to run after call, 631.
on agent’s authority, 494.
on power of repeal, 405.
on corporate power, parties dealing with, must notice, 423, 440.

LIMITED PARTNERSHIP is guasi corporation, 24.
LIMITS OF THE DISCUSSION, 2.
LINDLEY, SIR NATHANIEL, comments concerning promoters, 564.
672 INDEX. de

LIQUIDATION, statutory methods of, 46.

continuing corporation for certain purposes, 46.

by sequestration, 308-317.

by assignment, 158-168.

by execution, 294-307.

generally effected through receivership, 169, 663.

See DissoLuTION, DivipeNDs, RECEIVERS, ASSETS, WINDING UP.

LIQUIDATOR, may sue fer breach of trust, 52.

retirement of, receiver appointed, 186.
LITIGANT, status of, receiver as, 224.

See RECEIVER, COMPLAINANTS.

LITIGATION, directors’ power to control, 38.
unnecessary, receiver protected from, 237.

LOANS, foreign corporation may enforce, 318, 328.
by creditor member, rights of, 95.

LOBBYING, liability for money spent in, 587.

LOCAL AUXILIARIES of foreign corporations, 331.

LOCATION OF RAILROAD, change of, effect on subscription, 576.
LODGE, assets of, on dissolution, 664.

LOSING ENTERPRISE, continuing, 367, 368.

LOSS, business continued at, 367, 368.
by receiver as carrier, earnings liable for, 240.

LOUISIANA, appointment of receiver in absence statute, 174.
receiver in voluntary dissolution, 186.
receiver may sue for subscriptions, 235.

MAINE, creditor of bank may sue for official mismanagement, 52.
receiver may bring forcible entry, 225.

MAJORITY, power of, to dissolve corporation, 359.
tule as to securities, 452, 611.
cannot compel minority to accept stock, 425, 609.
of stockholders govern, 611.
minority cannot interfere with, 626.
of quorum of board may direct an assignment, 160.

MALFEASANCE OF RECEIVER, neither party liable for, 170.
MALICIOUS PROSECUTION, corporation liable for, 7.
MALUM PROHIBITUM ACT, cannot be ratified, 553.

MANAGEMENT OF CORPORATION, majority governs, 611, 626.
entrusted to directors, 13.
governed by board, 649.

MANAGING AGENTS OF CORPORATION, directors are, 157.

MANDAMUS, nature of remedy, 60, 516.
not preventive, 60.
executive, not creative remedy, 60.
Tio the section INDEX. 673

MANDAMUS contasen,
when writ of, granted, 60.
not issued in doubtful cases, 60.
discretion as to issuance, 60.
against whom issued, 60.
corporations may invoke, 60.
to compel inspection of books, 60, 516, 517.
reference ordered, 516.
to hold an election, 60.
to enforce admission of members, 60.
to restore member, 60, 651.
to reinstate a teacher or minister, 60.
to restore directors, 60.
to compel replacement of tracks, 60.
to require construction of bridges, 60.
when not allowed, 60.
appeal from, 60.
to enforce public duty, 61.
when not allowed against receiver, 205.
to restore member to club, 651,

MANNER OF MAKING INSPECTION, 573.
MANUAL LABORERS protected, 568, 657.
MANUAL SUBSCRIPTION to stock not necessary, 606.

MANUFACTURING CORPORATION, no assignment by, allowed in
New York, 161,

MARYLAND, right of receiver to sue, 225.
receiver may recover subscriptions, 235.

MASSACHUSETTS, receiver not charged with trustee process, 44.
statutory method of. liquidation, 46.
when no action at law maintainable, 53.
jurisdiction over foreign corporation, 62.
cases Concerning defective incorporations, 474.

MATERIALS, preference of claims for, 568, 657.
claims for, have no lien, 657.

MATTER OF COURSE, receiver not appointed as, 254.
MECHANIC'S LIEN, when not enforceable, 63.

MEETING, affairs of corporation must be transacted at, 649.
of corporation chartered in several States, 329.

MEMBER CREDITOR, right of, to sue, 95.
may attach property, gs.

MEMBERS, inspire acts of corporate body, 13.
expulsion of, restrained, 42.
restored by mandamus, 60, 651.
admitted by mandamus, 60.
when not creditors, 88.
suing in place of receiver, 99, 100, 228,

43 os
6 74 INDEX. The figures refer

ta the sections.

MEMBERS—continued.
producing books to prove who are, 526.
of fraternities, liability of, 589.
expelling from corporation, 651.
personal liability of, 560—6or.
creation of relation of stockholder, 603.

See STOCKHOLDERS.
MEMBERSHIP, proof of, 492, 603.
MEMORANDUM FROM BOOKS, right to make, 512.
MERGER OF DEBT, when not effected, 599.
MERITS, plea to, admits corporate existence, 136, 484.

MIGRATE, corporations cannot, 14.
See FOREIGN CORPORATIONS,

MILITARY ORDER will not annul charter, 395.
MILL, JOHN STUART, comments on partnership principle, 4 2.
MINISTER reinstated in pulpit by mandamus, 60.

MINORITY, right of, to receiver, 192.
cannot be forced into an association, 609.
cannot control majority, 626.
may be restrained from interfering with majority, 42.

MINUTE BOOKS, evidence, 525.
prima facie evidence, 525.
of conference, 525.
must be kept by proper officer, 525.

MISAPPROPRIATIONS BY TRUSTEES, remedies, 72.

MISCONDUCT OF OFFICERS, as ground for dissolution, 363.
ground of removal, 363.

See DIRECTORS, PERSONAL LiaBILITY,

MISFEASANCE, of receiver, neither party responsible for, 170.
of officers, 586, 587, 590, 636, 637.

MISSOURI, when guo warranto issues, 57.

MISTAKES, not fatal to incorporation, 22.
not ground of forfeiture, 408, 414.
of judgment, officers not liable for, 592—s95.
in prayer, 138, 516.

MISUSER, ground of forfeiture, 57, 399.

MONEY, judgment, corporation must be defendant, 105.
borrowed to operate road, 286,
distribution of, in sequestration, 316.
had and received, foreign corporation may sue for, 318.
had and received, assumpsit for, 52.
due corporation, receiver may sue for, 224.
liable to execution, 297.
Th.
bs poles fag INDEX. 675

MONOPOLIES, nature of “stock trusts,” 478.
comments concerning, 478.

MORTGAGE, corporate property subject to, may: be seized, 299.
debtor cannot use as shield, 299.
foreign corporation may take and enforce, 328.
on consolidated property, 433.
not affected by consolidation, 435.
ultra vires, execution of, enjoined, 625.
on rolling stock, 307.
on railroad, embraces accessions, 263.
appointment of receiver for, 252-273.
See FORECLOSURE.

MORTGAGEE, may bring foreclosure, 69.
in possession, expenses allowed to, 278.
cannot improve mortgagor out of property, 278.
of railroad, implied agreement of, 290.

MOTION, not exclusive remedy against fraudulent sale by receiver, 56,

MOTIVES, investigation as to, 499.
for inspection, 514.
jury must pass upon, 498, 609.
for consolidation, 421.
why these unions are sought, 421.
distribution of corporate risk, 421.

MOVING PAPERS, examination before trial, 524.
on motion for discovery, 524.

MULTIFARIOUS, when bill is, 132.
when bill is not, 133.

MULTIPLYING EVIDENCES OF DEBT, 678.

MUNICIPAL CORPORATION, embraced within word “person,” 7 2.
created for public good, 19.
shown by prescription, 19.
mandamus against, 60.
not dissolved by courts, 390.
only dissolved by legislature, 390.
common council of, 649.
act by resolution or ordinance, 649.
establishing subscriptions by, 606.

MUNICIPAL ELECTION, tax-payer may test, 51.

NAME, of corporations, 25.
must be given to corporation, 25.
corporation cannot act without, 25, 123.
business of corporation transacted in, 25.
application to change, 25.
as applied to consolidated bodies, 433.
abbreviation of, 25.
change of, does not release subscriber, 576.
how acquired, 25,
6 76 INDEX, The figures refer

to the sections.

NAME-—continued.
suits prosecuted by, 25, 38.
committee may use corporate name, 9I.
pleading, 123.
change of, should be averred, 123.
assignee may use name of, 168.
use of, by receiver, not necessary, 199-
receiver, use of, 224, 225.
of papers called for on examination, 524.
of another, subscribing in, 620.
of corporation, given to firm, 475.

NATION, may demand payment of a debt, 68.
State is not, 68.

NATIONAL BANK, insolvent, receiver appointed, 89.
State receiver of, 195.
title of receiver of, 200.
how wound up, 393.
not subject to collateral attack, 393.
suit against, how abated, 393-
when equity assumes jurisdiction, 393.
views of Blodgett, J., 393.
appointment of receiver does not dissolve, 393.
effect of default on notes, 393.
reorganization of, 459.
directors of, 590.
officers sued in State court, 590.

NATURAL PERSON, duties of, rest on corporation, 13.

NATURE, of corporation restated, 11.
of guo warranto proceedings, 57.
of an assignment, 158.
of a receivership, 170, 177, 275+
of receiver's title, 199.
and duration of receivership, 275.
of personal liability, 561.

how it arises, 561.

review of the cases, 561.
of savings banks, 592.

NECESSARY DEFENDANT, when corporation is, 105.
when personal judgment is sought, 105.
in bill in equity, 105.
when receiver is asked, 105.
See DEFENDANTS, PARTIES.

NEGLECT, to exercise corporate powers, 364.
does not work dissolution fer se, 364.
to comply with charter, effect, 366.
to hold annual meetings, not a dissolution, 372.
to declare dividend, remedy, 672.
Th :
widen INDEX. 677

NEGLIGENCE, suits for, belong to corporation, 38.
of trustees, receiver may sue for, 89, 593.
of receiver, test of liability, 232.
of receiver, lost goods, 240.
of bank director’s liability, 590.
compensation as affecting liability for, 596.
in cancelling stock, liability, 605.
creditor at large cannot sue for, rot.
proving precautions, 526.

NEGOTIABLE, bonds payable to bearer are, 156.
receiver’s certificates are not, 288.

NEGOTIABLE PAPER, certificates of stock are not, 605.
NET EARNINGS, payment by receiver from, 268.

NEW CORPORATION, consolidated company is, 430.
test of character of, 454.

NEW JERSEY, when receiver not appointed, 192.
receiver in insolvency proceedings, 259.

NEW SCHEME, shareholders cannot be impressed into, 422 7., 426.
of reorganization, 450-463.

NEWSPAPER, continuation of publication by receiver, 216.
NEW STOCK, option for, does not belong to life tenant, 676.

NEW YORK, supplementary proceedings not allowed against corpora-
tion, 45.
title to office, how tested, 57.
remedy against railroad, 61.
service on foreign corporation, 62.
grounds of dissolution, 70.
rule as to judgment before suit by creditor, 103.
claim against county, 11.
pleading corporate name, 123.
alleging appointment of receiver, 125.
rule as to verifying pleadings, 139.
transfers in contemplation of insolvency, '161.
director or trustee, when appointed receiver, 171.
appointment of receiver in sequestration proceedings, 172.
sequestration statute, 182.
voluntary dissolution, receiver, 186.
corporation may be receiver, 196.
temporary receiver in, 200.
filing and recording of receiver’s bond, 2or.
title to real estate on dissolution, 202.
status of receiver, 210.
right of receiver to sue, 225.
meaning of sequestration, 308,
dissolution practice and procedure, 343.
statutory requirements as to dissolution, 343.
criticisms on dissolution proceedings, 343-
678 INDEX. pap ios

NEW YORK--continued.
grounds for dissolution, 356.
notice to attorney-general, 388.
statutes as to forfeiture, 401.
Parties admitted in forfeiture suit, 402.
cases as to partnership liability, 469.
examination before trial, 523, 524.
corporations cannot plead usury, 555-
quo warranto proceedings, defenses, 557.
non-survival of cause of action, 60%.
preferences prohibited, 654.
proceedings against receiver, 663.

NO DISSOLUTION, or forfeiture in equity independent of statute, 339.
of municipal corporations in the courts, 390.

NO FORFEITURE in collateral proceeding, 403.

NO JUDGMENT after repeal of charter, 380.

NO TRUST RELATION between stockholder and corporation, 610.

NON-COMPLIANCE with incorporating statutes, ground of forfeit-
ure, 408.

NON-EXISTENCE of corporation, when may be shown, 534.
NON-NEGOTIABLE, receiver’s certificates are, 288.
NON-OBSERVANCE of formalities of incorporation, 22, 464.
NON-PERFORMANCE of conditions, ground of forfeiture, 409.
NON-RESIDENTS, cannot sue foreign corporation, 321.
NON-SURVIVAL of cause of action, 601.

NONUSER, ground of forfeiture, 57, 399-420.
when not evidence of abandonment, 350.

NORTH CAROLINA, supplementary proceedings against corporation
: allowed, 45.
statutory methods of liquidation, 46.

NOTE of corporation, receiver may sue on, 224.

NOTES, situs of, comity, 556.
form of, personal liability, 56t.
adding designation of secretary, 561.

NOTICE, of order for issuance of receiver’s certificates, 284.
of application for receiver in sequestration, 312.
of foreign laws, 324.
to executive department, not a dissolution, 372.
to attorney-general in New York, of dissolution proceedings, 388.
consolidated company, not a purchaser without, 435, 438.
to corporations, establishing, 496.
to president, 496.
to cashier, 496.
to stockholder, 496.
The
tothe setioin INDEX. 679

NOTICE—continued.
to produce, questions concerning, 500, 519.
rule regulating, 519.
when not necessary, 519.

NOTORIOUS INSOLVENCY, definition of, 30.

NUISANCE, corporation liable for, 7.
unchartered street railway is, 18.

, OATH OF RECEIVER, not usually essential, 201.
required by statute in New York, 2o1 2.

OBJECT OF INCORPORATION, 6.

OBLIGATIONS of corporation, survive dissolution, 382.
assumption of, by consolidated body, 434.

See CONTRACT, DIRECTORS.
OBSERVANCE of formalities, 22, 649.
OBSTRUCTING A HIGHWAY, liability for, 7.
OBVIOUS OVER-VALUATION, evidence of fraud, 609.
OFFENSES justifying disfranchisement, 651.

OFFICE, de jure and de facto, 23.
claimant of, may inspect corporate minutes, 508.
injunction with reference to duties of, 42.
parties exercising, presumption as to, Io.

See QuO WaARRANTO.

OFFICERS, of banks, presumption concerning acts of, Io.
process served upon, 38, 62.
restrained from committing particular wrong, 42.
executive, may be authorized to appoint receivers, 184.
effect of resignation of, 362.
misconduct of, as ground of dissolution, 363.
omission to elect, not a dissolution, 364.
wrongful acts of, 546.
personal liability of, 560-601, 647.
must act in good faith, 560.
must show reasonable ‘diligence, 560.
personal liability, creature of statute, 560.
must account for secret profits, 570, 636.
hold-over, liability of, 581.
right to sacrifice property, 588.
wrongful acts of, 587.
liability of, for fraud, 586.
of national bank, liability of, 590.
liability of, for theft, 598.
of savings bank, liability, 592-596.
relation of, to corporation, 632-652.
cannot speculate with assets, 635.
not entitled to secret profits, 570, 636.
bribes and gifts, 637.
680 INDEX. gi ey Spit

OFFICERS—continued.

agreement to resign, 638.
selling property to corporation, 641.
common director, 642.
recovering profits from, 644-

condonation of fraud of, 645.
possession of treasurer, 646.
compensation of, 648.
powers of, to act, 38, 183, 649.
ex maleficio, 650.
power to expel members, 651.
ousting directors, 652.

OFFICERS, de facto, 23, 486.
are agents of corporation, 13.
rules ‘relating to, 23, 486.
of consolidated company, as defendants, 119.
when appointed receivers, 171, 194.
as receivers Of railroads, 271.

See AGENTS, DIRECTORS.

OFFICIAL. mismanagement, suit for, 52.

duty, mandamus to enforce, 60.

liquidator, may impeach fraudulent acts, 562.

covenants, effect of, 206.

bond of receiver, 201.

bond of receiver must be filed in New York, 201 2.

bond, corporation may execute, 38.

OHIO, right of receiver to sue, 225.
receiver may sue for subscription, 235.

OMISSION of part of name, 25.
of word “The” in corporate name, 25.
to elect officers, not a dissolution, 364.

ONE PERSON, exclusive ownership in, 370.
ONUS OF PROOF, rests on parties seeking to charge officers, 595.
OPENING JUDGMENT of dissolution, 378.

OPERATING EXPENSES, paid by receiver, 268.
expenditures not allowed, 269.

OPERATION OF RAILROAD, when mandamus not allowed, 217.
equity should not attempt, 252.

OPPOSING INSOLVENCY PROCEEDINGS, 537.
duty of offiters, 537.

OPTION FOR STOCK, does not belong to life tenant, 676.

ORDER, to issue receiver’s certificates, notice, 284.
military, effect of, 395-
to distribute fund, protects receiver, 221.

ORDERING, payment of claims by receiver, 244.
issuance of receiver’s certificates, 284.
Tener INDEX. 681

to the sections.

ORDINANCES AND RESOLUTIONS, evidence of, 501.
how proved, sor.
common council act by, 649.

ORDINARY BUSINESS, suspension of, meaning, 366.
care, officers must exercise, 593, 594, 595.
rules of law control receiver, 232.
powers of directors, 13, 560, 632, 649.
powers of agents, 13, 494.

OREGON, jurisdiction to appoint receiver, 172.

ORGANIZATION OF CORPORATIONS, not dwelt upon, 2.
under void law, 92.
when defective, 22, 27, 464.

ORIGINAL STOCKHOLDER liable for unpaid balances, 582.
OUSTER of corporation, must be by creative authority, 403.
OUSTING DIRECTORS, 652.

OUTLAYS BY RECEIVER, allowed, 268.
expenditures not allowed, 269.

OUTSTANDING OBLIGATIONS will not prevent dissolution, 336.

OVER-VALUATION of property evidence of fraud, 498.
jury must decide question of, 609.

OWNERSHIP, implies right to convey, 26.
of stock in one person, effect of, 370.
of stock, books not conclusive, 577.

PAROL proof of corporate proceedings, 529.
written subscription cannot be varied by, 606,
declarations affecting corporations, 495, 496.

PAROL AGREEMENT, cannot vary written instrument, 606.
PARSON, corporation sole, 21.

PARTIAL OUSTER, judgment of, 417.
PARTICULARITY in pleading in corporate litigation, 122.

PARTIES (see Piaintirrs, COMPLAINANTS, DEFENDANTS), 65-121.
answer by party not sued, 121.
corporation as party where receiver is asked, 175.
dissolution by act of, 358.
corporations must be, in forfeiture proceedings, 402.
complainants, 65-96.
defendant, 104-121.
multifarious bills, 132, 133.
PARTNERS, corporators liable as, 27, 464, 563.
assuming corporate capacity, 27.
unincorporated members as, 464, 477-
committee of creditors not, 243.

PARTNERSHIP ASSETS, trust fund, 143.
Professor Pomeroy’s views, 144.
Th
682 INDEX. ee

PARTNERSHIP disputes, ground for receiver, 173.
liability, rule as to, 464-477, 563.
principle, comments upon, 4 2.
theory, New York and other cases, 469.

PATENT, infringing, corporation liable for, 7
unissued not property, 609,

PAYMENT, of costs by receiver, ordering, 231.
of claims by receiver, order how made, 244, 268.
and discharge of receiver, 317.
under order protects receiver, 221.
defense of, to claim for personal liability, 539.
of capital stock, certificate of, 565.
effect of failure to effect, 565.
not essential to create relation of stockholder, 603.
by railroad, in stock and bonds, 609.
exchange of property for stock, 583, 609.
PENAL, when statute is, 561.
statute not effectual in foreign jurisdiction, 565.

statute, effect of repeal of, 600.
non-survival of cause of action, 6o1.

PENDENTE LITE, no injunction in guo warranto, 58.
receiver, title of, 200.
effect of judgment of forfeiture, 379.
object of receivership, 170.

PENDING ACTION, effect of consolidation on, 448.
not necessarily abated, 448.

PENNSYLVANIA, sequestration superseded by execution, 308.
sequestration operates like bankruptcy commission, 314.

PEOPLE, as complainants in forfeiture proceedings, 66, 400.
right of, to sue, 67, 375, 400.
corporation as defendant in suit by, 105.
may apply for dissolution, 375.
will not redress private wrong, 67, 400.
construction favorable to, adopted, 482.

PERFORMANCE OF PUBLIC DUTY, enforcement of, 61.
PERMANENT RECEIVER vested with assets of corporation, 199.

PERMISSION, to sue receiver, when not withheld, 237.
to sue, pleading it, 126.
to bring suit by receiver, 226.

PERPETUAL SUCCESSION, incorporation had to secure, 5.

PERSON, municipal corporation embraced within word, 7 7.
corporation is, within meaning of constitution, 7 7.

PERSONAL INJURIES, liability of consolidated company for, 431.
liability of receiver, 241.
Th 4 s
tea INDEX. 683

PERSONAL LIABILITY, of promoters, 564, 639.
enforcement of, in equity, 41.
trust fund a substitute for, 142.
of assignee or receiver, 242.
of committee of creditors, 243.
not affected by sequestration, 315.
of incorporators, stockholders, and officers, 560—6ot.
personal liability of officers and stockholders, 560.
nature of personal liability, 561.
who may enforce liability, 562.
partnership liability, 27, 464, 563.
certificate of payment of capital stock, 565.
construction of statutes imposing liability, 566,
statutes declaratory of the common law, 567.
personal liability for certain classes of debts, 568.
liability to creditors only, 569. ,
directors as trustees for stockholders and creditors, 570.
trustees cannot release stockholders, 571.
attempted condonation by corporation, 572.
cancellation of subscription, 573.
transfer to irresponsible party to avoid liability, 574.
transfer to fictitious person, 575.
release by alteration of charter, 576.
stock held as collateral, 577.
taking pledge of stock in name of third party, 578.
holding stock as trustee or agent, 579.
pro tanto discharge of liability, 580.
*hold-over officers—liability, 581.
stockholders’ liability for calls, 582.
stock issued for property, 583.
subscriber’s default no defense, 584.
excusing failure to file report, 585.
liability of directors for fraud, 586.
wrongful acts of directors, 587.
sacrificing property, 588.
liability of members of fraternities, 589.
directors of national banks, 590.
religious corporations, 591.
nature of savings banks—personal liability of officers for er-
rors of judgment, 592.
the doctrine of Hun v. Cary—form of remedy, 593.
the test in that case, 594.
certain illustrations, 595.
compensation of officers as affecting liability for negligence,
596.
protesting against improper action, 597.
liability of officers for theft, 598.
effect of judgment against corporation, 599.
effect of repeal of penal statute, 600.
non-survival of cause of action, 6or.

See Directors, OFFICERS, INpivipuAL LIABILITY, COMPLAINANTS,
DEFENDANTS, ACTIONS,
684 INDEX. th ee

PERSONAL PROPERTY OF CORPORATION, vests in receiver,
202,
liable to execution, 294, 297.
sequestration affecting, 308.
of charitable organization, 392.

See ASSETS, EXECUTION.

PERSONS, who will not be selected as receivers, 171, 194.
corporations treated as, 7 7.
duties of, devolve on corporations, 10, 13.

PERVERSION of objects of grant, ground of forfeiture, 408.

PETITION, for dissolution in New York, 343.
of creditor to come in and share, 669.
for leave to sue receiver, 237.,

PLAIN ABUSE, to justify forfeiture, 408.
accident or mistake insufficient, 408.

PLAINTIFF, right to inspection, 506.
See PLAINTIFFS,

PLAINTIFFS (see CoMPLAINANTS), 65-96.
status of, 97-103.
people as, 66, 67, 400.
receivers as, 227.
sovereign States, 68.
in foreclosure, 69.
in dissolution proceedings, 70, 375.
joinder of, 79, 80.
one suing on behalf of all, 82.
creditor member, 95.
bondholders, 96.
foreign corporations as, 93, 318, 319.
trustees of foreign corporation, 113.

PLEA OF GENERAL ISSUE, 136, 484.
admits corporate existence, 136, 484.

PLEADING, ground of forfeiture, 124, 415.
must be specific, 124.
denial of equities by answer, 193.
consolidation, rule as to, 447.
general rules of, govern corporations, 40, 122.
in guo warranto proceedings, 57.
refusal of corporation to sue, 98.
sufficiency of request to bring suit, go.
in corporation cases, particularity, 122.
corporate name, 123.
appointment of receiver, 125.
permission to sue, 126.
refusal of corporation to prosecute, 127.
ultra vires act, 128.
fraud, 129.
Th
ble ‘INDEX, 685

PLEADING—continued.
dissolution, 130.
answer, when demurrable, 131.
multifarious bills, 132.
when not multifarious, 133.
joinder of causes of action, 134.
Interpleader, 135.
general issue, 136, 484.
Incorporation, 137-
prayer of complaint, 138.
verification, 139.
insufficient affidavit, 140.

PLEDGE OF STOCK, in name of third party, 578.
POLICE POWER, surrender of, not binding, 17.
POLLUTING STREAM, by corporation restrained, 42.
POOLING AGREEMENT or stock trust, 478.

POSSESSION of corporation, superseded and displaced by receiver,170.
will be protected, 170.
of receiver, protected from interference, 197, 237, 245-
of treasurer is that of agent, 646.

POWER, to grant public franchise, 18.
to create corporations, 15.
to issue receiver’s certificates, 279, 280, 281, 282.
of corporations, 7, 26, 159, 318.
of receiver to make repairs, 282.
charter of corporation, measure of, 7-
of disposition of property, 26.
abuse or misuse of, restrained, 42.
not conferred by mandamus, 60.
of corporation, complaint need not set out, 122.
of assignee to sell on credit, 165.
to appoint receiver, 169-198.
to protect receiver, 237.
of repeal, nature of, 353-
of majority to dissolve, 359:
of receiver to compromise claims, 212.
to remove receiver, 246.
of State, to effect consolidation, 423.
to consolidate, does not embrace power to lease, 423.

See DIREcTors, AGENTS, ULTRA VIRES.

POWERS and liabilities, of corporations, 7.
tort and contract liabilities distinguished, 8.
changes in the law, 9.
liability for acts beyond power, 7.
enumeration of, excludes others, 7.
to hold real estate, 154.
of receiver, discretionary, 211.
of corporation in foreign State, 328.

See ULTRA VIRES.
686 INDEX The figures refer

to the sections.

PRAYER OF COMPLAINT, form of, 138.
relief must conform to bill, 138.
may be amended, 138.
when receiver appointed, 138.

PREFERENCES, 653-661.
preferences by insolvents, 653.
corporate preferences, 162, 654.
no preference of death claims in insurance cases, 655.
depositor or claimant of salary, 656.
claimants for materials furnished and for labor, 657.
State preferences, 658.
drafts, checks, and proceeds of consignments, 659
attorney’s fees, 660.
claim of agent, 661.
in assignments, 162.
to laborers, 568, 657.
illegal, by bank, ground for receiver, 89.

PREFERRED STOCK, dividends on, 677.
not absolutely entitled to dividend, 677.

PRELIMINARY PAYMENT on stock subscription, 584.

PRESCRIPTION, corporations created by, 19.
corporations by, how proved, 483.

PRESENTING CLAIMS, extending time for, 669.

PRESIDENT, notice to, 496.
‘cannot speculate with assets, 635.
is not a laborer or employé, 657.
purchase of judgment claim by, as set-off, 635.

PRESUMED SURRENDER OF FRANCHISE, 396.

PRESUMPTION affecting corporate acts, ro.
concerning insolvency, 33.
of innocence, 10, 490.
as to contracts signed by officers, 10.
as to parties in office, Io.
as to consent to suit, Io.
as to use of real estate, ro.
as to quorum attending meeting, ro.
as to seal, 10, 488, 490.
as to corporation, rightful origin, 19.
as to surrender of franchise, 396.
concerning foreign charter, 480.
against grant of corporate power, 482.
as to corporate existence, 487.
affecting corporate acts, 490.
that directors will serve without compensation, 648.

PRESUMPTIVELY FRAUDULENT, when contract is, 636.
PRETENDED OFFICER, when usurper, 23, 486.
Th
to ta section” INDEX. 687

PREVENTING FORFEITURE, by appointing receiver, 256.
by issuing receivers’ certificates, 283.

PRIVILEGE, to sell lottery tickets repealable, 17.
to stockholder, does not belong to life tenant, 676.

PRIVATE ACT, defined, 480.
tule as to pleading, 480.

PRIVATE CORPORATIONS, defined, 16.
how classified, 16.
charters must be accepted, 16.
acquiescence cannot establish, 19.
mandamus against, 60.
executions against, 295.
evidence to establish charter, 480.

PRIOR TO DEFAULT, receiver when appointed, 257.’

PRIVATE grievance, people will not redress, 66.
use, property not condemned for, 18.

PRIVATE INDIVIDUALS, when not allowed to proceed by guo
warranto, 57-

PRIVATE USE, property cannot be condemned for, 18.
PRIVATE WRONG, people will not redress, 67, 400.
PROCEDURE, forms of, bind receiver, 231.

PROCEEDING, ¢x invitum, not effectual in foreign jurisdiction, 153.
in foreign jurisdiction, 340.

PROCEEDINGS, by and against receivers, 224-251.
status of receiver as litigant, 224.
suing in corporate name, 225.

See RECEIVERS.

PROCESS, served on officer or agent, 38.
of garnishment against corporation, 43.
of garnishment against receiver, 44.
service on foreign corporations, 62.
power of legislature to regulate, 62.
service of, notice must be reasonable, 62.
against public corporations, 63.
of sequestration in civil law, 308.
of consolidation, 421.

PROFITS SECRET, corporate officers must account for, 570, 636.
directors not allowed to make, 636.
promoters not entitled to, 639.

PROMOTERS, claims created by, 71.
demands of, may be assumed, 71.
tule in England as to, 467.
who liable for obligations of, 71, 564.
liability of, 564, 639.
act in fiduciary character, 639.
cannot make secret profits, 639.
Th
688 INDEX, Nieto

PROOF of corporate proceedings by parol, 529.
ot incorporation, 137.
when dispensed with, 483.
de facto existence sufficient, 483, 485.
of receiver's appointment, 497-
of insolvency, judgment, 103.
of election and vote of directors, 49r.

See EVIDENCE.

PROPERTY, effect of consolidation on, 431.
stock issued for, 583, 609.
sacrificing, when allowed, 588.
selling to corporation by officer, 641.
dividend is, 672.
See PERSONAL PROPERTY.

PROPERTY OF CORPORATION, trust fund, 142.
liable for debts, 150, 294, 297.
conveyance of, in fraud of creditors, 150.
trade-mark is, 151.
what not, 152.
creditors may follow, 156.
vests in receiver, 202.
which receiver may take, 236.
subject to execution, 294-307.
in hands of receiver, 298.
not essential to corporate existence, 356.

PROPRIETY OF APPOINTMENT of receiver, 254.
rests in discretion, 254.

PROSPECTUS, liability for false, 587.
PRO TANTO discharge of liability, 580.

PROTECTING RECEIVER, from interference, 197, 237.
leave to sue, 237.
nature of the power, 237.

PROTESTING against improper action, 597.
duty to take offensive action, 597.

PROVING DEBT IN BANKRUPTCY, effect of, 543.

PUBLIC FRANCHISE, power to grant, 18.
cannot be cover for private enterprise, 18.

PUBLIC and private corporations, 17.
when are public, 17.
mandamus against, 60.
corporations, process against, 63.
nature of railroad company, 252.
executions affecting public corporations, 300, zor.
corporation not dissolved by courts, 390.
wrong, abuse of franchise is, 400.

PUNITIVE DAMAGES, liability of corporation for, 7.
Th ‘
Hise INDEX. 689,

PURCHASE, of stock by corporation, 149.
rule at common law as to, 149.
of stock for purpose of suit, 628.
who may unite to effect, 462.

PURCHASE MONEY, lien for, 435.

PURCHASER, receiver cannot be, 220.
judgment creditor may become, 220.
without notice, consolidated company is not, 438.

PURCHASING CLAIMS AT DISCOUNT, 679.

PURPOSE OF STATUTE, should not be defeated by construction,
566.

QUALIFICATION of receiver, 201.
filing of bond, 2o1.
oath of, 201.

QUARRELS in benevolent society, when interfered with, 391. z

QUASI CORPORATIONS, 24.
legislative recognition of, 19.
joint stock company, 24.
limited partnership, 24.
railroad company, g#asz public, 252.

QUASI TRUSTEES, directors as, 633.

QUESTION of intention, abandonment is, 350.
of prudent economy left to majority, 626.
of value is for jury, 609.

QUESTIONS of individual liability, 3, 560.
See PERSONAL LIABILITY.

QUORUM, presumption as to, at regular meeting, ro.
of board, majority may direct assignment to be made, 160.

QUO WARRANTO PROCEEDINGS, nature of, 57.
to regain franchises, 57.
to oust officer, 57.
when may be brought, 57.
civil action in New York, 57.
issues in legal, 57.
trial by jury, 57-
affecting title of office, 57.
rights of private parties, 57.
no injunction pending, 58.
information not a substitute, 59.
for non-performance of duty, 61.
when proper remedy, 339-
defenses in, 557-
rules of evidence, 557.
presumptions in, 557.
when cannot be brought, 557.
abbreviation of name, not justify, 25.

44
690 INDEX. race

RAILROAD, assignment directing completion of, invalid, 166.
receiver operating, rule of liability, 232.
interfering with receiver operating, 238.
receivers of, 252-273.
reluctance to appoint receivers of, 252.
company, g#asz public association, 252.
receiver, duties of, 266.
receiver leasing additional line, 267.
receiver, suits by, 270.
receiver, selection and removal, 272.
money borrowed to operate, 286.
nature of rolling stock, 307.
charter, forfeiture of, 412.
illustrations of grounds of forfeiture, 412.
purchase of, by director, 635.
aid of, by issuing stock and bonds, 609.
mortgages, peculiar class of securities, 425.

RAILROAD COMPANY, guarantee by, when void, 7.
domicil of, 14.
de facto, 22.
power to sell or lease, 26.
receiver of, effect, 36.
mandamus to replace track, 60.
mandamus to perform duties, 61.
not liable for injuries after foreclosure, 109.
when receiver not appointed, 192, 252.
when mandamus not allowed, 217.
receiver of, 252-273.
nature of, 252.
reluctance to appoint receiver in England, 253.
lying in different States, 262.
accessions acquired, 263.
effect of receivership, 264.
running road by receiver, 266.
officers as receivers, 271.
certificates in aid of, 274-293.
consolidation, 421-449.
effect of consolidation on debts and property, 431.
receiver of consolidated, 443.
reorganization of, 450-463.
when liable to forfeiture, 408.
when entitled to repudiate contract, 636.

RATIFICATION, of unauthorized consolidation, 423.
of consolidation by legislature, 423 7.
by laches, 552.
by. acquiescence, 551, 553.
of directors’ acts by stockholders, 551.

REAL ACTION, foreign corporation may maintain, 318.
real writ, corporation may sue out, 38,
Th
erase” INDEX. 691

REAL ESTATE, presumption as to use intended, 10.
power of corporation to hold, 154.
right to hold, only questioned by government, 154.
title by adverse possession, 154, 502.
title to, on dissolution, 202.
may be seized on execution, 296.
sequestration process applied to, 308.
in foreign State, not interfered with, 319.
foreign corporation may hold, 328.
of charitable organization, 392.

See LAnp,
REAL WRIT, corporation may sue out, 38.
REASONABLE CONSTRUCTION of statutes, 566.

REASONS for creating corporations, 3, 4.
for repeal need not be assigned, 351.

RECEIVER, garnishment against, 44.
creditors’ remedies against, 56.
sale by, if fraudulent, set aside in equity, 56.
general creditor cannot secure, 86.
of insolvent savings bank, suit by, 89, 592.
of corporation as complajnant, go, 224-251.
may move to vacate attachment, go.
member or creditor suing in place of, 100,
appointment of, does not effect dissolution, 109.
suing corporation after appointment of, 109.
alleging appointment of, 125.
prayer for, 138.
preferential payments as ground for, 162.
statutory, debts of, 285.
conditions annexed to appointment, 289,
counter-claim or set-off against, 550,
may impeach fraudulent acts, 562.
proceedings against, in New York, 663.
claims allowed by, 665.

RECEIVER OF CORPORATION, nature of, 169, 170-198, 31°
in sequestration, 311, 312.
persons not appointed, £71.
jurisdiction to appoint, 172.
internal dissensions as ground for, 173.
in absence of statutory authority, 174.
corporation as party on application, 17:.
not appointed ex parte, 176.
irrevocable nature of appointment, 177.
stockholders’ right to, 178, 179.
creditors’ right to, 180,
resignation of directors to secure, 181,
on sequestration, 182.
insolvency as ground of relief, 183.
on repeal of charter, 184.
Th ‘er
692: INDEX. ian

RECEIVER OF CORPORATION—continued.
defunct corporation, 185.
in dissolution proceedings, 186, 388.
statutory receiver on dissolution, 187.
foreign corporation, rules as to, 188, 332.
foreign receiver, recognized, 189, 333.
conflicting receivers, 190.
and injunction, 191,
when not appointed, 192.
denial of equities by answer, 193.
disqualifications of, 194.
State receiver, national bank, 195.
corporation as, 196.
protecting from interference, 197.
laches affecting appointment, 198.
title, powers, duties, and liabilities af, 199-223.
status of temporary receiver, 200.
qualification of receiver, 201.
title to real estate upon dissolution, 202.
appointment of, does not effect dissolution, 203.
duty of, 204.
to whom accountable, 205.
official covenants, 206.
liability for rent, 207.
authorized acts bind, 208.
transactions avoided by, 209.
relation of, to creditors and stockholders, 210,
discretionary power of, 211.
power to compromise claims, 212.
resisting claims, 213.
completing contract of insolvent corporation, 214.
use of franchises by, 215.
when not allowed to continue business, 216.
mandamus as to operating road, 217.
levying assessments, 218.
election of directors after, 219.
purchaser at sale of, 220.
investment and care of fund, 221.
discharge of, 222.
compensation and expenses, 223.
represents corporation and creditors, 199.
may apply for instructions, 204.
proceedings by and against receivers, 224-251.
status of receiver as litigant, 224, 227.
suing in corporate name, 225,
permission to bring suit, 226.
member suing for receiver, 100, 228,
discretion as to suit, 229.
control of courts over suits, 230,
forms of procedure bind, 231.
ordinary rules of law control, 232,
Ti
Dineen INDEX, 693

RECEIVER OF CORPORATION—$roceedings—continued.

when receiver cannot sue, 233.
foreign receiver, 234.
suits for subscriptions, 235.
actions against receivers, 236.
protecting receiver—leave to sue, 237.
what constitutes interference with, 238.
creditors’ remedies against, 239.
liability as carrier, 240.
suit for tort against, 241.
personal liability of, 242.
committee of creditors, 243.
receiver of foreign corporation, 332.
ordering payment of claims by, 244.
collateral attack on appointment of, 245.
removal of, 246.
collusive appointment, 247.
abatement of suits, 248.
substitution of, 249.
effect of judgment, 250,
right of appeal 251,

railroad receivers, 252-273, 276.
reluctance to appoint, 252, 254.
rule in England, 253.
discretion as to appointment in foreclosure, 254.
receiver after decree, 255.
to prevent forfeiture, 256.
receiver prior to default, 257.
in sequestration proceedings, 258.
appointment on petition of corporation, 259.
to collect damages, 260,
conflicting jurisdictions, 261.
consolidated roads, 262.
title of receiver in foreclosure, 263.
effect of appointment, 264.
when not appointed, 265.
duties of, 266.
leasing of additional line, 267.
payments by receiver, 268.
expenditures not allowed, 269.
suits by, 270.
officers as, 271.
selection and removal, 272.
discharge of, 273, 317.

receiver's certificates, 274-293.
right to issue, recognized, 279.
criticisms upon the power, 280, 281.
to prevent forfeiture, 283.
non-negotiable, 288,
application of proceeds, 287.

RECEIVER’S CERTIFICATES, nature of, 274-293.
trustees’ power to create lien, 277.
694. INDEX. ie

RECEIVER’ S CERTIFICATES—continued.
expenditures by mortgagee, 278.
right to issue, recognized, 279.
criticisms upon power to issue, 280, 281.
to prevent forfeiture, 283.
order for, notice, 284.
issued to prevent forfeiture, 283.
not negotiable, 288.

RECEIVER'S APPOINTMENT, proof of, 497.

RECEIVERSHIP, does not vacate office of directors, 36.
not defense to note of the corporation, 36.
inspecting papers and accounts, 2 39-
no defense to unpaid subscription, 554.

See RECEIVERS,

RECOGNITION, of corporations, 19, 487.
of unauthorized consolidation, 423.
of act of agent, 494.
by acquiescence, 551, 553.
of directors’ acts, by stockholders, 551.

RECORD, best evidence of corporate action, 491.
corporation may rely on, as to ownership of stock, 672..

RECOVERING profits from directors, 636, 644.
profits from promoters, 639.

REFERENCE ordered in mandamus case, 516.

REFUSAL OF CORPORATION TO SUE, pleading, 127.
suit by stockholder, 74, 75.

REIMBURSEMENT, of successful complainant, 76.
on avoidance of u/tra vires act, 547.

RE-INCORPORATION scheme, creditors may pursue property, 156.
See REORGANIZATION,

RELATION OF OFFICERS AND DIRECTORS TO THE COR-

PORATION, 632-652.

corporation and officers, 632.

relation of officers to the corporation, 633.

contracts between directors and the corporation, 634.

certain illustrations, 635.

secret profits, 636.

bribes and gifts, 637.

agreement to resign, 638.

liability of promoters, 639.

contracts voidable and not void, 640. ~

officers selling property to corporation, 641.

common directors, 642.

election to avoid within reasonable time, 643.

recovering profits from directors, 644.

condonation of officer’s fraud, 645.

possession of treasurer, 646.
Th
sere | INDEX, 695

RELATION OF OFFICERS AND DIRECTORS TO THE COR-
PORATION—continued.
personal liability of officers, 647.
compensation of officers, 648.
power of directors to act, 649.
trustees ex maleficio—fraudulent dissolution, 650.
power to expel members, 651.
ousting directors, 652.

RELATION OF RECEIVER, to creditors and stockholders, 210,
acts in triple capacity, 210,
tule in New York, 210.

RELATION OF STOCKHOLDERS to corporation, 610.
not a position of trust, 610.

RELATIONSHIP OF STOCKHOLDER, how created, 603.
by signing subscription, 603.
arises in several ways, 603.
payment not essential to create, 603.

RELEASE, by corporation, effect of, 542.
trustees cannot release stockholders, 571.
of subscription by alteration of charter, 439, 576.
by corporate directors, ineffectual, 613.

RELIGIOUS CORPORATIONS, liability of members, 591.

RELUCTANCE to appoint railroad receivers, 252,
to issue receiver’s certificates, 279.

REMAINDER-MAN, dividend to, 676.
and life tenant, disputes between, 676.

REMEDIES, affecting corporations, officers .or stockholders, 37-64.

multiplicity of, 37.

actions by and against corporations, 38.

actions at law, 40.

jurisdiction of equity, 41.

foreign corporations, 39.

garnishment against corporations, 43.
receivers, 44.

supplementary proceedings, 45.

statutory methods of liquidation, 46.

against stockholders, 47.

of resident stockholders, 321.

concurrent, 48.

on unpaid subscription, 49.

election of, 50.

to test election of directors, 51.

against directors, 52.

in Massachusetts, 53.

injunction against directors, 54.

when action for damages will not lie, 55.

of creditors against receivers, 56.

nature of guo warranto proceedings, 57..
696 INDEX. Tete cine

REMEDIES—continued.
no injunction pending gue warranto, 58.
information in equity not a substitute, 59.
mandamus, 60, 516.
to enforce performance of public duty, 61.
Federal courts, 64.
by execution, 294-307.
to enforce forfeiture, 66, 400.
of defrauded subscriber, 614.
against corporation, exhausting, 621.
in equity to set aside subscription, 624.

REMEDY, against corporation, exhausting, 97.
against insolvent city, 112.
of assignee, 167.
See REMEDIES.

REMOVAL OF DIRECTORS, 652.

REMOVAL OF RECEIVER, power as to, 246, 272.
grounds for, 246, 272.
claims not affected, 246.
substitution of new receiver, 246.

REMOVAL OF SUITS to Federal courts, 449.
RENT, liability of receiver for, 207.
RENTAL, when to be paid, by receiver, 268.

REORGANIZATION, of corporate bodies, 450-463.
corporate reorganization, 450.
through foreclosure, 451.
legislative power over securities, 452.
assent to, 453. .
test of character of new corporation, 454.
title of purchaser is free from debts, 455.
compromise agreement, 456.
Texas statute, 457.
curing defective, 458.
of national bank, 459.
transfer of franchise, 460.
fraudulent transfer to new corporation, 461.
who may unite to purchase, 462.

| attacking, 463.

REPAIRS, receiver’s certificates issued to make, 282.

REPEAL, of penal statute, effect of, 600.
of charter, effect of, 666.
division of assets, 666.

REPEAL OF CHARTER, creditor cannot question, 157.
receivership on, 184.
and forfeiture, distinguished, 338.
exercise of reserved power, 338, 351, 405-
for neglect or abuse, 338.
The figures refer ‘ INDEX. 69 7

-t0 the sections,

REPEAL OF CHARTER—continued.
effect of, on property rights, 348.
reservation of right, 17, 351.
is a dissolution, 352.
is a legislative power, 353, 405.
not allowed by implication, 354.
action must be reasonable, 405.

REPORT, excusing failure to file, 585.

REPUDIATION of certificate, attempted, 618.
of subscription for fraud, 619.

REPUTATION, parish proved to exist by, 19.

REQUEST, by stockholder that suit be brought, 38, 98, 99.
by member or creditor to sue, 100.
of stockholder, intervention of court at, 622.

RESERVATION, of right of repeal, 17, 351-
exercise of the right, 351.

RESIDENT STOCKHOLDERS, remedies of, 321.

RESIGNATION, agreement concerning, 638.
of directors, to secure receiver, 181.
effective without acceptance, 181.
does not destroy corporation, 362.

RESISTING CLAIMS, by receiver, 213.

RESOLUTION, not essential to authorize contract, ro.
of board as to agency, 494.
corporation acts by, 649.

RE-STATED, nature of corporation, 11.

RESTRAINING, acts of incorporated bodies, 42.
interference with receivers, 237.

RE-TRY QUESTIONS, receiver not permitted to, 208.
REVERSION for nonuser, 202, 349.

REVIVAL, bill of, filed by receiver, 248.

REVOCATION of receivership, when allowed and not allowed, 177, 246.
RHODE ISLAND, receiver may sue for subscription, 235.

RIGHT of the people to sue, 67, 400.
of creditor member to sue, 95.
of creditors, assertion of, 156.
of creditor to secure receiver, 180.
of stockholder to have receiver, 178,
of corporation, not changed by receiver, 199.
of receiver to sue, 224, 225.
of appeal by receiver, 251.
to issue receivers’ certificates, 279.
of repeal, nature of, 353.
to discontinue business, 368.
698 INDEX, air Ase hal

RIGHT—continued.
to question consolidation, 440.
to effect consolidation, power of State, 423.
of majority stockholders and bondholders, 451, 611.
of forfeiture belongs to corporation, 612.

RIGHTS under defunct charter fixed by dissolution, 352.
RIVAL COMPANIES, when illegal to buy up, 587.

ROLLING STOCK, character of, 307.
seizing on execution, 307.

ROYAL PREROGATIVE, franchise is, 12.

RULE OF JUSTICE controls corporations, 9.
RULES OF PRACTICE govern receiver, 231.
SABBATH-BREAKING, corporation liable for, 7.
SACRIFICING PROPERTY by corporation, 588.
SALARY, claimant of, not entitled to preference, 656.

SALE, of whole property to pay debts, 26.
by receiver, set aside if fraudulent, 56.
by assignee, fraud of stockholder as affecting, 163.
receiver's, purchaser at, receiver cannot be, 220.
of railroad in different States, 262.
of corporate franchise, 300, 301.
what passes under sale of franchise, 302.
of stock, 304.
of corporate property, does not work dissolution, 364, 372.
in foreclosure not a dissolution, 372.
consolidation is not, 427.
of consolidated railroad, 436.

SAVINGS BANK, nature of, 89, 592.
liability of officers, 592-596.
relation of trustees to depositors, 89.

SCIENTER, how proved, 583.
inferred from circumstances, 583.

SCIRE FACIAS, when proper remedy, 339.
SCRIP DIVIDENDS allowable, 672.

SEAL, not essential to valid contract, 10,

presumption as to affixing, Io.

of corporation, acts by, 488.
omitted from deed, 488.
presumption as to, 488,
what device may be used, 488.
evidence of authenticity, 488,
presumption concerning, 490.

SEALING UP irrelevant portions of books, 510.
The
iene INDEX. 699

SECRET, PROFITS, officers must account for, 570, 636.
promoters cannot make, 639.

SECRET reorganization agreement not tolerated, 456.
agreement to release subscriber invalid, 613.
profits, officers not allowed to make, 636.
profits, promoters not entitled to, 639.

SECURITIES, legislative power over, 452.
railroad mortgages, peculiar class of, 425.

SECURITY, given by receiver, effect of levy before, 201.

SELECTION and removal of receivers, 272.
grounds for removal, 272, 273.

SELLING PROPERTY, to corporation by officer, 641.
corporation has power of sale, 26.

SEQUESTRATION, receivership on, 182, 258, 311.
statutory construction, 182.
in civil law, 308.
receiver, right to sue, 233 7.
protecting receiver in, 258.
property or income, equity may order, 299.
when execution supersedes, 306.
process, nature of, 308.
in New. York, 309.
jurisdiction of chancery to order, 310.
appointment of receiver, 182, 258, 311.
notice of application for receiver, 312.
judgment to sustain, 313.
receiver in, as complainant, 314.
affecting personal liability, 315.
distribution of money in, 316.
does not effect dissolution, 317, 372.
sequestrator of rents, has no title, 308 x.
effect of, 559.

SERVANT, wages of, 657.
secretary is not, 657.
See LABORERS.
SERVICE OF PROCESS on foreign corporations, 62.
upon public corporations, 63.
on officer or agent, 38.
notice must be reasonable, 62.

SET-OFF, when allowed, 549.
illustrations, 549.
against receiver, 550.

SETTING ASIDE consolidation, 441.
status of stockholders, 441.

SETTING FORTH permission to sue, 126.
See PLEADING.
700 INDEX. Tie

SETTLEMENT, of suit by directors, 38.
by corporation binds receiver, 208.

SEVERAL STATES may unite in creating corporations, 15.

SHARES of stock, what are, 604, 605.
transfer, future calls, 616.
of stock, seizing on execution, 304.
eminent domain as applied to, 426.

See STOCK, STOCKHOLDERS.
SHAREHOLDERS, rights of, 602-631.

personal liability of, 560-601.
when partners, 27, 404.

See STOCK, STOCKHOLDERS.

SHARSWOOD, J., views as to legislative declaration of forfeiture, 404.
observations as to officers’ liability, 592 7.

SIGNATURES, how proved, 489.
admission as testimony, 489.
SIMPLE CONTRACT CREDITOR, cannot interfere with debtor,

34,97, 101.
cannot secure receiver, 86.

SIMULATED TRANSFER, effect of, 574.
liability not avoided by, 574.

SITUS OF NOTES, rule as to, 556.
SMITH, ADAM, comments upon corporations, 4 2.

SOCIETY, BENEVOLENT, dissolution of, 391.
not for slight causes, 391.

SOLE CORPORATION, 21.
illustrations of, 21.
SOLICITOR, right to examine books, 506.
See ATTORNEY.
SOLVENCY, meaning of, 29.
tested by its opposite, 29.
See INSOLVENCY.

SOLVENT, when party said to be, 28, 29.
corporation, when not wound up, 367.

SOURCE OF POWER to create corporations, 15.

SOVEREIGN, may exact payment of a demand, 68.
power, corporate life springs from, 5, 1 5, 337:
source of corporate existence, 15.
sheer oppression by, not allowed, 405.

SPECIAL CHARTER, may be repealed by general law, 405.

SPECIFIC PERFORMANCE, of public duty, how not enforced, 61.
of contract, when not decreed, 319.
Th
Dime INDEX, 701.

SPECIFIC PERFORMANCE—continued.,
of contract to build railway, when not enforced, 252 2.
not decreed of contract to build house, 252 7.
by receiver, not ordered, 252 2.

SPECULATIVE NATURE of corporate énterprise, 4.
STAKEHOLDER, receiver as, 227.

STATE, power of, over foreign corporations, 39.
cannot be subjected to garnishment, 43.
as plaintiff, 68.
cannot be trustee, 68,
is not a nation, 68,
corporations chartered by more than one, 329.
law regulating commerce, when void, 329 z.
may be stockholder, 603.
when not entitled to preference, 658.
absence of corporation from, 411.

of books from, 411, 514.

STATE COURTS, may prosecute national bank officers, 590.
STATE RECEIVER of national bank, 195.

STATUS, of complainants, 97-103, 224.
exhausting remedy against corporation, 97.
suit by stockholder as substitute for corporation, 98.
sufficiency of request that corporation sue, 99.
of receiver, 224.
member or creditor suing in place of receiver, 100.
creditor at large, Ior.
guarantor, 102.
proof of insolvency, judgment, 103..

STATUS OF TEMPORARY RECEIVER, 200. <
rule in New York, 200.
not a trustee for creditors, 200,

STATUTE, personal liability, creature of, 560.
of limitations, effect of calls, 631.

STATUTES, of New York, as to forfeiture, 401.
enlarging scope of execution, 297.
regulating sequestration, 308-317.

STATUTORY, authority, receiver in absence of, 174.
liability, creditors enforcing, 85.
when receiver cannot enforce, 233.
method of liquidation, 46.
policy as to suits by receivers, 225.
liability, 560-60t.
See PERSONAL LIABILITY.

STEAM-TUG, when not liable to seizure, 63.

STOCK, subscribed for, may be sold and deficiency recovered, so.
capital, defined, 141.
702 INDEX. ie aac

STOCK—continued.
-capital is aggregate of sums subscribed, 141.
purchase of, by corporation, 149.
rule at common law, 149.
shares of, on execution, 304.
abandonment of, what is not, 575.
transfer to irresponsible party, 574.
held as collateral security, 577-
pledge of, in name of third party, 578.
held as trustee or agent, 579.
taken by executors, 579 .
issued for property, 583, 609.
shares of, what are, 604.
certificates of, 605.
forfeiture of, 612.
subscribing for, in name of another, 620.
purchase for purpose of suit, 628.
preferred, dividends on, 677.

See STOCKHOLDER.

STOCKHOLDER, suit by, for corporation, 38, 98, 99, 595, 622.
bound by settlement made by directors, 38.
may restrain directors'in equity, 41.
remedies against, 47.
concurrent remedies against, 48.
right of, to test election, 51.
interference by, 54, 99-
suit by, in Federal court, 64.
transfer, for purpose of suit, 64.
acts through the corporation, 72.
when cannot sue for damages, 73.
suit by, when allowed, 74, 75.
request of corporation to sue, 74.
one suing on behalf of all, 82.
suing as substitute for corporation, 98.
joining as defendant, 110.
assent of, to assignment, 160.
right of, to a receiver, 178.
representative of hostile party, 179.
has vested right in subscription, 211.
suing in place of receiver, 100, 228,
suing foreign corporation, 320.
remedies of resident, 321.
attempted surrender of franchise, 358.
right to apply for dissolution, 375.
consent of, to consolidation, 425.
withdrawing protection of statute, 471.
how man may become, 492, 603.
right to inspect books, 504.
rule as to right of inspection broadening, 504.
personal liability of, 560-601, 602.
general rights of, 602-631.
The figures refer INDEX

to the sections.

793

STOCKHOLDER—continued.
comments concerning stockholders, 602.
relationship of stockholder, how created, 492, 603.
what are shares of stock, 604.
certificates of stock, 605.
evidence to establish relation of stockholder, 606.
corporators succeeded by stockholders, 607.
conditional subscriptions, 608.
stock issued for property, 583, 609.
relation of stockholders to the corporation, 610.
majority of stockholders govern, 611.
collusive forfeiture of stock, 612.
release of subscription, 571, 573, 613.
remedies of defrauded subscriber, 614.
concerning assessments, 615.
transfer of shares, future calls, 582, 616.
calls by court of equity, 617.
attempt of corporation to repudiate certificate, 618.
repudiation for fraud, 619.

* subscribing in name of another, 620,
exhausting remedy against corporation, 621.
intervention of court at request of stockholder, 38, 99, 622.
carrying on unauthorized business, 623.
remedy in equity, 624.
acts enjoined by stockholders, 625.
acts not enjoined, 626.
action for deceit, 627.
purchasing stock for purpose of suit, 628.
liability, by what law governed, 629.
bona fide purchaser, 630.
statute of limitations, etc., 631.
contribution between, 569.
directors trustees for, 570.
trustees cannot release, 571.
interest in subscription, 573.
pro tanto discharge from liability, 580.
liability for calls, 582.
may enjoin corporation, 587.

State may be, 603.

municipal corporation as, 606.

effect of death of, 616.
administrator of, may vote, 616.
subscribing in name of another, 620.
deferred to creditor, 662.

equality of distribution, 668.
declaring scrip dividend, 672.

STOCK-TRANSFER BOOKS, inspection of, 509.
STOPPING PAYMENT, evidence of insolvency, 28.
STORY, J., inventor of trust-fund doctrine, 142.
7)
704 INDEX. ited

STRANGERS, not entitled to inspection, 507.
corporate books not evidence against, 528.
volunteer not a creditor, 88.

STRICT CONSTRUCTION OF CHARTER, 482.
* theory of the rule, 482.
See CONSTRUCTION.

SUB MODO TRUSTEES, directors as, 633.

SUBSCRIBERS, directors cannot release, 571, 613.
default no defense, 584.
tule in New York, 584.
defrauded, remedies of, 614.
See STOCKHOLDERS,

SUBSCRIPTION, no action at law by creditor to enforce, 49.
election of remedies on, 50.
unpaid, suit of judgment creditor for, 78.
receiver may sue for, 235.
title of receiver to, 235.
effect of consolidation on, 439.
insolvency of corporation no defense to, 535.
receivership no defense, 554.
releasing, 571, 613.
cancellation of, 573-
release of, by alteration of charter, 439, 576.
by municipal corporation, 606.
conditional, rule as to, 608.
repudiation for fraud, 619.
remedy in equity, to set aside, 624.

SUBSEQUENT AND EXISTING CREDITORS, rules as to, 87.

SUBSTITUTE FOR CORPORATION, suit by stockholder or re-
ceiver, 74, 98, 100.

SUBSTITUTION, of receiver in attachment action, 224.
of receiver as complainant, 333.
of securities, power of Canadian Parliament, 452.

SUCCEEDING CORPORATION, books in custody of, 522.
right to inspection, 522.

SUCCESS OF WRONGFUL ACT, when not defense, 77.

SUCCESSION, and consolidation distinguished, 428.
illustrations of difference, 428,
perpetual, secured by incorporation, 5.
SUE AND BE SUED, corporation may, 14, 25, 38.
foreign corporations, 39.

SUFFICIENCY OF REQUEST that corporation bring suit, 99.

SUIT by de facto officers, 23.
corporation, 37-64.
must be in corporate name, 25, 38.
Th
Dene INDEX, 705

SUIT—continued.
by stockholder, right to bring, 74, 75, 98.
success of wrongful act, 77.
permission to bring, by receiver, 226.
continuance of, by receiver, 235.
by railroad receiver, 270.
stock purchased for purpose of, 628,
complainants i in, 65-96,
defendants in, 104-121,
pleading in, 122-140,

See ACTIONS.

SUPERVISORS, claim against county prosecuted against, 111.

SUPPLEMENTARY PROCEEDINGS not allowed in New York, 45.
permitted in North Carolina, 45.

SUPERINTENDENT, not entitled to lien for services, 657.

SURPLUS belongs to corporation, 141.
paid to stockholders, 662.

SURPLUS  ASSETS—DIVIDENDS— PRESENTATION OF
CLAIMS, 662-679.
surplus assets on dissolution, 662.
remedy of creditors, 663.
assets of charitable corporation, 664.
claims allowable by receiver, 665.
effect of repeal of charter—division of assets, 666,
assets of foreign corporation, 667.
rights of stockholder—equality of distribution, 668.
extending time for presenting claims, 669.
barring claims not proved, 670.
application of receiver as to distribution, 671.
title to dividends, 672.
dividend wrongfully withheld—form of remedy, 673.
legislative transfer of dividend, 674.
participation in dividend by director guilty of fraud, 675.
dividend to life tenant or remainder-man, 676,
dividends on preferred stock, 677.
multiplying evidences of debt, 678.
purchasing claims, 679.
SURRENDER, of books, mandamus to compel, 60.
of charter without acceptance, ineffectual, 360,
of charter, dissolution by, 337.
of franchise, when presumed, 396.

SUSPENDING OFFICERS for misconduct, 363.

SUSPENSION, of trustee, court may order, 172.
of business, ground of dissolution, 366.

SWORN, usually receiver need not be, 201.
when must be in New York, 201 z.

45
706 INDEX. one

TAXATION, of foreign corporation, 323.
immunity from, as applied to consolidated body, 446.
when exemption from, is lost, 446.

TAX-PAYERS may test municipal election, 51.

TELEGRAPH COMPANIES, instruments ot commerce, 330.
rules governing, 330.

TEMPORARY CO-OPERATION is not amalgamation, 421,

TEMPORARY RECEIVER, status of, 200.
not a trustee for creditors, 200.
title not disturbed by appointment of, 200.
when not appointed, 200.

TENANT, defendant in foreclosure, 104 z.
in common, corporation my hold land as a, 155.

TERM of office of receiver is temporary, 275.
of duration of corporation, 346.

TERMINATION of contracts, by act of officers, 632.
of corporate existence, how effected, 337.

by act of legislature, 337.

death of all members, 337.

failure to comply with conditions, 337.
expiration of charter, 337.

forfeiture of charter, 337.

surrender of charter, 337.

TERMS OF FRANCHISE, forfeiture by, 406.

TEST of insolvency, 28,.357.
of character of new corporation, 454.
of official liability, 594.

TEXAS, receiver not subject to garnishment, 44.
statutes, as to sold-out corporations, 457.

THEFT, liability of officer for, 598.

THIRD PARTIES, interpleading, 120.

THIRD PARTY, pledge of stock in name of, 578.
THREATENED FORFEITURE, when no defense, 544.

TIME, lapse of, laches, 551, 552, 553.
statute of limitations, 631.

TITLE, to office, how tested, 57.
powers, duties, and liabilities of receivers, 199-223.
of receiver, nature of, 199, 233.
of liquidator acquired by operation of law, 199.
of receiver, when it vests, 201, 224, 225.
to real estate on dissolution, 202,
of receivers in foreclosure, 263.
upon expiration of charter, 347.
The figures refer INDEX. 707

ta the sections,

TITLE—continued.
of purchaser free from debts, 455.
to assets and franchises of consolidating bodies, 433.
to dividends, 672.
TORTS, corporation liable for, 7, 8, 241, 431.
suits for, against receiver, 241.
when receiver not personally liable, 241.
liability of consolidated company for, 431.

TORTS AND CONTRACTS, liability for, distinguished, 8.
TOWNS, personal liability of members of, for debts, 112, 560.

TRADE-MARK, corporation entitled to, 151.
may be protected, 151.
as assets, may be applied to debts, 151.

TRADER, insolvency of, 28.

TRANSACTIONS AVOIDED BY RECEIVER, 209.
may sue for wasted assets, 209.
may annul mortgage, 209.
repudiate illegal contract, 209.
TRANSFER, of franchise, 460.
fraudulent, to new corporation, 461.
of stock to avoid liability, 574.
must be dona fide, 574.
of shares, future calls, 616.
in contemplation of insolvency, 161, 654.
to irresponsible party, 574.
will not avoid liability, 574.

TRANSFERS in contemplation of insolvency, 161. |
avoided in New York, 161.

TRANSITORY ACTION, liability for failure to file certificate, 565.
may be brought in any jurisdiction, 565.

TREASURER, when not liable for fraudulent statement, 55.
nature of possession of, 646.

TRESPASS, liability of corporation for, 7.
may be restrained in equity, 42.
by receiver, 236.

TRESPASSER, receiver in character of, 236.

TRIAL, examination before, 523, 524.
by jury as to question of value, 583.

TROVER, receiver may maintain, 224.
TRUE AMALGAMATION defined, 422.

TRUST, breaches of, restrained in equity, 41.
See TRUSTEES,
798 INDEX.

TRUSTEE, as to its capital, private corporation is, 41.
sovereign State cannot be, 68.
plaintiff in foreclosure, 69.
represents bondholders and stockholders, 115.
when appointed receiver, 171.
of an express trust, receiver is, 187,
receiver is, for creditors, go, 210, 233.

TRUSTEES, equity may compel, to execute trust, 41.
may be removed in chancery, 41.
remedy for misappropriations by, 72.
as defendants, 106.
of foreign corporation as parties, 113.
of foreign corporation, may sue, 189.
power of, to create liens, 277.
for stockholders and creditors, directors are, 570.
cannot release stockholders, 571.
holding stock as, 579.
ex maleficio, 650.

TRUST FUND, assets of corporation are, 142.
may be followed, 142.
doctrine, invented by Judge Story, 142.
is of modern date, 142.
prohibits wasting funds, 142.
debts due are part of, 142.
partnership assets as, 143.
Professor Pomeroy’s views, 144.
after insolvency, 145.
scope of the rule, 146.
assets of charitable corporation, 147.
property exchanged for cash, 148.
effect of doctrine, 142.

“TRUSTS,” nature of, 478.
stock trusts, 478,
objects of, 478.
certificates, 478.

The figures vejer
to the sections.

TWO INNOCENT PARTIES, rule applied to defective incorporations,

466,

ULTRA VIRES ACT, restrained, 42.
pleading, 128,
creditors may overthrow, 156.
arising out of consolidation, 421.
reimbursement on avoidance of, 547.
acquiescence in, 553.
liability for losses by acts, 570.
mortgage, execution of, enjoined, 625.
estoppel after acceptance, 7.
UNAUTHORIZED, consolidation, ratification, 423.

business, carry on, 623.
acts, acquiescence in, ‘623.
The figures refer INDEX 709.

to the sections.

UNCONSTITUTIONAL, when repeal of charter is, 351.
statute concerning dividend, 674.

UNINCORPORATED COMPAN IES, as copartnerships, 27, 464.
corporators and promoters of, 464.

UNITING TO PURCHASE, who may join, 462.
UNNECESSARY LITIGATION, receiver protected from, 237.
UNPAID PURCHASE-MONEY, lien for, in case of consolidation, 435.

UNPAID SUBSCRIPTION, no action at law by creditor for, 49.
judgment creditors’ suit for, 78.
part of trust fund, 142.
suit by assignee for, 167.
receiver may sue for, 227, 235.

UNSECURED, creditors, cut off by foreclosure, 118.
prior claims disallowed, 292.

“UNTIL,” meaning of word, 346.

USAGE, corporate name acquired by, 25.

USE AND OCCUPATION, corporation may sue for, 38.
USELESS THINGS, law does not exact, 103.

USURY, corporations in New York cannot plead, 555.
scope of the statute, 555.
when corporation may plead, 555.
directors or shareholders cannot bind corporation to pay, 632 7.

VALUE, question of, when stock is issued for property, 583, 609.

VENDOR'S LIEN, when doctrine of, not applicable, 427, 548.
effect of reservation of lien, 548.

VERIFICATION, former practice, 139.
"now made by officer, 139.
when omitted in New York, 139.

VESTED RIGHT in subscription, stockholder has, 211.
VEXATIOUSLY OBSTRUCTING TRADE, liability for, 7.
VICAR is corporation sole, 21.

VIOLATION, of duty by directors redressed in equity, 41.
of charter not tried in collateral way, 319.

VIOLENCE, money lost by, officer not liable for, 598.
VIRGINIA, forfeiture of railroad charter, 412.
VOICE OF MAJORITY governs, 451, 611.

VOID, contracts with officers are not,"64o.
law, organization under, 92.

VOIDABLE, receiver's purchase would be, 220.
and not void, corporate contracts with officers, 640,

VOLUNTARY ASSIGNMENT defined, 158, 158 x.
7 ae INDEX. The figures refer

to the sections.

VOLUNTARY ASSOCIATIONS, characteristics of, 464 2.
New York cases reviewed, 464 7.

VOLUNTARY DISSOLUTION, receivership in New York, 186.
no temporary receiver in that State, 200.
petition for in New York, 343.
English act, 344.
substance of English act, 344.
character of act of, 355.

VOLUNTARY LIQUIDATION, appointment of receiver, 372.
does not effect dissolution, 372.
national bank in, 393.

VOLUNTARY REORGANIZATION, bondholders protected, 463.
VOLUNTEER not a creditor, 88.

VOTE of members, will not effect dissolution, 372.
of directors, proving, 491, 527.
by administrator of stockholder, 616.
books produced to establish, 527.

VOTING COMPENSATION, rule as to, 648,

WAGES, meaning of term, 657.
money due attorneys not, 657.

WAIVER OF FORFEITURE, 66, 420.
duty of State when infraction is not wilful, 420.
remitting penalty, 420.
lapse of time not bar State, 420.
not revive corporation, 420.

WALKER, PROFESSOR, comments on growth of corporations, 5 #.

WASTE, restrained after decree of foreclosure, 255.
prior to default prevented, 257.

WHAT can be proved from books, 526, 527.
are shares of stock, 604.
constitutes interference with receiver, 238.
passes under sale of franchise, 302.
does not effect dissolution, 372.
corporations may consolidate, 429.
books may be examined, 508.

WHEN receiver will not be appointed, 192, 265.
receiver cannot sue, 233.
dissolution is effected, 397.

WHO MAY APPLY FOR DISSOLUTION, 375.
disinterested party cannot, 375.
nor can interloper, 375.
people or stockholders may, 375.
creditors can, 375.
right of single stockholder, 375.
creditor at large cannot, 375.
Th
to t eae” INDEX. 7 II

WHO MAY unite to purchase, 462.
enforce personal liability, 562.

WIDOW, when becomes a stockholder, 606.
WILFUL, misfeasance or nonfeasance must be, 124.

WINDING UP (see DissoLuTion), 336-398.
act, English, 344.
no inherent equity jurisdiction, 339.
in one of several States, 341.
solvent corporation, 367.
national bank, 393.
by forfeiture, 399.

WISCONSIN, garnishment against corporation debtor, 43.
WITHDRAWING permission, to sue receiver, 237.

when not withdrawn, 237.
protection of statute, 471.

WRITTEN CONTRACT, cannot be varied, 606.
WRONG, corporations capablé of doing, 7.
name, suing corporation by, 123.
complained of remedied, suit dismissed, 374.
public, abuse of franchise is, 400.

WRONGFUL ACT, success of, does not defeat stockholder, 77.

WRONGFUL ACTS, of officers, 546, 587.
when enjoined, 587.

WRONGFUL DETENTION of dividend, 673.

WHOLE NUMBER OF PAGES, 760.
KF 1475 wih

 

Author Vol.
Wait, Frederick Scott. l
Title

 

A practical treatise on in- “P”
solvent corporations.

 

 

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