we ran its Migs Curry a Ma Pian bmeabad ty tats anh e ay Sa ee LT cant) Abad aay Pa nal Cornell Law Srhool Library | Cornell ere Library KF 1386.U5B84 1875 wil on the doctrine of ultr. in A TREATISE ON THE DOCTRINE OF ULTRA VIRES: BEING AN INVESTIGATION OF THE PRINCIPLES WHICH LIMIT THE CAPACITIES, POWERS, AND LIABILITIES OF CORPORATIONS, JOINT STOCK COMPANIES, BY SEWARD BRICH, M.A., LL.D., Lonpon, OF THE iter mers ESQ., BARRISTER-AT-LAW. WITH NOTES AND REFERENCES TO AMERICAN CASES, BY ASHBEL GREEN, OF THE NEW YORK BAR, NEW YORK: BAKER, VOORHIS & CO., PUBLISHERS, 66 NASSAU STREET. 1875. Entered, according to the Act of Congress, in the year eighteen hundred and seveaty-five,. By ASHBEL GREEN, Ta the office of the Librarian of Congress, at Washington. BAKER & GODWIN, PRINTERS, No. 25 Park Row, New York, INTRODUCTION TO THE AMERICAN EDITION. Tue attention of the American lawyer is, perhaps, as fre- * quently called'to the law of corporations as to any subject within the range of his professional study. The great number of cor- porations in America, the vast interests within their control, and the nuimerous questions daily arising out of their transactions, make this branch of jurisprudence an object of peculiar interest. to practitioners in this country. Every attempt towards general- ization, which may lead to the establishment of rules and the deduction of common and controlling principles, from authori- ties which are so often conflicting, should be weleomed with favor, whatever may be the judgment as to the success attend- ‘ing the effort. The treatise of Mr. Brice, to which I have added notes and references to American Reports, while, professedly, only an at- tempt to collect and group the more important English judg- ments on the doctrine of Ultra Vires, is the beginning of a needed work, which must be accomplished before this most im- porant part of the law of corporations is reduced from a chaos of discordant decisions to a branch of legal science with accurate and well established formulas. Whatever is crude, incongruous or indefinite in the book is due rather to the inherent difficulties: of the subject which Mr. Brice is considering, than to any want of ability in the author or to any defect in the method which he has pursued, | That which is most open to criticism in Mr. Brice’s work is the repetition which occurs in dealing with the different phases of the doctrine of Uttra Virus and the extent to which he has gone in considering the general law of corporations. If he has erred in these particulars, it is a fault not so much to be deprecated as the contrary would have been. I can fully appre- ciate the difficulties which Mr. Brice has encountered, not only iv AMERICAN INTRODUCTION. in the selection of the cases, and in deducing from the opinions of the English Judges the rules he has enunciated, but also in determining what limits he should set to himself, as to matters relating to companies to be considered. The chief embarrassment, that I have experienced in per- forming my task, has arisen from the excess of material that I have collected, and which I have endeavored to compress and curtail as far as practicable. As it is, the notes have exceeded the dimensions originally , proposed ; and the fear that, otherwise, the book would prove too bulky for a single volume, has induced me to omit a large amount of matter prepared mainly for the appendix. In the appendix I have treated of some subjects which, though not strictly within the doctrine of Ultra Vires, are eol- lateral to those found in the text. T have not cited the cases, so numerous in our reports, as to the powers of municipal corporations, except in a very few in- stances, but have referred to the valuable and widely known treatise of Judge Dillon on the Law of Municipal Corporations, as illustrating that branch of the subject. The notes have been prepared during such leisure as could be sparec-trom the duties attendant upon active practice. They are far from being satisfactory to myself, but, I trust, may assist those who investigate the topics discussed. I am obliged to many of my legal brethren in this State and elsewhere for valuable briefs and suggestions. The index, which is entirely new, has been prepared and the proof sheets read by my friend Thomas Thacher, Esq., to whom I am also indebted for much valuable assistance in the prepara- tion of the notes. AsHBEL GREEN. New York, November, 1875. PREFACE. Tuts treatise is, as the title page describes it, “ An Inves- tigation of the Principles which limit the Capacities, Powers, and Liabilities of Corporations, and more especially of Joint Stock Companies.” The doctrine of Ultra Vires is of modern growth. Its appearance as a distinct fact, and as a guiding, or rather misleading, principle in the legal system of this country, dates from about the year 1845, being first prominently mentioned in the cases, in equity, of Colman v. Eastern Counties Railway Company, in 1846;1 and, at law, of East Anglian Railway Company v. Eastern Counties Railway Contpany,? in 1851.* 110 Beav. 1; 16 L. J. Ch. 73. *11C.B. 775; 21 L. J.C, P. 28, ‘* The powers of private corporations, and the effect of going beyond them, received earlier consideration from American courts, than from those of England. The reason for this is to be found in the fact that, until a comparatively recent period, joint stock associations, consisting of indi- viduals united under and governed by deeds of settlement or other articles of agreement, occupied, in England, the place corresponding to private corporations in this country. Lord Langdale, M. R., in Colman ». Eastern Counties Rw. Co. 10 Beav. 1, 13, says: “I think it right to observe that companies of this kind, possessing most extensive powers, have so re- cently been introduced into this country, that neither the legislature nor courts of justice have been able to understand all the different lights in which their transactions ought to be viewed.” This difference between the number of cases in the American and the English courts was com- mented upon by Tilghman, C. J., in Commonwealth ». Arrison, 15 8.& R. 127. Accordingly, those curious to trace historically the doctrine treated of by our author, will find that the American courts, both Federal and State, years before the earliest English case cited in this treatise, discussed the powers of trading corporations, and laid down rules inregard thereto. See Head ». Providence Ins. Co, 2 Cr. 127 (1804); Bulkley ». Derby Fish- vi PREFACE TO ENGLISH EDITION. At the period now mentioned the great railway companies were being projected and developed. For the making of these lines there were required larger funds than any partnership, however numerous, could possess, and compulsory powers of a description utterly beyond the royal prerogative to confer by charter on any individual or association. Consequently, ap- plication was made to the supreme legislature, by whose sanc- tion corporations were called into being, authorized to raise the necessary capital by methods analogous to those used by joint stock companies already in existence, and enabled to acquire—by coercive means, where amicable overtures were rejected—the lands, houses, easements, and other proprietory rights needful for the profitable prosecution of the under- taking. Scarcely had these bodies been created when questions were raised as to the exact nature of the powers and other incidents so conferred upon them. Parliament had simply constituted them corporations. But corporations, according to the old common law notion, were civil persons differing from ordinary physical persons, mainly, if not entirely, in that they. were intangible, and that, having thus a theoretical existence only, and being incapable of mental expression, they could not suffer excommunication, be attainted, or perform certain ing Co. 2 Conn, 252 (1817); People ». Utica Ins. Co, 15 Johns. 358 (1818); N. Y. Firemen’s Ins. Co. ». Sturges, 2 Cow. 664 (1824); Same ». Same, 5 Conn. 574 (1825); Bank of U.S. ». Dandridge, 12 Wheat. 64 (1827); Binney’s Case, 2 Bland, 142 (1829); Beach ». Fulton Bk. 3 Wend. 573 (1829); Bank of Augusta v. Earle, 13 Pet. 587 (1889); Barry 0. Merchants’ Ex. Co. 1 Sand. Ch. 280 (1844); Perrine o. Ches. & Ohio Can. Co. 9 How. 172 (1849); Moss ». Averill, 10 N. Y. 449 (1853); Steam Nav. Co. o. Weed, 17 Barb, 878 (1853); Pearce ». Madison & Ind. R. R. Co. 21 How. 441 (1858); Bissel x. M. 8S. & N. I. R. R. Co. 22 N. Y. 258 (1860). The phrase ultra vires is to be found in Lord Kames’ Principles of Equity, originally published in 1766 (3d ed. p. 309); thus: “ A deed or cove- nant being void at common law, as wléra vires, can a court of equity afford any relief? A principle in logics, that will without power cannot produce any effect, is applicable to matters of law, and is thus expressed, that a deed ultra vires is null and void, &c., &c.” And it appears to the knowledge of the editor, first in English reports, as used by Baron Bramwell, when at the bar, in 11C. B. 775. It does not appear in Angell & Ames on Corporations until the 5th edition, published in 1855. PREFACE TO ENGLISH EDITION. vii acts requiring on the part of the performer actual intention. Was this doctrine strictly correct? And, if so, were the new corporations endowed with all the capacities of the old ones, and possessed of a character exactly similar? These questions, or rather the latter, the courts, as soon as the railway mania’ had to some extent subsided, were called upon to determine. The former they have left open to the present moment, inclining to answer it, though not positively answering it, in the negative. The latter was decided, in the first instance, in a dispute between a few shareholders in a railway company, who objected to the grant of a subsidy to a steam packet company in communication with their own line, and the general body, who supported such a disbursement of the corporate funds, the then master of the rolls holding in favor of the dissentients that this was a matter in respect to which the majority could not bind the minority, and which, if legal, could be so only when all concurred.!’ From disputes in which the only persons concerned were the corporations themselves and their own members, and in which the decisions might have been based upon the principles of ordinary partnership, the courts went farther, to matters which involved the rights of outsiders. First, Turner, V. C., restrained a railway company from engaging in a trade in coal,? and, in doing so, he dis- tinctly stated and expressly founded his jurisdiction upon the doctrine of Ultra Vires. Then the doctrine was extended to transactions of every description where doubts could exist, or by fine drawn reasoning be raised, as to the business peculiar to corporations, or the special powers, express or implied, be- longing to them. As one result, not unseldom has it been called into requisition to relieve a company from a contract of which it may have had the benefit, but which it finds con- venient to repudiate.* It is thus the creature purely of judicial decision. It was originated by the courts proprio motu upon grounds of public 1 Colman v. Eastern Counties Rail- * Balfour v. Ernest, 5 C. B. N.S. 601; = Company, 10 Beay. 1; 16 L. J. 2813.0. P. 170; Ernest v, Nicholls, 6 h. 73, H. Lds. 401 ; Athenzum Life Assurance "* Great Northern Railway Company Company ». Pooley, 3 D. G. & J. 294; vy. Eastern Counties Railway Company, 28 L. J. Ch. 119. 9 Hare, 306; 21 L. J. Ch, 837. ¥ viii PREFACE TO ENGLISH EDITION. policy and commercial necessity, and to meet and provide for circumstances which called for the intervention of some strong hand, but for which the State had not directly provided. Being so originated, and, as most will probably admit, wisely originated, and in the best interests of trade and commerce, it has, however, become a’ species of Frankenstein. The tribunals have created; but they have confessed themselves. powerless to control the operations of the principle which they have called into’ existence, or even to systematize its effects. In consequence, the doctrine of Ultra Vires is constantly cropping up in unexpected quarters, and manifesting its effects. in an unforeseen and unwelcome manner. One of its first onslaughts was upon the time-honored maxim of the common law that a man cannot stultify himself'—that the lunatic, the fool, the drunkard, and the knave, who have made a contract, shall not subsequently repudiate the same by alleging that neither they nor their agents had at the time sufficient brains or authorization to make it. This maxim the doctrine of Ultra Vires soon demolished, and corporations may set up their incapacity whenever it is inconvenient for them to carry out their engagements.’ It next ran full tilt against the less rigid, but more equitable principles laid down by the Courts of Lincoln’s Inn. “Who seeks equity must do equity,” and “who comes for aid to chancery must come with clean hands,” are two of the most elementary principles of the chancellor’s jurisdiction. But the new doctrine refused to allow them to be applied to corporations, and, after much wrangling, it came off victorious, and corporations can now be relieved from Ultra Vires contracts, and yet keep the benefits thereof Another rule was found to hamper the development of the doctrine, and to impose some check upon the license assumed by cor- porations in their dealings. “Qué facit per alium facit per se” is the basis of the law of principal and agent, and it has hitherto been deemed a very useful and common sense rile, as sound and rational when applied to the complex transactions ? Beverley's Case, 4 Rep. 128, b. * With the exceptions and qualifica- *Balfour v. Ernest, 5 C, B. N. 8. tions set forth, post, in Part IV, chap. 601; 28 L.J.C. P. 170; London Dock III, p. 608. Company v. Sinnott, 8 E. & B, 847, PREFACE TO ENGLISH EDITION. ix of trade and commerce, as to the ordinary intercourse of every-day life. But the doctrine of Ultra Vires objected to its restraint, and made a desperate stand to be relieved from it. Here, however, the common law maintained its - supremacy,' though, méradile dictu, equity yielded,’ so that there is now to be seen the strange anomaly that corporations may be liable at law under circumstances where chancery imposes no liability, and that what the former says is palpable fraud, the latter will often pass over, or at least admit: its inability to punish. Besides. these anomalies, there is the uncertainty that shrouds the application of the doctrine. It is often impos- sible to predicate beforehand what transactions will be held within the powers of a given corporation. It is ultra vires of. the Great Eastern Railway Company to run steam packets from Harwich, but not of the South Wales Railway Company to run them from Milford Haven.‘ It is ultra vires of a steamship company to sell the whole of its vessels except two,® but perfectly legal’thus to dispose at one swoop of every one of them.’ It is ultra vires of railway companies to enter into partnership,’ but not ultra vires to make arrangements for dividing the whole of the joint profits among themselves in fixed proportions.® It is ultra vires of the town of Southamp- ton ® or Sheffield to incur expense in order to obtain a proper supply of water for their respective inhabitants, but not so for Ashton-under-Lyne” or Wigan” to do exactly the same thing. As a necessary result the decisions and dicta upon this subject are very conflicting, and some absolutely irreconcilable, while the principle itself is become, if not an excrescence upon, at least a very disturbing element in the legal system. > Barwick v, English Joint Stock Bank, L. R. 2 Ex. 259. ? Mixer’s Case, 4 D. G. & J. 575, 586, and post, pp. 246-255 inclusive. *Colman v. Eastern Counties Rail- way Company, 10 Beav. 1. ‘South Wales Railway Company v. Redmond, 10 C. B. N. 8. 675. ° Gregory v. Patchett, 33 Beav. 597. ° Wilson v. Miers, 10 C. B. N.S. 348. 7 Charlton v. Newcastle and Carlisle Railway Company, 5 Jur. N. 8. 1097. ‘® Hare v, London and Northwestern Railway Company, 2J. & H. 80. ® Attorney General v, Andrews, 2 Mac. & G. 225. : * Reg. v. Mayor &e, of Sheffield, L. R, 6 Q. B. 652. "Bateman v, Mayor &e, of Ashton- under-Lyne, 3 H. & N, 323. " Attorney Gen, v. Mayor de, of Wigan, 5 D. G. M. & G, 52. x PREFACE TO ENGLISH EDITION. But it soon showed itself almost as inimical and dangerous as a friend as unquestionably it was as an enemy. From being a protector to shareholders, by preventing their companies from embarking in hazardous enterprises, it has developed into their terror, by putting on the list of contributories persons whose shares were surrendered or forfeited years before, but which surrender or forfeiture was ultra vires.! Acquiescence and lapse of time will lay the ghost of most misdeeds, but they are unavailing when this doctrine is concerned, and ultra vires com- promises, bona fide made, have been opened after the lapse of well nigh a quarter of a century, in order to fix with liability the parties thereto. ‘ This work is an attempt, though perhaps nothing more, to collect and group the more important of these various decisions. ‘Where possible, the general conclusions deducible from a series of authorities have been formulated in specific terms. The subject has been arranged under four main heads—viz., a brief introduction ; then the effect of the doctrine upon what may be called the substantive law of corporations; next its influence upon their special powers which any particular corporation may possess ; and, lastly, the procedure relating to ultra vires pro- ceedings and persons affected thereby. It has been endeavored either to state the substance of, or at least to refer to, all the chief cases. Omissions may nevertheless be noted, as well as imperfections of other kinds; but this is the first attempt that has been made to deal with the subject as a whole, and I there- fore ask for the kind consideration and the lenient criticism of the profession. I have to acknowledge, with many thanks, the’ great assistance rendered by my friend and former pupil, Mr. B. L. Mosery, LL.B., of the Middle Temple and Gray’s Inn, who has compiled the index of cases and corrected many of the proof sheets. S. B. Tux Temptz, July, 1874, ? Ten years afterwarcs, in Stanhope’s Case, 3 D. G, & Sm, 198. * Spackman », Evans, L. R. 3 H. Lds. 171. TABLE OF CONTENTS... Seas SE Seo i PART I. INTRODUCTORY. PAGE. Sxction 1.—THE LEGAL STATUS OF CORPORATIONS. ......... es eee 1 ee 2.—THE ORDINARY INCIDENTS OF CORPORATIONS..........- 6 ue 3.—VABIBTIES OF CORPORATIONS ........ 000. cee sere eneee 15 as 4,—How CORPORATIONS £RE CRHATED........ Re aie BysutcoGnets 20 * PART II. "THE DOCTRINE* OF ULTRA VIRES AS AFFECTING THE BUSI- NESS AND OTHER TRANSACTIONS ENGAGED IN BY COR- . PORATIONS, AND THEIR RIGHTS AND LIABILITIES IN RESPECT THEREOF. CHAPTER I. THE EXACT IMPORT OF THE DOCTRINE OF ULTRA VIRES. Sxcrion 1.—JupIcIAL EXPLANATIONS OF ULTRA VIRES......... one 28) “ 2.—VaRIOUS MEANINGS THAT HAVE BEEN GIVEN TO THE TERM ULTRA VIREBiece csc nee be bee bd ed esa cee ees 84 ef 3.—THE BURDEN OF PROOF IN QUESTIONS OF ULTRA VIRES.. 39 CHAPTER II. ‘THE AFFAIRS OF CORPORATIONS AND THE CONDUCT OF THE SAME........ cc ccceeesereeeees se wanna Gedheaeae oe 43 xi TABLE OF CONTENTS. CHAPTER II. THE BUSINESS WHICH TRADING CORPORATIONS MAY TRANSACT. PAGE. Srcrion 1.—THE BUSINESS OF TRADING CORPORATIONS. ...-6.--000es 66 eS 2,.—THE EXTENSION AND DEVELOPMENT OF THE BUSINESS OF CORPORATIONS ss hsv ce ismee sae cee ee eases awies %8 CHAPTER IV. THE FINANCIAL AFFAIRS OF CORPORATIONS. SECTION 1.—CAPITAL AND PROFITS.......0..scee cece ee ceeeteeees 105 ne Dr=— SHARES $45 eocececesdeiige nies tra sg eee weal BIRR Merwe iecasens 140 a 3.—ORDINARY NEGOTIABLE INSTRUMENTS........ 0.20005: 155 ss 4.—-INSTRUMENTS UNDER SEAL WHICH PURPORT TO BE WHGOTER BIR jie! sotuss newness geoktia eaten enh wate ete 163 CHAPTER V. LEGAL PROCEEDINGS. * Srcrion 1.—LEGAL PROCEEDINGS INSTITUTED BY OR AGAINST THE CORPORATION DIRECTLY.......0000c ccc eeceeceeces 183 at 2.—LEGAL PROCEEDINGS NOT BY OR AGAINST THE CORPORA- TION DIRECTLY. ......-. 0 .eeee Sisieswiawisbes /e cket | wid eunistas 189 CHAPTER VI. APPLICATIONS TO PARLIAMENT. Section 1.—APPLICATIONS TO PARLIAMENT NOT PURPORTING OR IN- 5 TENDED TO BE AT THE CORPORATE EXPENSE ........ foo, i 2.— APPLICATIONS AT THE CORPORATE EXPENSE .......... 215. CHAPTER VII. LIABILITIES OF CORPORATIONS EX DELICTO. BECTION 1.—FRAUDS ... 0... eee eee ccc eeevececee cece 242. ih 2— OTHER TORTS........00 0.0 cece cece cece cceecceccnees 261 se S.—CRIMES is hoa gj wha ced se bd sawn aie, bad kecee oa vans pyaa TABLE OF CONTENTS. xiii PART III. THE DOCTRINE OF ULTRA VIRES CONSIDERED WITH -REFER- ENCE TO THE POWERS AND PRIVILEGES OF CORPORA- TIONS, AND THE MANNER AND PURPOSES IN AND FOR WHICH SUCH MAY BE EMPLOYED. © CHAPTER I. THE SPECIAL POWERS AND PRIVILEGES OF CORPORATIONS. PAGE, Section 1.—THE UsER OF SPECIAL POWERS AND PRIVILEGES....... 278 st 2.—THE TRANSFER BY ONE CORPORATION TO ANOTHER OF ITS SPECIAL POWERS AND PRIVILEGES ....... .... 305 CHAPTER Il. TRAFFIC ARRANGEMENTS ........ 06.0. ccc cence eens 318 CHAPTER III. THE EXERCISE OF THE POWERS OF A CORPORATION BY THE CORPORATION ITSELF. Section 1.—MEETINGS OF THE MEMBERS OF A CORPORATION. ...... 850 oe 2.—THE NECESSITY FOR SHALING.....--. 0.0. ceee rene eee 356 es 83.—OTHER FORMALITIES.......... GamiGh eane wits Ss aes’ 388 CHAPTER IV. THE POWERS OF DIRECTORS AND OTHER SIMILAR OFFICTALS. Section 1.—THE EXACT POSITION FILLED BY DIRECTORS AND OTHER SIMILAR PERSONS: i seceaedises ae vesscue serene dee 390 a 2.—PoWERS POSSESSED BY DIRECTORS AND OTHER SIMILAR PERSONS: 4.5 shales chess eee Ve sass eee sei eS s 409 CHAPTER V. ACTS INTRA VIRES, BUT INFORMAL. Sxcrion 1.—FoRMALITIES TO THE OBSERVANCE OF WHICH OERTAIN PARTIES ARE UNABLE TO SEB. ... ees e eee eee eee 426 xiv TABLE OF CONTENTS. PAGE. SEcTION 2.—FORMALITIES TO THE OBSHRVANCE OF WHICH CERTAIN PARTIES ARE BOUND TO BEE.........--+ecereeeee 440 sf 3.—FORMALITIES RELATING TO THE TRANSACTIONS OTHER THAN CONTRACTS OF CORPORATIONS.....0.- 000 eee 444 «“ 4,—FORMALITIES RELATING TO THE MEETINGS OF THE MANAGING BODY ...... ccc ese eee ect ee eee neces 451 CHAPTER VI. RATIFICATION BY CORPORATIONS.............02-0 eee eee 462 CHAPTER VII. THE LIABILITY OF CORPORATIONS FOR THE ENGAGEMENTS ENTERED INTO UPON THEIR BEHALF BY THEIR PRO- MOTERS. . Section 1.—WHEN THE ENGAGEMENTS ARE ULTRA VIRES.......... 480 ' ss 2.— WHEN THE ENGAGEMENTS OF THE PROMOTERS ARE NOT ULTRA VIRES OF THE CORPORATION AS CONSTITUTED.. 482 CHAPTER VIIL. THE AMALGAMATION OF CORPORATIONS. Section 1.—TH PRINCIPLE OF NOVATION ...... 00 ee cccecccecece 505 He 2.—THE POWER OF CORPORATIONS TO AMALGAMATE ....... 509 THE RIGHTS AND LIABILITIES OF PERSONS CONCERNED IN OR OTHERWISE AFFECTED BY TRANSACTIONS CONSID- ERED TO BE ULTRA VIRES, AND THE LEGAL PROCEED- INGS WHICH MAY BE TAKEN IN RESPECT THEREOF. CHAPTER I. THE INTERFERENCE OF THE COURTS IN THE INTERNAL AFFAIRS OF CORPORATIONS, ADSL Rada Aide ace 551 TABLE OF CONTENTS. xv CHAPTER II, , PROCEEDINGS TO RESTRAIN ACTS WHICH ARE ULTRA VIRES. PAGE, Section 1.—By THE MEMBERS THEMSELVES ..........0ceeeceeees 588 2.—ByY OR ON BEHALF OF THE PUBLIC*... «0.0.0... ..0000. 595 oe 3.— BY THIRD PARTIES. .... 0... 0c c cece eee cece eee anes 604 CHAPTER Hf. LIABILITY FOR PROCEEDINGS WHICH ARE ABSOLUTELY ULTRA VIRES. Section 1.—Liagmiry oF A CORPORATION IN RESPECT OF ULTRA VIRES TRANSACTIONS. ......00 ccc eect cece eee e eens 608 " 2.—LIABILITY OF THE DIRECTORS AND OTHER OFFICIALS OF A CORPORATION IN RESPECT OF ULTRA VIRES TRANS- ACTIONS stan eaarat ¢ comes ss aes sislencenes weeroee ss 630 CHAPTER IV. THE DISSOLUTION OF CORPORATIONS ..... Heine ahaneinnes 646 APPENDIX. I.—ALTERATION, AMENDMENT, AND REPEAL OF CHARTERS— “ GRANGER QUESTION”............ Nose aes fteees 687 IL.—JuRISDICTION OF CIVIL COURTS OVER ECCLESIASTICAL BODIES AND PROPERTY HELD BY THEM .........eeesece eter tees 670 I0.—CoxnTRacTs BY A RAILROAD COMPANY TO CARRY BEYOND ITS OWN DINE icccicccouetie nie Cae eee Ae mite saanees eae 673 IV.—VALIDITY OF CORPORATE ACTS OUTSIDE OF STATE CREATING CORPORATION ......-20-06- Nevccneas ewes siaig Rie ehbelelneals 676 V.—CHARACTER oF ‘‘ ROLLING STOCK” OF RAILROADS. .......... 681 VL—EXECUTORY CONTRACTS, ESTOPPEL, STOCKHOLDERS’ SUITS.... 689 TINED BEX ik eed se ae see ee TE Gnd eee aaa 691 ERRATA AND ADDENDA. TABLE OF BRITISH CASES. [Those in Italics added by the American Editor.] PAGE. Adams’ case, re United Ports Co., 419, 526 Addison's case, re Patent Paper Man. Co., Adley ». Whitstable Co., Agace, ex parte, Agar v. Atheneum Life Ins. Soc., 398, 487 Aggsv. Nicholson, 155, 162, 438 Agra Bank, ex parte, re Worces- ter, 424 Agra "and Masterman’s Bank, re, 535 re, ex parte Asiatic Banking Cor- poration,‘ 164, 165 Agriculturist Cattle Ins. Co., re Bush’s case, Agriculturist ‘Cattle Ins. Co., ex parte Spackman, Agriculturist Cattle Ins. Co., re Stanhope’s case, Alabaster’s case, re Oriental Oo a . 575, 588 610 440 660 420 Commercial Bank, 515 Albert Average Asso., re, 665 Albert Life Ass. Co., re, 535 re, ee parte Western Life Ass. Soc. .» 517, 525 Aldebert o. Leaf, 589, 590 Alexander ». Sizer, 6382 Allard o. Bourne, 438, 459 Allen’s case, 530 Allen », London and South Western Rw. Co., 263 Allen v. Talbot, 581 Ambergate Rw. Co. ». Mitchell, 142, & 416 Anchor Ass. Co,, re, 509, 528, 529 Anglo-Australian &c. Co. 2 British Provident &c. Ins. Co., 101, 517, 522, 615 Anglo-Danubian Steam Nav. &e. Co., re Walker's case, 444 B PAGE. | Anglo-Greek Steam Nav. Co., re, 661 Anglo-Italian Bank and De Rosaz, re, 534 Annesley, ez parte, 19 Apsey, ea parte, 610 Arnold v. Mayor &¢c. of Grave- send, Arnold v, Mayor &c. of Poole, 360, 369 Ashton’s Charity, re, 51 Asiatic Banking Corp., ex parte, re Agra and Masterman’s Bank, 164, 165 Asiatic Banking Corp , re Royal Bank of India’s case, 96, 98 Astley ». Manchester, Sheffield, and Lincolnshire Rw. Co., 88, 207 Atheneum Life Ass. Co., re, ex parte Eagle Co., 433, 437 Atheneum Life Ass. Co. 2. Pooley, 160, 163, 398, 414, 464, 470, 620 ea 252 18, 237 58 50 Atheneum Life Ass. parte Sheffield, Att. Gen. v. Andrews, v, Aspinwall, », Baxter, 2 Birmingham &c. Rw. Co., 0. Browne’s Hospital, », Cambridge Con- sumers’ Gas Co. 7 . Church, 61 . Corp. of Leicester, 6 Daniels, 61 Daugars, 50 Earl of Lonsdale, 602 Eastlake, 236 . Ely &c. Rw. Co., 209, 295, 302 . Foundling Hospital, 48 v. Gould, 51, 563 Co., 314 50 ssesses eS | ILI i Fae xviii Att. Gen. o. Gt. N. Rw. Co., 80, oT v. Hartley, ». Jackson, b3 o. Kerr 6 v Manchester & Leeds Rw. Co., 206, 213 » Mansfield, 52 v. Margaret, 51. ». Mayor &c. of King- ston, 804 v Mayor &c. of Lich- field, 58 v. Mayor &c. of Nor- wich, 59, 186, 236 vo. Mayor &c. of Ply- mouth, 12 v. Mayor &c. of Poole, 58 v. Mayor &c. of Shef- field, 59 F Mayor &c. of War- wick, 58 0. Mayor &e. of Wigan, 59, 238 ». Mayor &c. of Yar- mouth, 58 v, Mid-Kent &c. Rw. Co. 292, 298 v. Munro, 50 Oe Myddelton, 13, 48, 51 ». Parr, 59 ». Pearson, 50 ». Ruper, 19 ‘o, Sidney Sussex Col- lege, Cambridge, 50 v. St. Cross Hospital, 50 » Tewkesbury and . Malvern Rw. Co., 298 ». Vivian, 602 ID AIG UL ae GUE TT of] GEST nt 2. West Hartlepool Improvem’t Com. 237, 238 — ». Whiteley, 52 — __ ». Wilson, 58, 602 Attwood 2. Small, 242 Atwool 0. Merryweather, 184, 186, 571, 572 Austin o, Guardians of Bethnal Green, Austin v, Lambeth Vestry, Australian Auxiliary Steamship Co. ». Mounsey, 117, 124, 421 Australian Royal Mail &e. Co. v. Marzetti, 369, 377 367 60 TABLE OF BRITISH CASES. Badger v. South Yorkshire &c. Rw. .Co., Bagshaw ». Eastern Union Rw. Co., 30, 312, 560, 562, 582, 589 Bagshaw, ez parte, re Empire _Ass. Association, 509, 512, 521, 526 Baglan Hall Colliery Co., ve, 154 Bailey v. Birkenhead &c. Rw. Co., 560, 581 Bailey (Doe dem.) v. Foster, 19 Bain v. Whitehaven Rw. Co., 488,446 Baker’s case, re National Patent Steam Fuel Co., 620 Balfour v. Ernest, 82, 101, 158, 611 Bank of Australasia 0. Breillat, "119, 62d 572 518 86 Bank of Gibraltar'and Malta, Bank of Hindustan ». Alison, — re Camp- bell’s case, 518, 522 Bank of Hindustan, Higg’s case, 509 — — _ reHippisley’s case, 513, 522 Bank of Hindustan, ve Los’s case, 532 Bank of London ». Tyrrell, Bank of Switzerland v. Bank of Turkey, 71, 592, 653 Barber v. Nottingham &e. Canal 402 Co., 61 Barber Surgeons of London ». Pelson, 374, 876 Bargate ». Shortridge, 41, 438, 449 Barker ». Allan, 631 Barned’s Bank, "ve, ex parte Con- tract Corp., 96 Barry v. Crosskey, 255 Barton v, Hutchinson, 488 Barwick ». English J oint Stock Bank, 250, 255 Bateman 2. Mayor &c. of Aston- under-Lyne, 42, 224, 232, 367 Bateman 0, Mid- Wales Rw. Co., "156, 168 Bayley v. Wolverhampton Water Works Co. Beardmer v. London ‘& North- Western Rw. Co., Beardshaw, ex parte, re Dover & Deal Rw. Co., 110 Beattie ». Lord Ebury, 472, 688, 642 Beauchamp ». Great Western Rw. Co., 287 295 TABLE OF BRITISH CASES. Bedford & Cambridge Rw. Co. » Stanley, Beeching »v. Lloyd, 586 Beman 0. Rufford, 91, 307 Bentinck ». Norfolk Estuary Co., 286 Berkhamstead School case, 50, 52 Bernard, ex parte, re North of England Joint Stock Bank- . ing Co., 252 Berwick (Mayor &e. of) v, Oswald, 507 Bevan ». Lewis, 610 Beverley 2. Lincoln Gas Light &e. Co., 364 Biddulph’ 2. St. George’s Vestry, bee Biederman ». Stone, 504 Bigg’s case, 447 Bigneld, ex parte, re Norwich Yarn Co., 438, 459, 626 Bignold ». Waterhouse, 422 Bill v. Sierra Nevada Lake &e. Co., 211 Bird ». Bird’s Patent &c. Sew- age Co. 593 Birkenhead Docks (Trustees of) ». Birkenhead Docks Co., Birmingham Banking Co., ex parte, re Patent File Co., 118, 123, 124 298 Birmingham Banking Co., ex parte, re Rhos Hall Iron Co., 168 Blackburn’s case, 258 Blackmore v. Yates, 491 Blake o. Great Western Rw. Co. 94 Blakeley Ordnance Co., re, New Zealand Banking Co.’s Claim, 164, 171 Blakeley Ordnance Co., re, ex parte Metropolitan & Provin- cial Bank, Blake's case, Blisset 0. Daniel, 566 Blood, ex parte, 529 Bloomer v.Union Coal & Iron Co., 421 164 507 Bloxam », Metropolitan Rw. Co., 135, 594 Bluck ». Mallalue, 568 Blundell’s case, 506, 530 Bonelli’s Telegraph Co., re Col- lier’s Claim, 456 Bostock o, North Staffordshire Rw. Co., 85 Boulton, ex parte, 424 Bradford Ni avigation Co., re, 663 Bramah v. Roberts, 156 xix ‘| Braund », Earl of Devon, 53 Bridport Old Brewery Co., re, 354 Bright v. Hutton, 476 Bright 2. North, 238 British & American Telegraph Co. v, Albion Bank, 424 British Empire &e. Co. 2. Browne, 387 British & Foreign Cork Co., re, Leifchild’s case, 95 British Museum (Trustees of) v. White, 50 British Provident Life & Fire Ins, Co., re, Grady’s case, 443 Ass. Co. o. Norton, 440, 620 British Provident Life & Fire Ins, Co., re, ex parte Stanley, 129, 421 British Sugar Refining Co., re, ex parte Faris, 351, 352, 452, 461 Broadbent 2. Varley, 150 Broughton v0. Manchester Water 448 | British Provident Life & Fire Works Oo., 156, 368 Brown v. Andrew, 459 —— ». Byers, 116 —— ew parte, re Newcastle Marine Ins. Co., 440, 620 Brown’s and Tucker's cases, re United Ports Ass. Co., 520, 521 Browning 2%. Great Central ‘Mining Co., 866, 469 Brownlow 2». Metropolitan Board, 269 Bruton Turnpike Trustees ». Wincanton Highway, 60 Bryon ». Metropolitan Saloon Omnibus Co., 117, 421 Budden’s case, 530 Bulkeley v. Schutz, 211 Bull ». Chapman, 486 Bult v. Morell, 156 Burbridge ». Morris, 472 Burges & Stock’s case, re Pheenix Life Ass. Co., 88, 617,619 Burmester v. Norris, "156 Burnes v. Pennell, 258, 425 Burslem Paper Mills Co., parte Key, 620 Burt v. British Nation Life Ass. Asso’n, | 585 Bush 2. Martin, 62 Bush’s case, re Agriculturist Cattle Ins. Co., xx Caledonian &c. Rw. Co. 2 Magistrates of Helensburgh, 481, 488, 501, 503 Cambrian Steam Packet Co. ex parte, re Trent & Humber Co., 660 Campbell’s Case, re Bank of Hindustan, 513, 522 Card ». Carr, 459 Carden »v. General Cemetery Co., 483 Carington », Wycombe Rw. Co., 287 Carlisle v. Southeastern Rw. Co., 581, 583 Carmarthen (Mayor, &c., of) ». Lewis, 377 Cartridge »v. Griffiths, 20 Cefn Cilicen Mining Co., re, 128, 161 Central Rw. Co. of Venezuela 2. Kisch, 257, 260 Challis’ case, ve Empire Ass. Corp., 515, 520 Chambers v. Manchester & Mil- ford Rw. Co., 39, 42 Chapman & Barker's case, 97 Charlton v. Newcastle, &c. Rw. Co., ; Chase’s case, Cherry ». Colonial Bank of Aus- tralasia, Chertsey Market, re Chippendale, ea parte, re Ger- man Mining Co., 624 Church »v. Imperial Gas, &c. Co., 364 City Bank, ex parte, re General Estate Co., 156, 166, 176 City of Glasgow Union Rw. Co. 337 15 636. 51 ». Hunter, "5 Clarke v. Cuckfield Union, 66, 363, 365 —— v. Dickson, 260 —— v. Imperial Gas Co., —— v. Manchester, &c. Rw. Co., 438 293 Clay v. Rufford, 415 Cleland’s case, 154 Clinch v. Financial Corp., 355, 512, 514, 522, 538 Clothier v. Webster, 61 Clowes ». Brettell, 445, 488 Coates’ case, 154 Coates », Nottingham Water- works Co., 145, 584 Cockburn’s case, 419 Cockerell 7. Van Diemen's Land Co., 445, 447 TARLE OF BRITISH. CASES. Coe v. Wise,. 61. Coey v. Belfast & Down Rw. Co., 145 Coghlan’s case, 580. Cohen ». Wilkinson, 93, 312 Colborne & Strawbridge ex parte, re Imperial Land Co. of Mar- seilles, 166, 176. Colchester (Mayor &c. of) », Brooke, 656 Colchester (Mayor &c. of) 2. Lowten, 11, 46, 58: Colchester v.. Seabar, 656 Collen v. Wright, 685 Collie’s Claim,.7e Bonelli’s Tele- graph Co., 456: Collinson ». Lister, 422. Colman »v. Eastern Counties Rw. Co.; 29, 89, 98 Commercial Banking Corp. of India, re, 663. Commercial Banking Corp. of India, re Jones’ Claim, 529: Conservators of River Tone ». Ash, 18, 22: Const v. Harris, 551, 566 Contract Corp. ex parte, re Bar- ned’s Bank, 96 Contract Corp. ve, Claim of Ebbw Vale Co., 870, 424 Contract Corp. re Head’s case, 443 Conybeare », New Brunswick &e. Land Co., 256, 425° Cooch v, Goodman, 5: Cook »v. Mayor &c. of Bath, 602 Cope v. Thames Haven &ec. Co., 366 Copper Miner’s Co. v. Fox, 368, * 370, 380 Corbyn », French, 50 Cork & Youghal Rw. Co. re, 612, 628 Corry ». Londonderry & Ennis- .- killen Rw. Co., 182, 145, 584 Coste’s case, 20 Cother o. Midland Rw. Co., 286, 295 County Life Ins. Co. re, 398, . _ 485, 439 County Marine Ins. Co. ve Rance’s case, 1389 Coxon ». Great Western Rw. Co., 94 Cramer 0. Bird, 583 Crampton v. Varna Rw. Co., 888 Credit Foncier of England re, ex parte Marseilles Extension Rw. Co., 424 Cromford &c. Rw. Co. 0. Lacey, 444 Crook ». Corp. of Seaford, 385 TABLE OF BRITISH CASES. ‘Cropper, ex parte, re St. George Steam Packet Co., Croskey 0. Bank of Wales, Crossman ». Bristol & South Wales Rw. Co., Crouch ». Credit Foncier of England, *Croxton’s case, Cruse v, Paine, *Cumber ». Wane, Cunliff v. Man. é B.O. Co., Cunningham v. Local Board of Health of Wolverhampton, . 621 585 286 170 196 98 507 200 361 ‘Daniell o. Royal British Bank, 438, 446 458, 458 “Daugars v. Rivaz, 50, 587, 599, 603 Davidson, ex parte, re Maryle- bone Banking Co., Davis & Wilson’s case, re Dur- ham County &c. Soc., 55, 56, 123 Dean 2. Bennett, 355 -Deffell ». White, 124, 438 -De Grave v. Mayor &c. of Mon- mouth, -Denton ». East Anglian Rw. Co., —— ». Great Northern Rw. Co., 2. Macniel, -Dent's & Forbes’ case, .De Pass’ case, re Mexican &e. Co., Deposit & Generai Life Ass. Co. v. Ayscough, 260, 425 De Rosaz v. Anglo-Italian Bank, 534 D'Arcy v. Tamar &c. Rw. Co., 100 364 377 246 258 153 150 Dickenson 2. Valpy, 110, 116, 156, 610 Diggle », London & Blackwall Rw. Co., 360, 369, 371 Dixon’s case, 440 Dodd ». Salisbury & Yeovil Rw. Co., 290 Dodgson’s case, “252 ‘Doe dem. Bailey v. Foster, 19 Doe dem. Pennington v. Taniere, 377 Dossett v. Harding, 438 -Doubleday v. Hoskins, 57 —— ». Muskett, 472 -Dougan’s case, re Empire Ass. Corp., 521 Dover & Deal Rw. Co. 1, e& ‘parte Beardshaw, ‘ -Dover Harbor (Warden of) ». .Southeastern Rw. Co., 110 .88 xxi Downes ». Ship, 572 Doyle ». Muntz, 589, 590 Drew’s case, re London, Bom- bay & Mediterranean Bank, 512 Droitwich Patent Salt Co. ». ‘Curzon, 114, 535 Drummond's case, 153 Ducarry v. Gill, 459 Dunston v. Imperial Gas Co., 12 Duranty’s case, 253, 259 Durham County &c. Building Society, re, Davis’ case, 55, 56, 123 Durham County &c. Building Society, re, Wilson’s case, 55, 56, 123, 621 Dutton v. Marsh, 158, 632 Eagle Co. ex parte, re Atheneum Life Ass. Co., 433, 487 East Anglian Rw. Co. ». East- ern Counties Rw. Co., 80, 39, 230, 282, 327 Eastern Counties Rw. Co. ». Hawkes, 32, 41, 226 Eastern Union Rw. Co. v. East- ern Counties Rw. Co., East Gloucester Rw. Co. ». Bar- tholomew, East London Waterworks Co. ». Bailey, 156, 369, 371 321 146 ‘East of England Banking Co. re, 660 East Pant du Lead Mining Co. v. Merryweather, 566 East & West India Docks &c. Rw. Co, v. Dawes, 88 Eastwood ». Bain, 636 Ebbw Vale Co. (claim of), re Contract Corp’n, 370, 424 Ecclesiastical Com. v. Merral, 377 Edinburgh &e. Rw. Co. v. Philip, 314 Edinburgh & Glasgow Rw. Co. ». Campbell, 286 Edmunds ». Bushell, 635 Edwards » Grand Junction Rw. Co., 493, 496, 497 Edwards », Kilkenny &e. Rw. Co, 464, 491 Edwards v. London & North- western Rw. Co., 263 Edwards ». Martin, 424 —— »..Shrewsbury & Bir- smingham Rw. Co., 560, 581 Elborough ». Ayres, 195 Electric Telegraph of Ireland, re, Troup’s case, 627 Ellis », Colman, 639 Xxii Ellis’s case, re Littlehampton &c. Steamship Co., 15 Elwood v. Bullock, 18 Emly, ex parte, 610 ». Lye, 610 Empire Ass. Corp’n, 7¢, ev parte Bagshaw, 509, 512, 521, 526 Empire Ass. Corp'n, 7¢, Chalis’ case, 515, 520 Empire Ass. Corp’n, re, Doug- an’s case, 521 Empire Ass, Corp’n, re, Somer- ville’s case, 520, 522 Era and Anchor cases, re Saxon Life Ass. Co., 509, 523 Ernest 2. Nicholls, 101, 397, 414, 429, 617 European Bank, re, 424 European Cent’l Rw. Co., re, Holden’s case, 443 European ‘Cent’l Rw. Co., 7, Sykes’ case, 409 European Life Ass. Soc., re, 661 Eustace », Dublin Trunk Con- necting Rw. Co., 149 Evan 2. Corporation of Avon, 11, 58, 596 589, 590 19 13 Evans v. Coventry, Evelin’s case, Everett ». Grapes, Eversfield ». Mid-Sussex Rw. Co., 286, 290 Exeter & Crediton Rw. Co. 2. Buller, 184, 447, 561, 566 Exmouth Docks Co., re, 628, 664 661 530 Factage Parisien, re, Fagan’s case, Family Endowment Soc., re, 528, 530, 663 Faris, ex parte, re British Sugar Refining Co., 351, 352, 452, 461 Fawcett v. Laurie, 580 Fazakerly v. Wiltshire, 23 Featherstone v. Cooke, 564 Featherstonhaugh »v. Lee Moor &c. Co., 102 Feiling’s case, 7¢ Financial Corp’n, 144, 410, 592 Fell », Burchett, 182 Ffooks vy. London & 8. W. Rwy. 00., 818, 595 Filder ». London, Brighton & - South Coast Rw., Financial Corp’n, re, Feiling’s case, 144, 410, 592 504 TABLE OF BRITISH CASES. Financial Corp’n, King’s case, 144 0) Financial Corp’n, Rimington’s case, 144, 592 Financial Corp’n (claim of), re Natal Investment Co., 168, 174 Finlay v. Bristol & Exeter Rw. Co., 874 Fisher v. Tayler, 609 Fishmonger’s Co. ». Robertson, 376, . 380 Fitzgerald ». Champneys, 660: Flanagan 0, Great Western Rw. Co., 66, 89 Fleming’s case, 529: Fleming ». Self, 57 Flight o. Bolland, 383 Flower v. London, Brighton & South Coast Rw. Co., 286,291,295: Forbes’s case, 153, 592 Forbes v. Marshall, 119 Forrest 0. Manchester Rw. Co., 67,. 594 Forster v. Macreth, 116 Foss v. Harbottle, 184, 185, 448, 557, 561 Foster v. Dawber, 507 Fothergill’s case, 154, 592- Fountaine v. Carmarthen &c. Rw. Co., 127, 429, 437, 438. Fox 2. Clifton, 110 Fox’s case, re Irrigation Co. of France, 352, 520, 522, 535 Fraser 0. Whalley, 568 Free Grammar School of Chip- ping Sodbury, re, 52 Frend 0. Dennett, 361 Frewin v. Lewis, 213 Frowd’s case, 258 Furness Railway Co. ». Smith, 323 Furness ». Caterham Rw. Co., 127 Furnivall ». Coombes, 19 Fyfe’s case, re, Joint Stock Dis- count Co., ° Gage v. Newmarket Rw. Co., 280 Galloway 0. Mayor &c. of Lon- don. 288 ? Galvanized Iron Co. ». Westoby, 109 Gardner ». London, Chatham & Dover Rw. Co., 127 General Co. for Promotion of Land Credit, re, 87, 146, 410, 663 General Estates Co., re, ex parte City Bank, 156, 166, 176 General Exchange Bank ». Horner, 196 TABLE OF BRITISH CASES, Gerhard ». Bates, German Mining Co., re, ex parte Chippendale, 612, 624, 629 Gibbs’ & West’s case, re Interna- tional Life Ass. Co., 118, 129, 421 Gibson, ex parte, re Hull & Lon- 242 don Life Ass. Co., 253 Gibson, ex parte, re Smith, Knight & Co., 529 Gilbert’s case, 409, 151 Gleadow v. Hull Glass Co., 95 Glover v. North-Western Rw. Co., 453 Glyn v. Baker, 178 Goff v, Great Northern Rw. Co., 262 Goldshede »v. Cottrell, 508 Goldsmid »v. Tunbridge Wells Improvement Commissioners, 304 Gordon ». Sea, Fire & Life Ass, Co., 158, 162, 433 Gorgier v. Mieviile, 178 Gouldsworth o. Knights, 19 Grady’s case, re British Provi- dent &c. Co., 443 Graham ». Birkenhead &c. Rw. Co., 312 Graham v. Van Diemen’s Land Co., 352 Gray v. Lewis, 1835, 424, 557 Great Cambrian Mining Co., ex parte Hawkins, Great Northern Rw. Co. ». Eastern Counties Rw. Co., 306, 339 Great Northen Rw. Co. », Lancashire & Yorkshire Rw. Co., ‘ Great Northern Rw. »v. Man- chester &c. Rw. Co., Great Northern Rw. Co. ». South Yorkshire & River Dun Co., Great Western Rw. Co. 2. Metropolitan Rw. Co., Great Western Rw. Co. ». Ox- ford &c. Rw.Co., Great Western Rw. Co, ». Rush- out, 218, 589, 590, 592 Green, ex parte, re Joint Stock 110 321 321 326 96 592 Coal Co., 661 Green v, General Omnibus Co., 241 Green 2. Rutherforth, 50 Greenhalgh », Manchester &c. Rw. Co., 497 Gregory v. Patchett, 91, 102, 415, : * 857, 571, 587, 608 Griffith’s case, re Medical In- valid Sc. Soc., 529 Xxilf Grimes v. Harrison, 55, 123 Grinham ». Card, 57 Grisewood’s case, 259 Grissell’s case, re Overend, Gur- ney & Co., Gunn ». London & Lancashire 553 Fire Ins, Co., 486 Haddon ». Ayres, 631 Haigh »v. North Bierly Union, 366 Halford ». Cameron’s &c. Rw. Co., 155 Hall ». Mayor &c. of Swansea, 374 619. Hall ». Taylor, 18, 196 Hallett ». Dowdall, 631 Hallows »v. Fernie, 583, 585 Hall’s case, re United Service Co., 419 Hambro’ v. Hull &c. Ins, Co., 398 Hamilton v. Smith, 476 Hammersmith & City Rw. Co. ». Brand, 15 Hare v. London & North West- em Rw. Co., 332, 593 Harris v. North Devon Rw. Co., 406 Harrison ». Stickney, 61 Hart v. Alexander, 508 —— », Clarke, 576 Hartnall v. Ryde Commissioners, 18 Hartridge & Allender, ex parte, re Chatham & Dover Arrange- ment Act, 207 Hattersley 0. Earl of Shelburne, 221, 568 Hawken ». Bourne, 117, 626 Hawkins, ex parte, re Great Cambrian Mining Co., 110 Hawtayne o. Bourne, 610, 626 Hawthorne’s case, re Solvency Mutual Guaranty Soc., 422 Hayman ». Governing Body of Rugby School, 51, 578 Head’s case, re Contract Corp., 443 Heathcote v. North Staffordshire Rw. Co., 198 Heaton, ex parte, 422 Hedges v. Metropolitan Rw. Co., 295 Hemming v. Maddick, 525 Henderson, ex parte, 440 ». Australian Royal Mail &e. Co., 368, 369, 370 Henderson »v. Harding, Official Manager of Royal British Bank, 446 Henderson », Lacon, 258 XxxiV Henry ». Great Northern Rw. Co., 145, 146, 575, 581, 584 Hercules Ins. Co., 7¢ Lowe's case, 444 Hermitage’s case, re Merchant’s Co., Heymann ». European Cent. Rw. Co., Hichens v. Congreve, Higeg’s case and Martin’s case 512, 535 Higgs’ case, re Bank of Hindustan, 509 Higgs, ex parte, 533, 5385 — »v. Northern Assam Tea Co., 169, 170 Highgate Archway Co. o. Jeakes, 70 Scheol, re, 51 Hill ». Manchester &c. Water Works Co., 230, 437, 489 Hill’s case, re Joint Stock Dis- 443 260 571 count Co., 443 Hill’s case re Victoria Perma- ’ nent Benefit Soc., 56, 622 Hippisley's case, 518, 522 Hoare’s case, 98, 627 Hoblyn ». Rex, 351 Hodgson ». Earl of Powis, 332, 593 Hodgkinson ». National Live Stock Ins. Co., : Holden’s case, re European Cent, Rw. Co., Holdsworth v. Mayor &c. of Dartmouth, 58, 187 Holliday v. St. Leonard’s, Shore- 152 443 ditch, 61 Holmes v. Eastern Counties Rw. Co., 89 Holroyd v. Marshall, 130 Holt’s case, 425 Home Counties &c. Asso’n Co. re Wollaston’s case, 417, 445, 447 Homersham ». Wolverhampton ‘Waterworks Co., 364, 366 Hoole v. Great Western Rw. Co., 135, 145, 598 Horn ». Ivy, 362 Hornby v. Close, 54 Horsey’s Claim, re London & Colonial Co., Howard’s case, re Leeds Bank- 69 ing Co., 459 Howbeach Coal Co. v. Teague, 107, 150 Howden ». Simpson eé¢ al., 496 Howley vo. Knight, 15 TABLE OF BRITISH CASES. Hughes ». Layton, 55 Hull Flax &c. Co. v. Wellesley, 144 Hull & London Life Ass. Co., re, ex parte Gibson, 2538 Humber Iron Works Co., re, 129 Hutchinson ». Surrey Gas Con- sumers’ Co., 486 Hutton ». Scarborough Cliff Hotel Co., 145 Hyam’s case, ve Mexican &c.. Co., 150 Imperial Anglo-German Bank, 668, 665 Imperial Bank of China, India & Japan, re, Imperial Bank of China v. Bank 572 of Hindustan &c., 514 Imperial Land Co. of Marseilles, re, ez parte Colborne & Straw- bridge, 166, 176 Imperial Land Co. of Marseilles, re, Vining’s case, 535 Imperial Mercantile Credit Asso’n re, 535 Imperial Mercantile Credit Asso’n re, Marino's case, 443 Imperial Mercantile Credit Asso’n v. Coleman, 402 Imperial Steam and Household Coal Co., re, 109 Inderwick 2. Snell, 557, 560 India &c. Ass. Co., re, 530 Ingate ». Austrian Lloyd’s Co., 182 Inglis 0. Great Northern Rw. Co., 461 Inns of Court Hotel Co., re, 125 International Life Ass. Co., Gibbs’ and West’s cases, 118, 129, 421, 590 Ipswich (Bailiffsof) v. Johnston, 4 Irish Peat Co. ». Phillips, 146 Irrigation Co. of France, re, Fox’s case, 352, 520, 522, 535 Jackson v, Cocker, 148 James 0. Eve, 515 —— 2. May, 196 Jefferys 0. Gurr, 19, 22 Jenkins v, Harvey, 21 Job », Lamb, 486 Johnson », Swann, 50 Joint Stock Coal Co., re, ex parte Green, 661 Joint Stock Discount Co., re, Fyfe’s case, 443 TABLE OF BRITISH CASES. Joint Stock Co. ». Brown, 97 Jones’s claim, re Commercial Banking Corp., 529 Jones’s case, re London & County Ins. Co., 146 . Jones’s case, ve Victoria Per- manent Building Soc., 56, 622 Jones v. Garcia Del Rio, 583, 585 Jones v. Williams, 50 Judd’s case, 4 592 Kay »v. Johnson, 630 Kearns ». Leaf, 589, 590, 655 Kelner v. Baxter, 472, 634 Kennedy’s case, 530 Kennedy v, Panama Royal Mail Co., 250, 242 Kennet & Avon Nay. Co. »v, Witherington, 61, 656 Kent Benefit Building Soc. 7, 55, 128, 630 Kent Coast Rw. Co. v. London, Chatham & Dover Rw. Co, 310 Kent ». Jackson, 556, 557, 588, 587 Kernaghan v. Williams, 195 Key, ev parte, Burslem Paper Mill Co., Kidderminster (Mayor &c, of) 0. Court, Kidderminster (Mayor &c. of) v. Hardwick, 380, 382 King ». Baylay, ° 15 —— ». Bishop of Chester, 48 —L ». Marshall, 126, 129 King of Two Sicilies ». Will- cox, 274 King’s case, re Financial Corp., 144 Kirk »v. Bell, 151, 459 Kisch v. Venezuela Rw. Co., 257, 586 Knight's case, re North Hallen- 620 452 beagle Mining Co., 418, 487, 447 Laing v. Reed, 56, 119 Laird v. Birkenhead Rw. Co., 383 Lake ». Argyll, 488 Lamb », North London Rw. Co., 292 Lamprell v. Billericay Union, 364, 366 Lancaster & Carlisle Rw. Co. v. North Western Rw. Co., 198, 207, 209, 332 Land Credit Co. of Ireland, re, ex parte Overend, Gurney & Co., 156, 437 Lang v. Purves, 602 Lang v. Smith, 178 xxXV Latymer’s Charity, re, 52 Law », London Indisputable Co., 590, 655 Lawless ». Anglo-Egyptian 269 Cotton & Oil Co., Lawrence’s case, 258 Laythoarp ». Bryant, 381 Le Conteur v. London & South- western Rw. Co., 94 Leeds Banking Co., re, Howard’s case, Leifchild’s case, re British & Foreign Cork Co., Leominster Canal Nav. Co. 2. Shrewsbury &c. Rw. Co., 383, 481, 499 Lewis v. Mayor &c. of Roch- 459 95 ester, 188 Limpus ». London General Omnibus Co., 262 Lindsey »v. Capper, 499 — (Harl of) ». Great Northern Rw. Co., 226, 383, 499 Lindus v. Melrose, 158, 632 Littlehampton Steamship Co. re, Ellis’s case, 150 Littlehampton Steamship Co. re, Ormerod’s case, 149 Llanelly Rw. & Dock Co. v. Lon- don & Northwestern Rw. Co., 321 Llanharry Hematite Iron Co. re, Tothill’s case, Lloyd 2. Freshfield, Local Board of Health of Chat- ham, extra, 0. Rochester Paye- 461 610 ment &c. Com., 61 Logan ». Courtown, 93, 312 London & Birmingham Rw. Co. ». Winter, 383 London & Blackwall Rw. Co. 2. Board of Works for Lime- house District, 298 London, Bombay & Mediter- ranean Bank, ve, Drew’s case, 512 London, Brighton & South Coast Rw. v. London & South- western Rw. Co., 307, 323 London, Chatham & Dover Ar- rangement Act, ex parte Hart- ridge & Allender, 207 London & Colonial Co. re, Hor- sey’s claim, 69 London & Continental Ass. Soc. v. Redgrave, 109 London & County Ins. Co. re, Jones’s case, 146 xvi Co. 620 371 London & County Ins. Wood’s claim, London Dock Co. ». Sinnott, London & Eastern Banking Corp. r¢, ex parte Longworth’s . executors, 109 London Gas Light &c. Co. ». Nicholls, 864 London, Hambro’, &c, Bank, 7e, Zulueta’s claim, 100 London India Rubber Co.re, 146 London Marine Ins. Assoc. re, 665 London (Mayor &c, of) v. Goree, 376 London (Mayor &c. of) 0, Hunt, pil eee Mercantile Discount Co. 566, 570 ecto & Northern Ins. Corp. re, Stace & Worth’s case, 514, 520 London & Southwestern Rw. Co. 2. Blackmore, London & Southwestern Rw. Co. ». London & Southeastern Rw. Co. Longworth’s Executors, ex parte, re London & Kastern Banking 70 307 Corp., 109 Lord »v. Governors & Co. of Copper Miners, 556 Los’s case, 512, 521, 582, 533, 535 Lowe v. London & Northwest- ern Rw. Co., 874, 487 Lowe’s case, re Hercules Ins. Co., 444 Lowndes ». Garnett & Moseley Gold Mining Co., Ludlow (Mayor &e. of) v. Charl- ton, 359, 369, 372 Lyde ' v. Eastern Bengal Rw- Co. 91, 223 Lyster’s case, re Tavistock Iron Works Co., Lyth », Ault, 627 460 508 Macbride ». Lindsay, Macdonell 0. Graud Junction Canal Co. Macdonell 2 Midland Great Western (Ireland) Rw. Co., Macdougall v. Jersey Imperial Hotel Co. limited, Macgregor ». Dover & Deal Rw. Co, 231, 640 Madrid Bank ». Pelly, 484 Magdalena Steam Nav. Co., re, 627 Mair 0. Himalaya Tea Co., "437, 446 585 592 341 184 TABLE OF BRITISH CASES, Manby ». Long ef al., 362 Manchester &c. L. Ass. Assoc. »7e, 529 Manchester & London Life Ass. &c. Assoc. re, ez parte Pike, 527 Manchester Rw. Co. 2. Reg., 293 Manchester School, ve, 52 Marine Mansions Co. re, 126 Marino’s case, Imperial Mercan- tile Credit Assoc. re, * 443 Marlborough School, re, 52 Marlow v. Pitjield, : 612 Marriott 0. Tarpley, 19 Marseilles Extension Rw. Co. re, ec parte Credit Foncier of England, 424 Marshall »v. Corp. of Queens- borough, 377 Martin’s case, 512, 5385 Martin v. Nutkin, 19 Marylebone Banking Co., re, ex parte Davidson, 100 Matthews vo. Great Northern Rw. Co., 145 Maughan v. Leamington Gas Co., 575 Maunsell v. Midland Great West- ern Rw. Co. of Ireland, 211, 232, 888 Maxwell v. Dulwich College, 383 May v. Great Western Rw. Co, 89 Maynard’s case, 184 Mears ». London & Southwest- ern Rw. Co., Medical &c. Soc. re, Griffith’s case, , 529 Melhado v. Porto Allegre Rw. Oo., 472, 487 262 Menier 2. Hooper's ao Works, 586, 593 Mercantile Trading OCo., re, Stringer’s case, 139 Merchants’ Co., re, Hermitage’s case, 443 Merchants’ & Trad. Ass. Soc., re, 665 Meredith, ex parte, re State Fire Ins. Co. Mersey Docks & Harbor Board v. Gibbs, 18, 61, 62, 270 Metropolitan Saloon Omnibus Co, », Hawkins, Metropolitan & Provincial Bank, < parte, re Blakeley Ordnance 0., Meux’s Executors’ case, Mexican &c. Co. re, De Pass’ case, 150 Mexican &. Co. re, Hyam’s case, 150 162 269 425 TABLE OF BRITISH CASES. Michel’s trust, re, Midland Cos. Benefit Building Soc., re, Midland Great Western Rw. Oo. ». Gordon, 148, 483 Midland Rw. Co. ». Ambergate &c. Rw. Co., Midland Rw. Co. v, Great West- ern Rw. Co., 321, 339 Midland Rw. Co. v. London & Northwestern Rw. Co., Miles ». Bough, Mills ». Northern Rw. of Buenos Ayres Co., Mixer’s case, re Royal British Bank, Moody v. Corbett, Moody 2. London, Brighton & South Coast Rw. Co., 425 Moore », Hammond, 350 Mozley v. Alston, 152, 184, 185, 557, 559, 561 Mulholland ». Belfast Corp., 59 Mullock o. Jenkins, 55, 57 50 321 333 461 137 253 89 Munt’s case, 417 Munt »v. Shrewsbury & Chester Rw. Co., 217 Murray v. Bush, 440 — 2. East India Co., 155 Natal &ec, Co., re, 662 re, claim of the Financial Corp., 168, 172 National Exchange Co, of Glas- gow v. Drew, 41, 244, 425 National Financial Co., re, ex porte Oriental Commercial Bank, 98, 196 ‘National Guaranteed Manure Co. v. Donald, 80, 86 National Patent Steam Fuel Co., re, Baker's case, National Patent Steam Fuel Co., re, Worth’s case, 145, 245, 592 National Permanent Building Society, re, ex parte William- son, 56, 121, 123, 612, 661 National Provincial ‘Life Ass. Society, re, 528, 529 National Provincial Marine Ins. Co., ve, Parker's case, 577 National Provincial Marine Ins. Co.; re, Binger’s case, 100 81, 83, 566 156 620 Natusch », Irving, Neale v. Turton, XXVii Neate v, Denman, 558. New Brunswick &c. Land Co. v. Conybeare, 254 New Brunswick Rw. Co. v. Mug- geridge, 256 Newcastle Marine Ins. Co., re, ex parte Brown, Newcastle Marine Ins. Co., re, ex parte Henderson, New Clydach Sheet & Bar Iron Co., re, 127 Newling ». Francis, 656- Newport Marsh Trustees, ex parte, 22 Newry & Inniskillen Rw. Co. 0. Edmunds, New Zealand Banking Corp. (claim of), re Blakeley Ord- nance Co., 164, 168, 170, 171 New Zealand Banking Corp., re, Sewell’s case, 144, 410, 462, 592. Nicholson 2, ‘Bradford Union, 364 Nicol, ez parte, re Royal British Bank, 240, 245, 260, 425, 430 Nixon v. Brownlow, 483 North British Ins, Co. 2. Hallett, 424 North Hallenbeagle Mining Co., re, Knight’s case, 418, 487, 447° N. Kent Extension’ Rw. Co., re, 663 North of England Joint Stock Banking Co., re, ex parte Ber- 440 440 150 nard, 252 North "Staffordshire Rw. Co. ». Peek 382 North Staffordshire Steel & Iron Co. ». Ward, 109, 111 Northwestern Rw. Co. 0. Me- Michael, Norwegian Titanic Iron Co., Limited, re, 71, 313 Norwich & Lowestoft Naviga- tion Co. v. Theobald, Norwich (Mayor of) v. Norfolk Rw. Co., Norwich Yarn Co., re, ex parte Bignold, 438, 459, 626, 629 437 109 231 Oakes ». Turquand, 254, 259, 591 Ohrby »v. ‘Ryde Com’rs, 61 Oriental Commercial Bank, re, 196 Oriental Commercial Bank, re, Alabaster’s case, 515 Oriental Commercial Bank, ez parte, re National Financial Or, 98, 196. Ormerod’s case, re Littlehampton &c. Steamship Co., 149- XXViil Ornamental Pyrographic Co. 2. Brown, 108, 109 Orr ». Glasgow &c. Rw. Co., 594 Osgood v. Nelson, 460 Overend, Gurney & Co., ex parte, re Land Credit Co. of Ireland, 156, 437 Overend, Gurney & Co., re, Grissell’s case, 553 Overend, Gurney & Co. ». Gur- ney, 407 Overend, Gurney & Co., 7, Walker's case, 443 Paice ». Walker, 630 Paine ». Guardians of Strand Union, 364, 372 Painter's case, 151, 252, 420 Pallister o. Mayor &c. of Graves- end, 60 Panama &c. Royal Mail Co., re, 128 Pare v. Clegg, 54, 620 Parker v. River Dun Navigation Co., 211 Patent File Co., re, ex parte Bir- mingham Banking Co., 118, 123, 124 Patent Paper Manufacturing Co., re, Addison’s case, 98 Pauling v. London & North- western Rw. Co., 375 Pawle’s case, 259 Payne v. Mayor &c. of Brecon, 34, 60 — vw. New South Wales Steam Navigation Co., 486 Pedell ». Gwynn, 162 Peek v. Gurney, 255, 259, 260 Pell’s case, 153 Pellatt’s case, re Richmond Hill Hotel, 420 Pennington (Doe dem.) ». Ta- niere, 377 Penny v. Southeastern Rw. Co., 74 Penrose v. Martyn, 158 Perrett’s case, 518, 520 Peruvian Rw. Co. ». Thames & Mersey Marine Ins. Co., 155, 156, 157, 422 Peto », Hammond, 55 Petre (Lord) v, Eastern Counties Rw. Co., 226, 493 Philip v. Edinburgh &c. Rw.Co., 297 Philpott. St.George’s Hospital, 50 Pheenix Life Ass. Co., re, Burges & Stock’s case, 83, 617, 619 TABLE OF BRITISH CASES. Phosphate of Lime Co. v. Green, o 4 Pickering ». Ilfracombe Rw.Co., 129 ». Stephenson, 194 Pierce o. Jersey Water Works 0., 109, 111, 440 Pike, ex parte, re Manchester & London Life Ass. &c. Asso., 527 Pilbrow ». Pilbrow’s Atmos- pheric Rw, Co., 182, 488 Pinnel’s case, 507 Port of London, ex parte, re Sea Fire & Life Ass. Soc., 616 Poulton »v. London & South- western Rw. Co., 264 Powis v. Harding, 446 Pratt’s case, 531 Preston y. Grand Collier Dock Co., 151, 576 Preston ». Liverpool &c. Rw. Co., 226, 227, 230, 488, 494, 501 Price & Brown’s case, 98 Prince of Wales Life Ass. Oo. 2. Harding, 432, 487, 488 Prince of Wales Life Ass. Co. v. Prince, 387 Pritchard's case, 154, 478 Professional, Commercial, & In- dustrial Benefit Building Soc., Te, : 56 Pudsey Coal Gas Co. . Corp. of Bradford, 597 Queen’s Benefit Building Soc., re, 663 Queen ». East’n Archipelago Co., 650 Rance’s case, re County Marine Ins. Co., 139 Randle v. Deane ¢ al., 362 Ranger v. Great Western Rw. Co., 240 Raphael v. Thames Valley Rw. 0., 298, 808 Rashdall a. Ford, 640 Reading Dispensary, 7e, 51 Redmond ». South Wales Rw. Co., 42 Reese River Mining Co. o. Smith, 258 Reese River Silver Mining Co., re, Smith’s case, 260 Reg. v. Ambergate Rw. Oo., 314 —— ». Beestor, 19 —— ». Birmingham & Glouces- ter Rw. Co., 273 TABLE OF BRITISH CASES. Reg. v. Bradford Nay. Co., 303 — v. Bridgewater, 190 —— v. Bristol Dock 0o., 314 —— v. Bristol & E. Ru. Co, 314 _— vv. Dean and Chapter of Rochester, 48 — v. Dunn, 190 — v. Durham, 21 — 0. Eastern Cos. Rw. Co., 312,314 —— ». Great North of England’ Rw. Co., 278, 274 —— ». Great Western Rw. Co., 314 — », Grimshaw, 854 —— 2. Lichfield, 187, 188, 238 — ». Longton "Gas Co., 273 —— 2. Mayor &c. of Leeds, 189 —— », Mayor &c. of Liverpool, 12 . Mayor &c. of Manchester, 273 . Mayor &c. of Monmouth, 188 . Mayor &c. of Sheffield, "191, 193, 239 -—— ». Mayor &c. of Tamworth, 190 —— ». Paramore, 190 —— ». Poor Law Com’rs, 19 . President and Chapter of Exeter, . Prest, . Richmond, RG HT. Co, . Scott, . Stephens, . Thompson, . Town Council of Lich- field, 187, 188, 238 . Town Council of Stam- ford, 188, 190 . United Kingdom Elec- tric Telegraph Co., . Watson, 58 . Woods and Forests, 61 . York, New. & B, Ru. Co., 314 . York & N. Midland Rw. Co. 297, 314 Rendall ov. Crystal Palace Co., 588, 650, 652 Reuss (Princess of) 0. Bos, 585, 663 Reuter ». Electric Tel. Co., 370, ea Rew ». Pettet, 188 657 314 54 273 190 273 Rex 2. ‘Amery, ea? — v. Attwood, 351, 460 — v. Austrey, 19 —— ». Bird, 351, 460 —— ». Bishop of Ely, 599 —— ». Bower, 657 —— v. Brecknock Co., 814 9) Riche y. Ashbury de. Co., XXX Rex v. Chetwynd, 350, 352 — v. Durham, 351 — », Dursley, 61 —— v. French & Wye Rw. 0o., 314 —— ». Hill, 852 —». Langhorn, 350 —— v. Mayor &c. of London, 8 —— ». Morris, 656 —— ». Parkyns, 460 — ». Pasmore, 648, 656 —— »v. Player, 461 —— ». Ponsonby, 647 —— v. Prop. of Birming’m Canal, 74 — ». Pulsford, ‘461 v. St. Cath. Hall, Camb., 47 — ». Wharton, 11 —— v. Westwood, 351, 460 —— v. Windham, 277 Rhos Hall Iron Co., re, ex parte Birmingham Bank, Rhymney Rw. Co. v. Taff Vale Rw. Co., Richards v, Scarborough Market Co., 294, 295 Richardson ». Williamson, 640 42 Richmond’s case, 151, 252, 418, 420 Richmond Hill Hotel sre, Pellat’s case, Richmond v. N. London Rw. Co., 295 Ridley ». Plymouth Stonehouse Grinding &c. Co., 82, 611 Rigby v. Great Western Rw. Co., 89 Rimington’s case, 144, "592 Robinson v. Chartered Bank, 578 v. Lewis, 19 Robson 2. Dodds, Rochdale Canal Co. 2. King, Rochester (Dean and Chapter of) ». Pierce, 377 Rogers v, Oxford &c. Rw. Co.,341,594 Rolfe v. Flower, 529 Romney Marsh », Corp. of Trin- ity House, 61 Ross v. Estates Investment Co., 256,, 258, 585 116 307 594 Rothwell », Humphreys, 9| Royal Bank of India’s Case, re Asiatic Banking Corp., 96, 98, 429 Royal British Bank, ve, Mixer’s case, Royal British Bank, re, ex parte Nicol, 240, 260, 425, 480 Royal British Bank v. Turquand, 119, 399, 482, 487, 440, 611 253 420° 297 XXX Royal British Bank, Walton’s case, 449 Ruck 2. Williams, 269 Bugby School, re, 52 Russian Vyksounsky Iron Works Co., re, 258 Sadd vo. Maldon &. Rw. Co., 295 Salisbury o. Metropolitan Rw. Co., 1384 Salomons 2. Laing, 30, 598 Sanders v Guardians of 8t. Neot’s Union, 364 Sanderson’s Patents Asso., re, 662 Sankey Brook Coal Co., re, 129, 421 Saxon Life Ass, Co., re, Era and Anchor cases, 528 Scarborough Charity Petitions,re, 50 Scarth v. Chadwick, 585, 589 Scholey 2. Central Rw. Co. of Venezuela, Schroder’s case, Scott ». Colburn, 421 —— ». Ebury, 158, 472 Scottish North-Eastern Rw. Co. vo. Stewart, 40, 227, 229, 230, 314, 486, 488, 501 Sea, Fire & Life Ass. Soc., ve, ex parte Port of London &c. Co., 616 Sea & River Marine Ins. Co., re, 662 Seaton , Grant, 592, 594 Seddon ». Connell, 586 Serrell v. Derbyshire &c. Rw. Co., 488 Sewell's case, re New Zealand Bank’g Corp., 144, 410, 462, 592 260 Seymour v. Greenwood, 262 Shaw v. Pope, 37 —— v. Poynter, 37 Sheers v. Jacob, 7 124. Sheffield, ev parte, re Atheneum Life Ass. Soc., Sheffield &c. Rw. Co., 0. Wood- 252 cock, 461 Shields Marine Ins, Asso., re, 665 Shipp v. Crosskill, 585 Shore v. Wilson, 50 Shrewsbury & Birmingham Rw. Co. ». Chester &c. Rw. Co., Shrewsbury & Birmingham Rw. Co. »%. London & North- western Rw. Co., 40 Shrewsbury & Birmingham Rw. Co. » London & North- western & Shropshire Union Cos., 31, 308, 329 323 153, TABLE OF BRITISH CASES. Shrewsbury & Birmingham Rw. Co. ». Stour Valley Rw. Co., 321 Shrewsbury (Earl of) ». North - Staffordshire Rw. Co., 35, 227, 288, 481, 488, 501 Shropshire Union Rw. Co. 2. Anderson, 151 Sibree ». Tripp, 508 Sichell’s case, 98 Simpson v. Denison, 217, 826, 339 — »v.Lord Howden, 226, 495 — ». South Staffordshire Water Works, 292 —— ov. Westminster Palace Hotel Co., Limited, 68 Singer’s case, ; 100 Skinners’ Co. 2. Irish Soc., 602 Slark o. Highgate Archway Co., 155 Slim ». Croucher, 635 Smallecombe ». Evans, 352 Smart v. West Ham Union, 366 Smith », Bank of Victoria, 520 — ». Goldsworthy, 113, 142, 460 v. Hull Glass Co., 397, 399, 467 Smith, Knight & Co. re, ex parte Gibson, 529 Smith, Knight & Co., re, West- on’s case, 577 Smith v. Lloyd, 57 -—— 2. Neale, 382 -—— ». Reese River Mining Co., 152, 258, 586 Smith’s case, re Reese River Silver Mining Co., 260 Smith v, Trowsdale, 507 ». Weguelin,; 211 Smout v. Ilbery, 635 Smyth v. Darley, 452 Snell’s case, 419 Solvency Mutual Guaranty Soc., re, Hawthorne’s case, 422 Somerville’s case, re Empire Ass, Corp., 520, 522 Southall o. British Mut. Life Ass. Soc., 535 Southampton Dock Co. ». Rich- ards, 150 Southampton & Itchin Bridge Co. v. Southampton Local Board, 269 South-Eastern Rw. Co.'s Claim, re, 98 South-Eastern Rw. Co. 0. Heb- blewhite, 151 South of Ireland Colliery Co. 2. Waddle, 366, 369, 877 - TABLE OF BRITISH CASES. South Wales Rw. Co. v. Red- mond, 39, 42, 94 South Yorkshire é&c. Rw. Co. ® Great Northern Rw. Co., 31, 33, 291, ’319, 388 Spackman v. Evans, 440, "443, "466, 660 —— ».Lattimore, 282, 589 ex parte, re ‘Agricul- ; turist Cattle Ins. Co., 660 Sparrow 2. Oxford &c. Rw. Co., 295 Spencer's case, 529 Spence’s Patent &c. Cement Co., re, 661 Spokes ». Banbury Board of Health, Btace and Worth’s case, re Lon- don & Northern Ins. Corp., 514, 520 Stafford (Mayor &c. of) o. Till, 364, 377 Stailingers of Sunderland’scase, 5 Stamps v. Birmingham &c. Rw. Co., Stanhope’s case, re Agriculturist Cattle Ins. Co. ag Stanhope’s case, re St. Maryle- bone Banking Co., Stanley, ex parte, re British Provident Life & Fire Ass. Co. 129, 421 Stanley ». Chester & Birkenhead Rw. Co., 226, 494, 497 State Fire Ass. Soc., re, ex parte Meredith, 162, 590, 655 Steele o. Harmer, 156 North Metropolitan Rw. Co., 205 Steevens’ Hospital o. Dyas, 383 . Stevens v. Midlund Rw. Co., 267 — ». South Devon Rw. Co., 207, 219, 580 258 305 292 420 417 — v Stewart's case, Stiles v. Cardiff Steam Nayig’n Co., St. George Steam Packet Co., s 76, 6% parte Cropper, St. James’ Club, re, St. John’s College, Cambridge 2. Todington, Stockport District Water Works Co. v. Corp. of Manchester, Stockton & Darlington Rw. Co. 2, Brown, 291, 295 Stockton & Hartlepool Rw. Co. o. Leeds & Thirsk Rw. Co., 267 621 665 48 597 211 XXxi Straffon’s Executors, re, 438 Strand Music Hall Co., re, 421 Straus v. Goldsmid, 50 Stringer’s case, re Mercantile Trading Co., 139 Stuart v. London & Northwest- ern Rw. Co., 226 Stuart’s case, re Russian Vyk- sounsky Iron Works Co., 258 Stubbs »v. Lister, 576 Stupart v. Arrowsmith, 556 Suburban Hotel Co., re, 661 Sutton’s Hospital, case of, 2, 4, 11 Swansea Docks Co. v. Levien, 150, 440 Sweny v. Smith, 420, 576, 580, 586 Swift o. Winterbotham, 250 Syke’s oe ve Kuropean Cent’l Rw. Co. 409 Talbot's case, Tattan v. Great Western Rw.’ Co., Taunton v. Royal Ins. Co., Tavistock Iron Works Co., re, Lyster’s case, Taylor v. Ashton, ». Chichester & Midhurst Rw. Co., 35, 41, 227, 233, 488 Taylor v. Crowland Gas & Coke Co., Telford ». Metropolitan Board 531 262 "4 460 242 486 of Works, 213 Temple 2. Flower, 602 Terrell ». Hutton, 486 Thames Haven Dock &c. Rw. Co. v. Rose, 460 Thom ». Bigland, 242 Thomas’s case, 419 ‘Thomas v. Hobler, 583, 586, 594 Thampson v. Davenport, 630 Thompson 2. Percival, 508 — v.Planet Benefit Building Soc., 57 — ». Spiers, 422 — 2, Universal Salvage Co., 156 —— ». University of Lon- don, 48, 599 — ». Wesleyan News- paper Asso’n, 399 .| Thornton v. Howe, 50 Tilleard, re, 486 Tilson ». Warwick Gas Co., 483 Times Life Ass. &c. Co., re, 529 XXX Tinkler v. Wandsworth District Board of Health, Tobacco-pipe Makers’ Co. 2. Woodroffe, Tothill’s case, re Llanharry Iron Co., Tott 0. Hughes, Totterdell ». Fareham Brick &c. Co., 866, 446, 459, 469 Touche ». Metropolitan ‘Rw. Warehousing Co., 473, 485 Towne v. London &c. Ship Co., 182 Tredwen v. Bourne, 117 Trent & Humber Oo., re, ex parte 351 461 57 Cambrian Steam Packet Co., 660 Tring &c. Rw. Co., re, 425 Trinity House ». Clerk, 377 Troup’s case, re Electric Tele- graph of Ireland Co., 627 Tucker v. Rex, 351 Tucker’s case, re United Ports Ins. Co., 520, 521, 526 Tuffnell 0. Constable, 19 Turquand o. Marshall, 73, 352, 407 Ulster Rw. Co. v, Banbridge &c, Rw. Co., 628 United Ports &. Co., re, Adam’s case, 419, 526 United, Ports &e. Co., re, Brown’ 8 case, 520, 521 United Ports &. Co. ) fe, Tuck- er’s case, 520, 521, 526 United Ports &. Co., re, Wynne’s case, 518, 522 United Service Co., ve, Hall’s case, 419 University of London v. Yarrow, 50 Vale of Neath &c. Co., ve, Wal- ter’s case, —_ v. East Lancashire Rw. 219, 221 Toorhall Bridge Co. ». Earl Spencer, Victoria Permanent Benefit &c, Soc., ve, Hill’s and Jones’s cases, 56, 622 Vining’s case, re Imperial Land 449 492 Co. of Marseilles, 5385 Vivian v. Mersey Dock & Har- bor Board, 61 Walker’s case, re Anglo-Danub- jan Steam Nay. &c. Co., 444 TABLE OF BRITISH CASES. Walker’s case, re Overend, Gur- ney & Co., Walter’s case, ve Vale of Neath &c. Co., Walton’s cane, re Royal British 443: 449: Bank, 449 Walworth 0. Holt, 499 Ward », Sittingbourne & Sheer- ness Rw. Co., 664 Ward v. Society of Attorneys, 206, 215, 588, 652, 655. Ware v. Grand J unction Water. works Co., ~ 200, 204, 207 Ware ». Regent’s Canal Co., 601. Waterford Rw. Co. ». Dalbiac, 109 Waterhouse v. Jamieson, 258 Waterlow ». Sharp, 161 Watson 2. Eales, 447, 576 Weale v. West Middlesex Water- works, 583. Weardale Dist. Highway Board ». Bainbridge, Webb». Commissioners of Herne Bay, 439 Webb’ v. Direct London &c. Rw. Co., 226 Webb v. Manchester &ec. Rw. Co., ne Weeks v. Propert, Welland Rw. Co. v. Blake, BL Wernnick’s case, 530 Western Bank ‘of Scotland ». Addie, 254, 255° Western Bank of Scotland 2, Bairds, 407 Western CO. M. Co. v. Lawes C. M. Co., 269: Western Life Ass. Soc., ex parte, re Albert Life Ass. Co., 517, 525 West London Rw.Co. 2. Bernard, 461 West London Rw. Ca. ». London’ & Northwestern Rw. Co., Weston’s case, re Smith, Knight & Co., 577 Weat’s case, 118, 129, 421 Wey & Arun Junction Canal Co., re, Whiston ». Dean and Chapter of Rochester, — 48, 578, 589, 599 White o. Carmarthen &. Rw. Co., 581, 585 Whittiela ». Southeastern Rw. Co. 241, 269 Wilby »v. West Cornwall Rw. Co., he Wilkinson ». Malin, Williams, ex parte, 484, 509, 552. 307 663- TABLE OF BRITISH CASES, 195 583 Williams ». O’Meara, vo. Salmond, v, St. George’s Harbor Co., 464, 491 Swansea Harbor Trustees, Williamson, ex parte, ' re National Permanent Benefit Building Soc., 56, 121, 128, 612, 620, 630, 661 Wills », Murray, 350, 446, "458, "461 Wilmot v. Corp’n of Coventry, 377 Wilson v. Furness Rw. Co., 72, 602 — »v. Miers, 102, 415, 635, 637 — ». West Hartlepool Har- bor &c. Co., 383, 469 Wilson’s case, re Durham Co. &c. Building Soc., 55, 56,123, 621 Winch »o. Birkenhead &c. Rw. Co., 306, 339, 587 Wise, ex parte, 661 Withnell ». Gartham, 19 Wollaston’s Case, re Home Counties &c. Life Ass. Co., 417, 445, 447 Wolverhampton & Walsall Rw. Co. v. London & Northwestern — 4 246 Rw. Co., 821 Wolverhampton Waterworks Co. ». Hawkesford, 146 Wood ». Tate, 377 Woodham ». Anglo-Australian Assoc’n, Wood's claim, re London & County Ass. Co., 164 620 XXXili Wookey v. Pole, 178 Woolf v. City Steamboat Co., 182 Worcester, ve, ee parte Agra Bank, Worcester Corn Exchange Oo., re, 422, 438, 610, 629 Worth, ex parte, re National 424 Patent Steam Fuel Co. ., 145, 245, 592 Wright o. Deley, 57 Wright’s case, 258 Wynne’s case, re United Ports &c. Gen, Ins, Co., 518, 522 Yarborough o. Bank of England, 241 Yelland’s case, 444, 445 Yetts v. Norfolk Rw. Co., 152, 559, 581 Yool vo. Great Western Rw. Co., 187, 140 York & North Midland Rw. Co. v. Hudson York & North Midland Rw. Oo. 402 v. Reg., 314 Yuuag 2. Brompton &c, Water- works Co., Ystalyfera Iron Co. v. Neath & - Brecon Rw. Co., 182 295 Zulueta’s claim, re London, Hamburgh & Continental Ex- change Bank, 100 TABLE OF AMERICAN CASES. PAGE. Abbey v. Chase, 637 Abbott » Am. Hard Rubber Co., 108, 402 —— v. Herman, 375 —— ». Johnson, 552 —— ». Merriam, 565, 574 Ackerson ». Erie R. R. Co., Adams ». Rivers, 272 85 Adderly o. Storm, 98 Adler », Milwaukee &c. Co., 654 Adriance », Roome, 395 African Soc. ». Varick, 4 Agricultural Bd. v. Citizens’ 8. R. R. Co., e 607 Agricultural Branch R. R. Co. ». Winchester, 80 Aiken v. Western R. R. Co., 279 Akin v. Blanchard, 40 Alabama Life Ins. Co. v. Smith, 122 Alabama R. R. Co. ». Kidd, 399 Alabama & Florida R.R. Co.% | Burkett, Albany Street, Matter of, Albert o. Savings Bank of Bal- timore, 241, 614 Aldrich », Cheshire R,R.Co., 75 v. Press Co., 269 —— », Drury, 289 Alexander v. Central R. R. Co., 591 Alford ». Miller, 417 Allegheny City o. McClurkan, 40, 614 Allegheny County ». Cleveland 668 85 & Pittsburg R. R. Co., 549, 681 Allen », Curtis, 572, 578, 574, 579, 587, 598 —— »v.Inhab. of Jay, 282, 344 —— ». Montgomery R. R. Co., 126 —— »v. Steam Nav. Co., 399 —— », Wannmaker, 251 Alloway’s Creek v. String, 3 All Saints Church ». Lovett, 435 American Academy ». Harvard College, 52, 108 American Express Co. v. Gilbert, 425 PAGE, American Ins. Co. v, Oakley, 368 American Print Works 0, Law- rence, 305 American Silk Works 2. Salo- mon, 108 Amesbury ». Ins. Co., 13 Amherst Academy v. Cowles, At Ammant v. N. A. & P. Turnpike Co., 277, 687 Anderson 2. Kerns Draining Co., 283 », Longden, . 414 v. New. & Rich. R. R. 148 357 365 Co., Andover & Medford T. Corp. v. Gould, Andover Turn. Co. v. Hay, Androscoggin & Ken. R. R. Co, v. Androscoggin R. BR. Co., Androscoggin R. R. Co. 2, Ste- vens, 4 Angle v. Miss. & Mo. R. R. Co., 675 325 Anthony v. Adams, 193 Applegate ». Ernest, 687 Arents ». Com., 180 Argenti v. San Francisco, 874, 619 Arms v. Conant, 677 Arnington v. Bennett, 284 Arnold v. Ruggles, 141 Arthur »,Com.& R. R. Bank, 108,124 —— ». Griswold, 250 Ashhurst’s Appeal, 403 Ashton », Atlantic Bank, 591 Aspinwall 2. Ohio & Miss, R. R. Co., 550, 679 v. Torrance, 636, 638 Atchafalaya Bank ». Dawson, 647 Athol & Enfield R. R. Co. a. Prescott, 153 Atkins v. Albree, 1380 Atlantic Cotton Mills v. Abbot, 106 Atlantic Delaine Co. v. Mason, 355 Atlantic Ins. Co. ». Sanders, 853 Atlantic & G. W. R. R. Co. 2. Duna, 272 XXXVI Atlantic & Ohio R. R. Co. o. Sullivant, 291 Atlantic &e. Tel. Co. v. Com., 140 Atlas Bank v. Nahant Bank, 277, 586 Att. Gen, v. Bank of Niagara, 600, 649 Boston & Maine R. — R. Co., 549 —— »v. Boston Wharf Co., 600 — ». Cambridge, 600 —— ». City of Salem, 598, 600 —— ». Clergy Soc., 51, 651 —— ». Cohoes Co., 600 — ». Detroit, 598 — ».Ely &c. Railw. Co., 209 —— ». Federal Street Meet- ing House, 673 —— ». Garrison, 600 —— ». Hudson River R. R. Co., 601 —— v. Ins. Co., 122 —— o. Jolly, 50 —— ». Merrimack Mfg. Co., 602 — 2. New Jersey R.R.Co.,601 —— », Old South Soc., 51 —— ov, Paterson & Hudson R. R. RB. Co., 75, 602 —— ». Proprietors of Meet- ing House, 602 — »v. RR. Cos, 550, 599, 602, 670 v. Tudor Ice Co.; 600, 648 —— ». Utica Ins. Co., 600 Auburn Academy vo. Strong, 13, 51 Auburn & Cato Plank Rd. ». Douglass, 63, 279 Audenreid ». Phila. & Reading R. R. Co., Augusta Bank 0. Hamblet, 412 Aurora City ». West, 179, 180 Aurora T. Co. 2. Holthouse, 658 348 Babbitt o. Savoy, 188, 192 Babcock v, Beman, 633 Bach ». Pacific Mail 8.8. Co. 557 Backus v. Lebanon, 667 Bacon v. Robertson, 654 Badger v. Bank of Cumberland, 365, 415 Bailey v. Hollister, 80 —— ». Phila. Wil. & Balt. R. R. Co., 668 — ». Power Bt. Church, 555, 668 — w.R.R. Co., 1477 575 Baird v. Bank of Washington, 11, 435 Baker v. Backus, 648, 649 —— 2v. Cotter, Baker». Fales, 474 |. TABLE OF AMERICAN CASES. 678- —— »v. Hannibal & St. Jo. R, R. Co., — >». Inhab. of Windham, Baldwin v. Bank of Newburg, Ballou v. Talbot, Balston Spa Bank 2. Marine Bank, Baltimore 0. Gill, » Reynolds, Baltimore &c. R. R. Co. v. Glenn, 75 192 415. 637 44. 598 376. 4,. 549 Baltimore & Havre de Grace T. Co. v. Union R. R. Co., Baltimore & Ohio R. R. Co. ». Blocher, Baltimore & Ohio R. R. Co. ». Gallahue, Baltimore & Ohio R. R. Co. 2. Supervisors, Baltimore & Ohio R. R. Co. 2. Wheeling, Baltimore & Phil. Co. v. Brown, Baltimore & Susquehanna R. R. Co. v. Comppton, 71, 298 Baltimore & Susquehanna R, R. Co. v. Musselman, Baltzer v. Nicolay, Bancroft v. Lynfield, Banet ». Alton & Sangamon R. -R. Co., 81, 84, 153 Bangor & Piscataqua R. R. Co. ». Harris, Bangor R. R. Co. v. Smith, Bangs v. Duckinfield, + Bank ». Carrolton,’ ». Commonwealth, v. Hammond, -—— »v. Lanier, 18, 141- —— 2». Stewart, 425 Bank Com’rs». Bank of Brest, 103,412 Bank of Augusta v. Earle, 29, 429, 677 Bank of Bellows’ Falls 0. R. &B. R. R. Co., a7 Bank of Chillicothe v. Dodge, 648 v. Town of C., 121 Bank of Columbia ». Patterson, "857, 365, 368 Bank of Columbus 2. Bruce, 99, 113 Bank of Genesee v, Patchin B’k, 122, 633: Bank of Grafton 0. Woodward, 425: Bank of Hartford o. Hart, 425: Bank of Kentucky ». Schuy 1kil] Bank, 392, 305. 439, 474. 299 272: 549 549 Qt Steamboat 675 546 636, 687 192 286 667" 445. 583. 64, 668 619 TABLE OF AMERICAN CASES. Bank of Metropolis v. Gutt- schlick, 857, 379 Bank of Michigan v.«Niles, 11 Bank of Middlebury o. Edgerton, 279, 412 ». Rutland & W.R.R. Co., 887, 412, 453 Bank of N. Y. 0. Bank of Ohio, 633 Bank of Northern Liberties 2. Cresson, 439 Bank of Penn. ». Reed, 415, 467 Bank of Pittsburg 2. Whitehead, 423 -Bank of Republic 7. Hamilton Co., Bank’ of Rome ». Village of Rome, Bank of State v. Bank of Cape Fear, «668 Bank of St. Mary’s v. St. John, 409, 417, 485 Bank of Toledo ». International Bank, 437 Bank of U. 8. ». Dandridge, 357, 358, 861, 368, 379, 388, 391, 670 179 429, 438 v. Davis, 248, 421, 423, 425 — » Dunn, 415 Bank of Waltham ». Waltham, 141 -Bank of Washtenaw ». Mont- gomery, i1 Bankhead ». Brown, 281 Bannon 2. Baltimore & Ohio R. , R. Co., 272 Baptist Asso. ». Hart, 50 Baptist Church v. Brooklyn Ins. Co., 425, 488 — ». Mulford, 365 _— ». Rouse, 673 — ». Witherel, 673 Barber », Andover, * 299 Barclay 0. Howell’s Lessee, 85 — » Quicksilver Mining Co. 517 —— ». Talman, 652 Bard ». Poole, 680 Bardstown & L. R. R. Co. v. Metcalfe, . 64, 123 Barker v. Cairo & Fulton R. R. Co., 234 —— v. Mech. Ins. Co. 121, 156 Barnard ». Vt. & Mass. R. R. Co., 134, : 147, 557 Barnes v. Ontario Bank, 115, 121,438 Barnet o. Smith, 248 Barnstead ». Empire Mining Co., o 5 XXXvii 179 Barrett », Schuyler Co., Barron 2. Baltimore, 285 Barrows v. Med. Soc., 45 Barry v. The Merchants’ Ex- change Co., 11, 66, 68, 73, ‘ 113, 121, 123 805 435 Barter v. Wheeler, Bartholomew ». Bentley, Bartlett v. Brickett, 182 — 2. Drew, 139 — ». King, 9 — Nor. & Wor. R. R. Co., — »., Tucker, Barton ». P. J. & U. F. Plank Rd. Co., 99, 405, 406 Basset v. Alton & Saginaw R. R. Co., 81, 84, 153 — ». Marshall, 438 — », Salisbury Mfg. Co., 811 Bates v, Audr. & Ken. R. R, Co., 187 v. Bank of Alabama, 66, 365 —— 2». Boston & N. Y. C. RB. 825 637 R. Co., 388 Bath . Miller, 126, 687 Bayington v. P.& §. R. R. Co. 107 Bay ». Cook, 636 Bayless v. Orne, 409, 555, 572, 5'73, 649 Beach 2. Fulton Bank, 29, 243 —— »v. Smith, 108 Beale v. Railway Co., 270 Beall o. Fox, 11, 50 Beardsley ». Ontario Bank, 685 Beaston v. Farmers’ Bank, 103 Beatty ». Knowler, 29 —— ». Marine Ins. Co., 438 — ». Kurtz, 581 Beckwith ». Windsor Manuf. Co., 356 Bedford R. R. Co. v. Bowser, 80, 107, 412, 417 Beekman ». §. & 8. R. R. Co., ue Beene v. Cahawba & M. R. R. Co., 153 Beers . Phoenix Glass Co., 115, 399 Belfast & Mousehead Lake R. R. Co. ». Brooks, 3438, 344 Belknap v. Boston & Me. R. R. Co., Bellinger vo. N.Y. Central R. R. 272 Co. 15 Belmont», Erie Rw. Co., 407, 588, 595 Benédict v. Denton, 388 Benjamin 2. Elmira R. R.Co., 125, 687 Bennett v, Judson, 251 XXXVili Benoist v. Inhab. of Carondelet, 388 Bensley ». Mountain Lake Co., 295 Benson ». Mayor, 669 Berks & Dauphin Turn. v, Meyers, 888, 437 Berry v. Yates, 95 Bestor 0. Wathen, 402 Bethany 2. Sperry, 353 Bicktord v. First Nat. Bank of C., 248 Bigelow v. Hartford Bridge Co., 601, 605 Billings v. Providence Bank, 63 Binghamton Bridge Case, 284, 667 Binney’s Case, 12, 84, 549 Bish v. Johnson, . 543 Bishop 2. Brainerd, 539, 546, 547 Bissell ». McLellan, 438 —— v.Mich. 8. &N. IRR. Cos., 84, 37, 38, 42, 122, 241, 335, 872, 874, 428, 482, 609, 674 Black v. Delaware & Raritan C. Co., 6,11, 68, 79, 84, 108, 124, 805, 309, 330, 539, 540, 541, 544, 555, 582, 652 Black R. & Utica R. R. Co. v. Barnard, 21, 125, 487 | —— —— v. Old Black & White Smiths’ Soc. ». Colony R. R. Co., 800 Vandyke, 45 | Bow 2, Allenstown, 21 Blackstone Mfg. Co. ». Black- Bowden v. McLeod, 673 stone, 4| Bowen ». Irish Pres. Cong., 388 Blair v. Milwaukee &c. R. R. Co., 670 | Bower v. Bank of the State, 4 Blake v. Hinkle, 656 | Bowler v. Lane, 272 — ». Holley, 41 | Bowne v. Douglass, 633 —— ». Livingston Co., 179 | Boyce »v. City St. Louis, 10, i1 — wP.&C.R.R. Co., 654 | Bracken v. W. & M. College, 49 —— ». Rich, 85, 289| Bradley ». Ballard, 115, 121, 375, 609 Blatchford ». Ross, 400, 484, 543 v Buffalo, N.Y. & E. Bliss v. Anderson, 588 R. R. Co., 669 v. Matteson, 400, 484, 515] —— o. Case, 19 Blissett 0. Hart, 279| —— oN. Y.&N.H.R.R. ° Blodgett 0. Morrill, 152, 248 Co., 63, 281 Bloodgood v. Mohawk & H. R. —— ». Richardson, 182 R. Co., 263 | Bradstreet ». Bank of Royalton, 453 Bloomfield Gas Co. v. Richard- Bradt v. Benedict, 652 - son, 282) Brady ». Mayor, 66, 160, 368 Blossburg & Corning R. R. Co. Brainard ». Clapp, 296 - v. Tioga R. R. Co., 336; —— o.N. Y. & Har. R. R. Bluehill Academy v. Witham, 480 Co., 179 Blunt v. Walker, 108; —— _». Peck, 126 Bodle v, Chenango Ins. Co., 445 | Brandon Iron Co. v. Gleason, 652, 657 Bonaparte v. C. & A. R. R. Co., Bredin ». Dubarry, 467° ' 281, 283, 298, 605) Breedlove o, Martinsville R. R. Bonesteel ». The Mayor, 875| Co., 445 - Boody v. Rutland R. R. Co., 107 | Brend ». State, a1 Booker, ev parte, 8, 258, 575 | Brewer v. Proprietors of Boston —— 2. Young, 458| Theater, 184, 578 TABLE OF AMERICAN CASES. Booth »v. Bunce, 517 —— v. Farmers’ & Mechanics’ Bank, . 241 Bordentown & 8. A. T. Co. v. C. & A. RB. R. Co., U7 Boston & Albany R. R. Co., in ve, 299, 301 — OC. & Me. R.R. Co. » Gilmore, 684 —— ». State, 273, 276, 669 Glass Co, v. Langdon, 651, 656, 657 & Lowell R. R. Co. 2. Boston & Maine R. R. Co., 63, 319 — & Lowell R. R. Co. ». Commonwealth, 130 —. — » Salem & Lowell R. R. Co., 284, 667 Boston Mill Dam Co. o, New- . man, 283 Boston Water Power Co. v. Bos- ton & Worcester R. R. Co., 84, 284, 299 Boston & Worcester R. R. Co. o. Western R. R. Co., 319 TABLE OF AMERICAN CASES. Brewster 0. Hartley, 95, 154, 563 Hough, 667 Bridge Co. ». Clarksville, 284 ». Hoboken Co., 284, 668 ». Lowell, 284 Bridgeport Bank 2. N.Y. &N, ——= =, H. R. R. Co., 141 Bridgeport City Bk. 0. Emp. Stone Dressing Co., 122 Bridge Prop. », Hoboken L. & I. Co., 64 Briggs 0. C. & A. R. R. Co., 64 —— ». Whipple, 192 Bright ». Hutton, 476 Brightwell v. Mallory, 141 Brinckerhoff v. Brown, 652 ‘Broadway Bk. ». McElrath, Brockenborough o. James River sCO., 153 Brockway ». Allen, 634 Brokaw vo. N. J.R. & T. Co., 246, 262 Brongon v. La Crosse R. R. Co., 572 Brooklyn Cent. R. R. Co. v. Brooklyn City R. R. Co., Brooklyn Park Com. v, Arm- strong, 86, 302 Brooks »v. Peck, 582 Brower v. Appleby, 106 Brown 2. Beatty, 281 141 800 —— v. Brown, 233 — o, Hummel, 668 —— »v. Leckie, 248 —— ».Lehigh Coal & Nav. Co., 1389 —— v..Somerset, 414 — ». Van Dyke, 572 o. Winnisimmet Co., 67, 469 Browning v. Cam. & Wood. R. R. Co., Brownlee v. Ohio &. R. R. Co., 283 247, 504 Bruce v. Del. & Hud. Canal Co., 90 — »v. Lord, 633, 634 Bruff v. Mali, 250 Bruffet o, Great Western R. R. Co., 108, 546, 648, 652, 668 Brundage v Brundage, 139 Bruning v. N. 0. C. & B. R. R. Co., 296 Brunswick v. Dunning, 15 Bryan v. Reynolds, 234 Bryant v. Goodman, 352 Buckley v. Briggs, 122, 368 Buck Mountain Coal Co. ». Le- high Coal Co., Buell o. Buckingham, 811, 317, 601, 608 401, 458 XXXIX Buffalo & Allegheny R. R. Co. o. Casey, Buffalo, Corning & N. Y. R. R. Co. »v. Pottle, Buffalo & N. Y. R. R. v. Brain- erd, 279, 281 487 80 — & N.Y. RR. Co. ». Didley, 80, 84, 148, 247 —— N.Y. & Erie R.R. o. eae ale 125, 400 Buffet 0. Troy & Boston RR. Co. 29, 674 Bulkley 0. Derby Fishing Co., 438, 442, 474 — tN. Y&N. ARR. Co., 669 Bullard ». Bank, 13 Buncombe Turnp. Co. v. Mc- Casson, 365 Bundy ». Birdsall, 182 Bunn »v, Van Dyke, 184 Burden 2. Stern, 283 Burgess v. Pue, 435, 439 Burke v. Smith, 151, 412, 417 Burr v. McDonald, 123, 356, 435 —— v. Smith, 50 Burrel v. Associate Ref. Synod, 673 Burrill ». Nahant Bank, 412, 413, 460, 474 Burroughs v. Housatonic R. R. Co., U7 — _ ». Richmond, 180 Burrows »v. Smith, 152 Burt 2. Farrar, 149 Burtis o. Buff. & 8. L. R.R. Co., ae Burton’s Appeal, Butchers’ Ags’n, 3 | Butler 0, Milwaukee, 188, 192 —— »v. Watkins, 249 Butternuts & O. Turnpike Co. ». Worth, 107 Butterworth v. Stagg, 596 Butts 0. Woods, 184, 400, 565 Cabot & W. Springfield Bridge Co, ». Chapin, 105 Cahill », Kalamazoo Ins. Co., 458, 459, 656 Caldwell v. N. J. Steamboat Co., 271 — ».Nat. Mohawk Val- ley Bank, California Tel. Co. v. Alta Tel. Co., Calkins 0. Bloomfield & Roch. Ins. Co., —— v. Cheney, 625 284 313 673 xl Calloway Co. ». Clark, 89 Camblos v. Phil. & Read. R. R. Co., 66, 78, 848, 596 Camden & A.R. R.Co.v. Remer, 29 oR. & D. B.R.R.Co., 64 Cammeyer v. German Churches, 453 Campbell v. Miss. Union Bank, 651 Canal Co. v. R. R. Co., 311, 381, 549, 647, 648, 649, 651, 656 Candee». Pennsylvania R. R. Co., 675 Carey v. Cin. & Chic. R. R. Co., 247, 546, 652 Carlisle ». Terre Haute &c. R. R. Co., 542 Carpenter v. Farnsworth, 632 v. New York & New Haven R.R.Co., 187, . 139, 581 —— _». Rommell, 179 Carr v. St. Louis 13 Carroll v. City of East St. Louis, 680 Carter v. Balfour, 50 Cary ». Cleveland & Toledo R. R. Co., 374 Catlin ». Eagle Bank, 657 Catskill Bank v. Gray, 334, 335 Cazeaux v. Mali, 250 Central Bank v. Empire Stone Dressing Co., 122 Central Bridge Co. ». City of Lowell, Central Gold M. Co. v. Platt, 10 Central R. R. Co., in re, 300 v. Claghorn, 401 »v. Collins, 95 Co. v. Valen- 105, 106 10 84 Central Turnpike tine, Chamberlain o. Chamberlain, v. Painesville R. R. Co., 107, 351, 358, 435 Champion ». M. & C.R. R. Co., 80 ». White, 251 Chapin ». Sullivan R. R. Co., 289 v. Vt. & Mass. R. R. Co., 179 Chaplin ». Hill, 375 Chapman 2. Atlantic R. R. Co., 77 v. Mad River R. R. Co., . 1038, 374 Charitable Assoc. ». Baldwin, 435 Charles River Bridge Co. v. War- ren Bridge Co., 63, 827, 647, 667 Charleston », Morehead, 387 Charleston Ins, Co. ». Sebring, 572 Charleston & Jeffersonville Turn- pike Co. v. Willey, 41 TABLE OF AMERICAN CASES. Charleston & Sav. R. R. Co. 2. Blake, 425 Charlotte & 8. C. R. R. Co. 2, Blakely, 153 Chase ». Vanderbilt, 147 Chater v. San Francisco Sugar Refinery, 479 Chautauque County Bank 2. Ris- i e Chelmsford Bank v. Demorest, 425 Chesapeake & Ohio C. Co. ». B. & O. R. R. Co., 84 vo. Knapp, 358 404 375, 504, 618 Chestnut Hill Co. v. Rutter, 268, 365 Chicago v. Longlass, 272 Chic. Bur. & Q. R. R. Co. ». Att. Gen., 842, 670 ». Coleman, 425 v. Parks, 348 0. Triplett, 670 v. Wilson, 90, 296 Chic. & N.W. R. R. Co. ». Fort Howard, 687 Chester ». Dickerson, Chester Glass Co. ». Dewey, — — ». James, 385 _—_ —— 2. People, 315, 348 —— ». Williams, 262 Chic. & R.I.R.R. Co. 0. Whipple, 268 Chicago Building Soc. v. Crow- ell, 464, 608 Childs a, Bank of Missouri, 267 —— 2. Central R. R. Coz, 294 Choquette ». Barada, 388 Christ Ch. 0. Barksdale, 409 %. Philadelphia, 669 Christian University 7. Jordan, 467 Church », Sterling, 464 Cincinnati, Ham. & Day. R. R. Co. v. Pontius, Cin. R. R. Co, v. Clarkson, Citizens’ Mut. Fire Ins. Co. 2. 675 108 Sortwell, 353 City Hotel Co. v. Dickinson, 152 City ». Lamson, 179, 180 City of Ohio »v. Cl. & Tol. R. R. 0., 134, 139 Clapp v. County of Cedar, 179 Clark », Benton Mfg. Co., 365 —— ». City of Janesville, 179 —— ». Corp. of Washington, 379 v. Farmers’ Woolen Mfg. Co., 156, 179, 388 », Farrington, 108 TABLE OF AMERICAN CASES. xli Clark o. Lee Co., 179 — vo. Monongahela Nav. Co., 80 v Titcomb, 115 Clark’s Executors ». Van Riems- dyk, 464 Clarkson », Hudson R. R. R. Co., 298 Clearwater v. Meredith, 80, 539, 541 Cleghorn o. N. Y. Cent. & H. R. R. R. Co., 271, 401 ‘Clemens v. Clemens, 10 Cleveland v. Chamberlain, 596 Cleveland & Pitts. R. R. Co. 2. Spear, 283, 300, 549 ‘Clinton, City of, v. Cedar Rapids & Mo. R. R. Co., 301 Clippinger o. Hepbaugh, “234 Coal Co. v. Blatchford, 591 Coburn 2. Boston Papier Mache Mfg. Co., 657 Coe v. Col. & Piqua R. R. Co., 123, 124, 125, 591, 687 — v. Hart, 682 — »v. Johnson, 128, 124 —— v. McBrown, 124, 125 —~— ». Pennock, 123 Coffin v. Rich, 667, 669 Coit v. Pittsb. Female College, 152 Coleough v. Nashville & N. W. R. RB. Co., 15 Coleman ». N. Y.& N. H. R.R. Co 262 —— ».Second Ave. R. R Co., 400, 484 Collins v. Taylor, 586 Colton v. Ross, 586 Columbus, City of o. Col. & Shelby R. R. Co., 311 Columbus P. & I. R. KR. Co. v. I. & B. RB. R. Co., 325, 336 Columbus R.R.Co. v. Powell, 545, 546 Columbus ». Woolen Co., 304 Comanche, The 182 Commercial Bank v. Cunuing- ham, 423 Bank »v. Farmer’s Bank ». French, 3 Bank ». Nolan, 376 Bank v. State, 668 Bank of N, O. ». Newport Mfg. Co., 121 Ins. Co. v. Union Ins. Co., 438 Commissioners v, Andrews, 602 o. Bk. of Buffalo, 414 v. Coms. of C’nty, 297 L.&T.Co., 688} Commissioners ». Gherky, 19 ». Holyoke Wa- ter Power Co., 669 v. Meeser, 316 Commonwealth v. Alger, 285 CTE TEMES STG BL Re) EL Se il | Pee a o. Atlantic & G. West. R. R. Co., 546 v. Boston & W. R. BR. Co., 277 v. Cent. Bridge Co., ava o. Commercial Bank, 647 v. Cullen, 656, 668 » Del. & Hud. Canal Co., 338, 349 ». Eastern R. R. Co., 667, 669 », Erie & N. E. R. R. Co., 29, 64, 299 v. Essex Co., 648, 667 o, Fisher, 86 ». Fitchburg R. R.Co., 71, 649 v. Franklin Ben. Soc., 45 v. German Soc., 45 », Gill, 13 ». Green,: 673 ». Guardians of Poor, 45 v. Milton, 681 v. Nashua & Lo- well R. R. Co., 276 ». New Bedford Bridge, 275, 667 v. Penn. Ben. Inst., 45 ». Penn. Canal Co., 669 v. Philanthropic Soc., - 45 ». Pike Ben. Soc., 45 v. Pittsburg, 179 o. Pittsburg &c. R. R. Co., 549, 647, 648 v. Railway Co., 601 v. Rosseter, 314 ». St. Patrick Soc., 45 o, Smith, 124 ov. Society, 45 o. Swift Run Gap Turnp. Co., 275 o. Troy & Green- 5 field Rw., 124 xlii Commonwealth v. Trustees of St. Mary’s Church, 892 ». Union Ins. Co., 647 v. Vt. & Mass. R. R. Co., 276, 277 — ». Westchester R.R. Co. 22 Concord Bank ». Gregg, 250 Concord R. R. Co. v. Greely, 280, 281 Conhockton 8. R. Co. o. B. N. Y. & E.R. R. Co., 15 Conklin ». Commissioners, 598 Conn. Mut. Life Ins. Co. ». C. C. & C. R. R. Co., 95, 179, 180 Conn. & Pass. River R. R. Co. v. Bailey, 152, 247 Conn. R. R. Co. 0. Baxter, 152 Conro ». Port Henry Iron Co., 3, 103, 391, 400, 464, 634 Contocook Valley R. RB. Co. . Barker, 105 Contra Costa R. R. Co. v. Moss, 300 Converse v. N. & N. Y. Tran. Co., 674, 675 Conway, ex parte, 124 Cook v. College of Physicians, 45 —— v. Nathan, 643 —— »v, State Bank, 415 2. Sumner Spring Co., 645 —— v. Tullis, 471 Cooley on Cons. Lim., 86 Coolidge v. Brookline, 239 Cooper v. Curtis, 435 —— ». Frederick, 13, 99 Coosa Riv. St’bt Co. v. Barclay, 670 Copeland ». Citizens’ Gas Light Co., 103 Copp ». Lamb, 678 Coppell v. Hall, 234 Corey v. Pittsburgh F. W. &c. R. R. Co., 685, 687 Corn Exchange Bank v. Cumber- land Coal Co., 453, 460 Corning v. Southard, 464 Corwin »v. N. Y. & Erie R. R. Co. 669 Coster v. N. J. R. RB. Co., 296 Cottrill ». Myrick, 280 County Attorney v. May, 600 Couvin v. Wallace, 376 Cov. & Lex. R. R. Co. v. Bowler, 401 — ». Winslow, 401 Cowley v. Grand Rapids & Ind. R. 2. Co., 459 Craig o. City of Vicksburg, 179 — v. Ward, 251 TABLE OF AMERICAN CASES. Cram v. Bangor House, 438, 455, 458, 459 Crandall », Nevada, 285 Crawfordsville R. R. Co. »o. Wright, 268 Crease », Babcock, 78, 98, 99, 581, 648, 654 Crocker v. Crane, 106, 108, 437 o. N. London &. R. R. Co., 262 —— »v. Old South Soc., 45 Crofut »v. Brooklyn Ferry Co., 4 Crosby v Hanover, 84, 279 Cross ». Sackett, 250, 259 Crowley v. Panama R. R., 4 Cramp ». U. 8. Mining Co., 250, 425 Culbertson ». Wabash N. Co., 38 Cumberland Coal Co. ». Sher- man, 400, 422, 466 Cumb. & Ox. ©. Co. 2. City of Portland, 274 Cumb. Val. R. R. Co. Appeal, 348 Cumberland Valley R. R. Co. e. McClanahan, 45 Cunningham ». Edgefield R. R. Co., 152 — ». Pell, 565 572, 581, 587 — vo. Vt. & Mass. RR. Co., 134 Curien 0. Santini, 652 Curran v, Arkansas, 112, 139, 147, 151, 648, 654 Currie v. White, 136 Currier 2, Concord R. R. Co., 827 v.M.& C. BR. R, Co., 286, 293 Curry v. Scott, ® 112 % Woodward, 139 Curtis v. Leavitt, 29, 115, 123, 375, 385, 420, 618 —-% Murray, --— v. Whipple, 282 Cushman v. Smith, 75, 298 Custer o. Titusville Gas & Water Co. 248 — Tompkins Co. Bank, 428 Cutler ». Middlesex Factory Co., 553 Dabney ». Stevens, 895 Daily Post Co. 1. McArthur, 269 Daland ». Williams, 130 Dale v. Grant, 579 Damon », Granby, 388 Dana », Bank of at, Paul, 41, 488 —— 0. Bank of U. 8. 108, 124, "391, 412 TABLE OF AMERICAN CASES. Danbury & N. R. R. Co. 0. Wil- son, 80, 148, 151, 158, 504 Danforth ». Schoharie & Duane T. Co., Daniel o. Mayor, 188 Daniels », Ch. & N. W.R.R.Co. 75 Darling v. B. & W. R. R. Co., 325, 385 Dart 0. Houston, 182 Dartmouth College ». gaa ward, , 29, 48, 51, 284, 599, 647, 658, ey 670 Dashiel ». Att. Gen., ; 50 Dater 0. Troy Turnpike Co., 263 Davenport v. Dows, 572, 573, 587 Davidson v, Borough of Bridge. 379 port, 438 Davis v. Bradford, 375 — »v. French, 504 —— ». La Crosse R. R. Co., 75 —— »v. Mayor, 598 —— v. Meeting House, 13 o. Tus. C. L. D. R. R. Co., 281 Davison v. Seymour, 234, 401, 484 Dawes v. North River Ins. Co., 4388 Day v. Stetson, 647 Dayton & Cin. R. R. Co, »v. Hatch, 391, 893 Dean o. Roesler, 631 — ». Sullivan R. R. Co. 85 Debois v. Richmond, 430 Debolt v. Ohio Life Ins, & Trust Co., 668 Decatur @. Fisher, 272 Dedham Bank ». Chickering, 414 Dedham Savings Inst. v. Slack, 468 DeGroff ». Am. Linen Thread Co., 40, 872, 374, 488, 608 Delacey v. Neuse River Co., 45 Del. & Atlantic R. R. Co. ». Trick, 80, 151, 504 Del. Canal Co. v. Com., 263 v. Penn. Coal Co., 435 v. Sansom, 153 Del. Lack. & West. R. R. Co. v. Central R. R. Co. of N. J., Del. Lack. & West. R. R. Co. 331 v. Erid Rw. Co., 324 Del. R. BR. Co. 0. Tharp, 80, 84, é 648, 668 Del. & Rar, Canal Co. v. Cam. & Atl. R. R. Co., 317 Del. & Rar. Canal Co. v. Rar. & Del. Bay R. R. Co., 284, 605 Del. Tax Cases, 63 Den 2. Bolton, 673 — »., Pilling, 673 xii Den », Vreeland, 387 Denmead ». Bank of Balt., 687 Dennett v. Drehens, 387 Dennistoun v. New York & New Haven R. R. Co., 549: Denton ». Livingston, 141 Derby v. Derby, 50 DeRuyter »v. St. Peters’ Church, 124 Despard v. Walbridge, 251 Despatch Line of Packets v. Bel- lamy Mfg. Co., 351, 365, 378, 412, 485, 458, 454, 474 Detroit, City of, v. Jackson, 365, si DeVaraigne v. Fox, Devoe v, Ithaca & Oswego R. R. Co., Qr7 DeVoss v. Richmond, 179 DeWitt v. Walton, 633 Dey ». Jersey City, 453 Diamond v. Lawrence County, 179 Dickson v. Montgomery, 50 Dillingham »v. Snow, 21 Dillon on Mun. Corps., 58, 59 Dingiey v. Boston, 86, 283, 305 Dist. Att. o. Lynn’ & Boston R.” R. Co., 600 Dobson 9. Pierce, 251 ‘Dodge ». Woolsey, 184, 568, 569, 571, 572, 589, 667, 668, 669 Doe v. Georgia R.R. Co., 75 | Donelly ». Vandenburg, 71 Doolin o. Ward, 328 Doremus v. Ref. Dutch Church, 649, 3 673 Dorr v. Munsell, 251 Doughty ». 8. & E.R. R.Co., 286 Downie v. White, 107 Downing 2. Marshall, 10, 11 2. Mt. Washington Road Co., 29, 40, 78, 90, 379, 613 Doyle v, Peerless &c. Co., 649 Draper v. Mass. Steam Heating Co., 632, 636, 637 Drury t. Cross, 400 Dublin Case, . 673 Dubois », Hermance, 251 Ducat ». City of Chicago, 680 Dudley 0. Ky. High School, 555, 557 Duncan »v. Niles, 636, 637 Dung v. Parker, 636, 637 Dunham ». Cincinnati & C. R. R. Co., 125 — Earle, 125 —— »., Isett, 126 Dunn ». Charleston; 85. —— »v. Commercial Bank, 141 xliv 365 21 Dunn »v, St. Andrew’s Church, Dunning v. New Albany R. R., Durfee ». Old Colony &c. R. R. Co., 84, 95, 555 Dusenbury ». Ellis, 636 Dutch Church v. Brown, 504 ». Mott, ~ 50 Dutchess Cotton Mig. Co. 2. Davis, Duvant v. Iowa Co., 153 179 Eakright ». Logansport R. R. Co., 151, 445 Earp’s Appeal, 131 East Hartford». Hartford Bridge Co., 301, 667, 670 East N. Y. & Jam. R. RB. Co. 2. Lighthall, 108 East River Bank v. Hoyt, 425 East Tennessee & Va. R. R. Co. ». Gammon, 152, 248, 555 Eastern Pl. R. R. Co.o. Vaughan, 148 Eastern R, R. Co. v. Boston & Me. R. R. Co., 300 Eastman v. Meredith, 304 Eaton v. B.C. & M. R. R. Co., 289 v. European & ‘N. A. R. R. Co., 298 Eaton & Hamilton R. R. Co. 0. Hunt, 546, 548 Echols, ex parte, Eclipse Towboat Co. v. Pont- chartrain R. R. Co., Edgerly ». Emerson, 348 351, 458, 454, «458, 459 Edinburgh &c. Rw.Co. v. Philip, 314 Edwards ». Jagers, 668 v. Stonington Ceme- tery Asso., 283 Eble v. Chittenango Bank, 181 Eidman ». Bowman, 112, 1138, 118 Eldridge v. Smith, 126, 287 Elizabeth City Academy ». Lindsey, . Ellis ». Boston, Hart. & Erie R. R. Co., : Ellison 0. Mobile R. R. Co., Elwell o. Dodge, 430, 634 Ely v. Sprague, 108, 187, 140 Elysville Manf. Co, v, Okisco Co., 153, 435 401 152 365 Embury v. Conner, 85 Emmet ». Reed, 474 Empire Bank, matter of, 97, 98, 99 Enfield Bridge Co. v. Hart. & N. H. R. R. Co., 84, 284, 668 199 a TABLE OF AMERICAN CASES. Enfield Toll Bridge Co... Conn. R. R. Co., 103, 651, 668 Episcopal Char. Soc. ». Episco- pal Ch. in Dedham, 474 Eppes v. Miss. &c. R. R. Co., 80, 108, 445 Erie Ins. Co. case, 509 Erie & N. E. R. R. Co. v. Casey, 648, 668 Erie Rw. Co. 0. D. L. & W.R. R. Ca, 279, 294, 302, 313 Erie Rw. Co. » Union Loc. & Ex. Co., 348 Erie & Waterford Pl. R. Co. 2. Brown, 107 Ernest v. Nichols, 429 Essex Bridge Co. v. Tuttle, 152 Essex Turn. Co. v. Collins, 365, 379, 474 Co., 106 Eureka Co. o. Bailey Co., 388 | European &c. Rw. Co. v. Poor, 400, 403 Evans 2. Chic. & Rock Island R. R. Co., —— »v. Osgood, 353 —— ». Phila. Club, 45, 46 Evansville &. R. R. Co. » Baum, 262 Evansville & Crawfordsville R. R. Co. 0. Androscoggin Mills, 674 Evansville R. R. Co. 0. Evans- Esiell ». Knightstown Turnpike 474 ville, 184, 147 Evarts v, Killingworth Co., 656 Everett 0. United States, 365, 474 Everhart v. Chester R. R. Co., 151 —— ». West Ches. & Phila. R. R. Co., 80 Ewing 0. Gordon, 381 Exeter Bank », Rogers, 414 Fallon v. R. R. Co., 386 Farmers’ Bank v. Emp. Stone Dressing Co., 122 Farmers’ Bank ». Gettinger, 549 v, Troy, 425 & Citizens’ Bank o. 422 40 Farmers’ Payne, Farmers’ L. & T. Co. 0. Clowes, — ov Com- mercial Bank, 126, Farmers’ L. & T. Co. », Hen- drickson, 123, 685, 687 Farmers’ L. & T. Co. o. Perry, 40, 160 128 TABLE OF AMERICAN CASES, Farmers’ L. & T. Co. v. St. J. & Denver City R. R. Co., 682 Farmers’ & Mechanics’ Bank », Butchers’ & Drovers’ Bank, 248, 395, 415 Farmers’ Trans. Co. ». McCul- lough, 387 Farnum ». Blackstone Canal Co., 546, 548, 680 354 422 121, 396 636 Farrar v. Perley, Farrell Foundry, Co. ». Dart, Fay v. Noble, Féeter 2. Heath, Feital ». Middlesex R. R. Co., 674 Fero v. Buffalo &. R. R. Co., 77 Ferraria v. Vasconcelles, 673 Field o. Field, Fire Department v. Noble, Fireman’s Ins. Co. v. Mayor of Baltimore, First Baptist Church 0. Brook- 681 314 ‘lyn Ins, Co., 425 First Nat. Bank »v. Nat. Ex- change Bank, 625, First Nat. Bank of Lyons 0. Ocean Rank, 624 First Parish in Sutton v. Cole, 3, 11, 594. Firth 0, La Rue, 372 Fish ». Potter, 125 Fisher 2. Evansville &c. R. R. Co., 103, 589, 542 — »v. Murray, 553 —— v.N. Y. Cent. & Hudson River R. R. Co., 546 Fisk v. Chic. R. I. '& Pac. R. R. Co., 154 Fitchburg R. R. Co. v. Gage, 349 — » Grand Junction R. R. Co., 667, 669 Fleckner 0. Bank of U. S., 359, 368, 878, 379, 392, 415, 430, 478 Fletcher v. Peck, 596, 667 Flint o. Clinton Co., 124, 379, 387 Flint & Fentonville P. R. Co. %. Woodhull, Flint & Pere Marquette R. R. Co. ». Dewey, 401, 405 Fogg ». Griffin, 247 Pew, 425 Ford v. Ch. & N. W. RB. R. Co., 75 —— v. Fitchb’g R. R. Co., 266 Forster 1. Shaw, 387 Ft. Edward Plk. Rd. Co. ». Payne 107 154 648 — 0 Fosdick », Sturges, 458, 459, 673 | xlv Fowler, in re, 279, 280 — ». Scully, 625 Fox ». Allensville Co. 106: —— ». Northern Liberties, 474 o. W. Pac. R. R, Co., 293 Frankford Turnpike Co. v. P. & T. R. R. Co., 77 Frankfort ». Winterport, 234 Frankfort Banlg v. Johnson, 241 Franklin Bank 0. Cooper, 425, 654 Franklin Bridge Co. ». Wood, 28 Franklin Fife Ins. Co. 0. Hart, 479 Franklin L. & F. Asso. ». Mc- Intyre, 55 Freeman », Freeman, 383 —— ,. .Machias Water Power & Mill Co., 678 —— ». Winchester, 153 Free School v. Flint, 13 Fremont 0, Stone, 400, 484, 515 French v. Braintree Mfg. Co., + 281 — », Gifford, 569 ». Quincy, 68. Frincke ». Coe, 272 Frost v. Belmont, 284, 239, 479 Fry 2. Lexington &e. R. R. Co., 81 Frye v. Tucker, 122 Fuld 2. Croaks, 437 Fuller ». Dame, 234, 400, 404 —— ». Hooper, 633 —— v. Inhab. of Groton, 192 —— ». Plainfield Acad. School, 29, 45 Fulton Bank vo. N.Y. & Sha- ron Canal Co., 424 Galena & Chic, Union R. R. Co. o. Appleby, 670 Galena & Chic. Union R. R. Co. v. Loomis, 669 Galena & Chic, R. R. Co, v. Rae, 348 Gallego v. ate Gen., 5 Galveston R. R. Co. o. Cowdrey, 125, 591, 677, 684 Gamsin v. Combs, 865. Gardiner ». Pollard, 573, 587 Garduer ». Hamilton Ins. Co., 543 —— ». Ogden, 484. Garrett v. May, 126, 130 Gas Co. ». San Francisco, 375 Gass o. N. Y. P. & B. R. RB. Co, 325, 336 —— 2. Wilhite, : 50 ‘Gayle o. Cahawba R. R. Co., 153 Gelpeke ». Blake, 151 ». City of Dubuque, 179, 180 xlvi Georgetown ». Alexandria Canal Co., 601 Georgia Co. v. Castleberry, 480 German Ref. Church 7. Common- wealth, : 673 Germantown Pass. Rw. Co. 2. Fitler, 576 Getty v. Devlin, 404 Gibbons ». Ogden, » 670 Gibson ». Armstrong, 673 —— v. Mason, 281 Giesy v. Cin. &c. R. R. Co., 85, 287, 288 Gifford » N. J. R. R. Co., 8, 555, 568, 575, 649 — »v. Thomeon, 131 Gill», Kentucky Mining Co., 680 Gillett ». Mo. Valley R. R. Co., 267 o. Moody, 99, 654 Gillis o. Bailey, 195, 413 Gilman 2. City of Sheboygan, 285 —— »v. Hamilton, 51 v. Phila., 285 Gilmer ». Lime Point, 282, 286 Gilmore v. Pope, 357 Gilpin v. Howell, 141 Girard ». Philadelphia, 670 Girard Bank ». Bank of Penn. Township, 248 Glaize v. So. Car. R. R., 4 Glass Co. ». Alexander, 152 Gleaves ». Brick Ch. T. Co., 149 Gloucester Bank 0. Salem Bank, 258 Glover v. Powell, 668 Gobold v. Mobile Bank, . 409 Goddard o. Grand Trunk R. R. Co., 266, 268, 270, 344 Going 0. Emery, 50 Goodin v. Whitewater Canal Co., 401 297 108 Goodrich », City of Chicago, v. Reynolds, Goodspeed v. East Haddam BK., 241, 268 Goodwin ». Evans, 108 o. Hardy, 139, 467 vo. Union Screw Co., 365, 379 o. U. 8. Annuity & L. Ins. Co., Gordon v. Appeal Tax Court, 669 o. Baltimore, 182 2. Preston, 124, 401, 412, 467 Goshen Turnpike Co. 0, Hurten, 153 Goshorn »v. Supervisors, 549 439 TABLE OF AMERICAN CASES. Gotham ». Gilson, 572 Gould v. Langdon, 546 —— ». Town of Oneonta, 372 Goulding o. Clark, 353 Gove v. Epping, 198 Governor v. Allen, 15, 19 — ». Gridley, 19 Gowen »v. Penobscot R. R. Co., 298 Graff v. Pittsburgh R. R.Co., 151 Gram »v. Society, 673 Grammar School v. Burt, 667 Granger ». Bassett, 139 Grannaban v. Hannibal & St. Jo. ° R. R. Oo., 670 Grant ». Van Schoonhoven, 583 Gratz ». Redd, 139, 153, 409 Gray v. Hook, 2384 —— v. Monongahela Nav. Co.g 80 ——.N. Y. & Virginia 8. 8. 401, 587 112, 357, 575 Great Falls Mfg. Co. o. Fernald, 281 Co., —— ». Portland Bank, Greaves v. George, 587 Green v. Af. Meth. Ep. Soc., 45 — ». Cady, 435 —— »v. Seymour, 21 Greenville & Columbia R. R. Co. o. Coleman, 80 Greenville & Columbia R. R. Co. v. Smith, 153 Grew v. Breed, 98, 277, 654 Griffin ». Graham, 50 —— >». Sanborntown, 328 Griswold 2». Haven, 248 —— ». Peoria Univ., 148 Grogan ». San Francisco, 623 Habersham ». Savannah & Oge- chee Canal Co., 317 Hackensack Imp. Com. ». New Jersey Midland R. R. Co., Hadsell », Inhab. of Hancock, 187, 192 Hagan ». Prov. & W. R. R. Co., 271 3802 Hagar 0. Whitehouse, 673 Hagerstown Turnpike Co. 2. Creeger, 3, 21 Hague v. City of Philadelphia, 375 Hain ». G. W. G. Co., 106 Haldeman vo. Penn. R. R.Co., 86 Hale o, Everett, 673 —— ». Lawrence, 305 —— v. The Bridge Co., 401, 406 374 Hall o. Mut. Fire Ins. Co., TABLE OF AMERICAN CASES, Halle. Selma & Tenn. R. R. Co. 151 —- ». Sullivan R. BR. Co., 104, oe —— vo. Vermont & Mass. R. R. Co., Hallett o. Hallett, Hamilton ». Annapolis & E. R. 478 581 R. Co., 287 %. Grand Rapids & Ind. R. BR. Co., 459 a. Lycoming Ins. Co., 66 . Newcastle R. R. Co., II | 115, 121, 156 ». Smith, 476 v. The State, 316 ». Third Avenue R. R. Co., 262, 272 Hamilton & Deansville Plk. Rd. Co. 2. Rice, 80, 106, 148 xlvii Haun v. Mulberry & Jefferson Gravel-road Co., 106 Haven ». Adams, “387 — »v. Emery, 125 —— »v. Grand Junction R. R. 0.4 179 —— v. New Hampshire Asy- lum, Havens v. Foster, Hawkins o, Miss. & Tenn. R. R. 365 643 Co., 80 —— 0». The Governor, 199 Hawley ». Keeler, 474 Hawter v. Ohio & Miss. R. R. Co., 152 Hawthorne ». Calef, 667 Haxton v. Bishop, 124 Hay v. Cohoes Co., 263, 281, 284 —». McCoy, 182 Hayden v, Middlesex T. Co., 365, na Hamilton Ins. Co. 0. Hobart, 543 | Hayes vo. State Bank, Hanna »v, Cincinnati & Fort W. Haynes v. Palmer, isi R. R. Co., 543 | Hays 0. Ottawa, 0. & F. R. V. Harding v. Goodlett, 284 R. R. Co., 104 Hardy 0. Merriweather, 121, 122, 152 | —— ». Pittsburgh R. R. Co., 150, Harlem Canal Co. v. Spear, 106 151, 445 — v, Seixas, 106, 1538,| —— ». R. R. Co., 151 445 | Hayward v. Pilgrim Soc., 401, 474 Harmon 2. Dreher, 673 — &P. Plank-road Co. o. Harris v. McGregor, 437| Bryan, 108 —— ». Muskingum Mfg. Co., 651 | Hazard ». Day, 261 —— »v. Roof’s Executors, 233 | Hazen v. Boston & Mass. R. R. —— »., Slaight, 10 Co., 263, 293 Harrisburg Bank v. Tyler, 425 | —— .. Essex Co., 283 Harrison v. Hoyle, 673 | Hazlehurst ». Savannah R. R. Hart v. State Bank, 141} Co., 95, 147, 372, 609 Hartford & N. Haven R. R. Co. Hazlett ». Wotherspoon, 480 ». Boorman, 151 | Head ». Provident Ins. Co., 438 Hartford & New Haven R. R. Co. Heath ». Ellis, 581 v. Croswell, 80, 151, 553 Hartford & N. Haven R. R. Co. o. Kennedy, 153 Hartford & N. Haven R. R. Co. v. N. Y. & New Haven R. R. Co., 71, 824, 825, 328, 339 Harthouse v. Day, 251 Hartridge v. Rockwell, 99, 579 Hartwell v. Armstrong, 283 Harvey v. Thomas, 281 Hatch v. Boynton, 108 — ». Chic. R. 1. & Pac. BR. R. Co., —- 2. Purcell, Hatcher ». Toledo, W. & W.R. R. Co Hatzfield », Gulden, 587 375 1038 288, 234 v. Erie Rw. Co., 184, 400, 562, 565, 571, 573, 581, o88, 587 Heaston v. Cin. & Ft. 'W.R Co., 148, 445 Hedges o. Paquett, 570 Heffner v. Commissioners, 316 Hegeman v. Johnson, * 636 vo. Western R. R. Co., 669 Hendee ». Pinkerton, 124, 421 Henderson v. R. R. Co., 152, 247 Hendrickson »v. Decow, 673 Henniker v, Contoocook Valley R. R. Co., Henning ». U. S. Ins. Co., Henry v. Dubuque & Pac. R. R. Co. 85, 289 — ». Vermilion R. R. Co., 108 15 438 / xviii Henson v. R. R. Co., 271 Hentz o. Long Island R. R. Co., 318 Herkimer Mtg. Co. 0. Small, 153 . Herod v. Rodman, 684 Herron »v. Vance, 654 Hersey v. Veazie, 572, 573, 587 Herzo v. San Francisco, 623 Hester v. Memphis R. R. Co., 152 Heyward v. Mayor, 86 Hewitt 0. N. Y. & Oswego Mid- land R. R. Co., 669 Higbee & Riggs o. Camden & Amboy R. R. Co., 605 Hightower v. Thornton, 153, 654 Hildreth ». Lowell, 283 Hilles v. Parrish, 144, 409, 680 Hilliard ». Goold, 467 Hill v. La Crosse & Mil. R. R. Co., —v.N. 0. 0. & G. W. R. R. Co., 272 ». Western Vt. R. R. Co., 288 Hill Mfg. Co.» B. L. L. R. R. 687 Co., 674 Hinsdale v. Larned, 579 Hoagland ». Hannibal & St. J. R.R. Co., 73 Hoboken Building Asso. 0. Mar- tin, 656 Hodges ». Harris, 553 — v.N.E.Screw Co., 95, 400, 409, 517, 578 Hodsdon »v, Copeland, 579, 647, 651 Hoffman Steam Coal Co. o, Cum- berland Coal & Iron Co., 401, 423 Holbrook 2. Bassett, 115, 123 — .v.N.J. Zine Co., 141 Holmes, He parte, 99 —— ». Gilliland, 437 —., v. Old Colony R.R. Co., 385 Holyoke Bamk o. Bur nham, 98 Holyoke Co. ». Lyman, 667 Home Machine Co. v. Snow, 425 Home of the Friendless v. Rouse, 669 mio Ys N.Y. & N. H. R.R., 28, 328, 675 Houked 0, Eagle Bank, 375 —— ». Turnpike Co., 85 —— _ ». Vandewater, 828 Hopkins ». A. & St. L. R.R. Co., 272 — ». Gallatin Turn. Co., 124, 356, 388 Hoppin. . Buffum, 564 Horn v, Atlantic & St. Lawrence R.R. Co., 669 TABLE OF AMERICAN CASES. Horton ¢. Baptist Church, 555 Hosea ». Jacobs, 673. Hotchin v. Kent, 469 House 2. Cooper, 573 Houser ». Herman B. Asso., 55 Hovey v. Rubber Co., 269 Howard v. Savannah, 13 Howden v. Simpson, 496 Howe ». Deuel, 407,417 —— v. Freeman, 125, 684 —— 2. Keeler, 356, 888 —— », Starkweather, 140 Howell v. Chicago & N. W. R. R. Co. 180, 137, 189, 557 Hoyle v, Plattsburgh & Montreal R.R. Co., 400, 401, 685 Hoyt ». Bridgewater Copper Mining Co., 474, —— »v. Sheldon, 657 —— »v. Thompson, 388, 412, 460, 474 Hubbard v. Chappel, 546- Hubbell». Warren, 585, 586 Hud. & Del. Canal Co. ». N. Y. & Erie R. R. Co., 606 Hueston ». Eaton & Hamilton R. R. Co., "5 Hugg ». Zanesville Mfg. Co., 425. Hughes v. Antietam Mfg. Co., : 106, 247 Hull ». Richmond, 272 Humes ». Knoxville, 263 Humphrey +. Pegues, 669 Hunt v. Test, 234 —— v. Babcock, 687 Hunter v. Hudson River Iron Co., 246 Hunterdon Co. Bank »v. Nassau Bank, 141 Hutchins o. Byrnes, 387 — ». State Bank, 141 Hyatt o. Allen, 189 Illinois Central R. R. Co. o. Copeland, 675 Ill. Cent. R. R. Co. ». Reedy, 263 Ill. Grand Trunk R. R. Co. 2. Cook, 542 Til. Insane Hospital v. Higgins, 182 Ill. & Mich. C. Co. 0. Chicago & Rock Island R. R. Co., 284 Ill. R. R. R. Co. o, Zimmer, 81 Imlay o. Union Branch R. R. Co., 84 Ingraham ». Chic. D. & M. RB. R. 802 Co. Indiana Cent. R. R. Co, o. Oakes, 75- TABLE OF AMERICAN CASES. Indiana Cent. R. R. Co. v. State, 801, 317 Indianapolis & Cin. R. R. Co. ». Kercheval, Indianapolis, Cin. & L. R. R. Co. v, Jones, Indianapolis &c., R. R. Co. 2. Renard, Indianapolis & Mad.R. R. Co. v. Solomon, Inhab, of Greenwich ». Easton & Amboy R. R. Co., 291, 300 Inhab. of Mendham ». Losey, 365 Inhab. of Princeton », Adams, 678 Inhab. of Saddle River v. Colfax, 365 inhab. of Springfield ». Conn. R. R. Co., Inhabitants 0. Woods, Insane Hospital ». Higgins, Ins. Co. v. Francis, 669 546 349 319 299 19 182 4 —- v. Morse, 680 —— », Woodruff, 425 Iowa & Minn. R. R. Co. v. Per- king, 106 Irving Bank v. Wetherald, 248 Irwin v. Turnpike Co., 80 Isham v. Ben. Iron Co., 141 Ives 0. Hazard, 381 Jackson v. Brown, 123 —— », Hampden, 351 — ». Hartwell, 19 —— ». Hathaway, 85 — ». Ludeling, 400, 565 —-~ 2. Marine Ins. Co., 649 —— ev. Newark Plank R. Co., 189, 575 —— ». Phillips, 600 —— », Pratt, 387 —— v2. Roberts, 445 — ». Rut. & Burl. BR. BR. Co. 85, 291 v. Second Av. R. R. Co. 262 Jameson v. People, 21 Janey v. Latane, 50 Jansen v. Ostrander, 15, 19 Jaques v. Marquand, 609 Jarden v. Phil. Wil. & Balt. R. R. Co.,. 606 Jay Bridge Co, ». Woodman, 13 defferis. v, P,. W.& B.R.R.Co., = 77 Jefferson & Pontchartrain R. R. Co. v. Hazeur, 291 Jeffersonville R. R. Co. v. Rogers, 262, 267, 272, 348 _ D xlix Jefts v. York, 636, 644 Jenkins v. Anderson, 282 v. Union School District, 46 0 Jessup v. Bridge, 136 —— ». Loucks, 871 John v. Farmers’ Bank, 647 Johns v. Johns, 141 Johns Island Church Case, 673 Johnson », Candage, 587 — », County, 179, 180 —— 0. Crawfordsville R. R. Co., 152, 247 —— ». Hathorn, 375 —— v. Jones, 429 —— v,Mayne, 51 —— v.WabashR.R.Co., 148 Johnston v. Datton, 553 —— ov, Ewing Fem. Univ., 148 — », Jones, 564 Jones v. Boston Mill Corp., 277 —— v. Galena & Chic. U. R. R. Co., 670 —— v. Milton T.Co., 352, 353 —— ». Terre Haute &c. R.R. Co., _ 189, 140, 406, 417 Joslyn ». Pacific Mail 8.8.Co., 557 Joy v. Jackson & Mich. Pik. R. ' Co. 81, 90 ’ Judson v. N.Y. & N. H. RB. R. Co., 669 —— »v. Rossie Galena Co, 277 Junction R. R. Co. v. Reeve, 108, 453 Kane v. Bloodgood, 139 Kansas Valley Nat. Bank ». Rowell, 625 Karnes v. Rochester & Genesee Valley R.R.Co., 180, 132, 139, 140 Kean v. Johnston, 79, 108, 540, 544, 5538, 568, 592, 652 Keeler v. Salisbury, 508 Keller ». Crawford, 425 —— v. Johnson, 152, 247 Kelley v. The Mayor, 438 Kelly v. Mariposa Mining Co., 517 Kelsey v. National Bank, 467 —— »v. Nor. Light Oil Co., 247, 251, 258 Kendall v. Rider, 553 Kennebec & Portland R. R. Co. 2. Jarvis, 106 Ken. & Port. R. R. Co. v. Ken- dall, 13, 158 Ken. & Port. R. R. Co. a. Palmer, 504 I TABLE OF AMERICAN CASES, Ken. & Port. R. R. Co. v. Port. & Ken. R. R. Co., 124, 125 Ken. R. R. Co. ». Waters, 152, 247 Kennedy ». Balt. Ins. Co., 365 Kennicott 0. Supervisors, 179 Kenosha, City of, ». Lamson, 179, 180 Kenosha, Rockford & R. LR. R. Co. v. Marsh, 81, 84, 151, 670 Kentucky Seminary a Wallace, 3 Kerr, in re, 284, 204 Kessler v. N. Y. Cent. R. R. Co., 675 Ketchum vo. Buffalo, 121 —— »v. Durkee, 609 —— ». Madison, Ind. & P. R. R. Co. 546 Key City, The, 546 Keyser v. Stansifer, 673 King »v. Doolittle, 644 —— ». Eagle, 251 —— ». Elliot, 108 —— 9, Mer. Exch. Co., 123 —— 2. Morris & Essex R. R. Co., 77 —— ». Paterson & H. R. R. R. Co., 139 —— v. Wilson, 179 Kingsbury o. Ledyard, 435 Kingsley 1. New Eng. Ins. Co. 480 Kinkead v. McKee, 673 Kirk v. Hodgson, 553 Kishacoquillas T. R. Co. v. Mc- Conaby, 648 Klein ». Alton & Sangamon R. R. Co., 158 Kline v. Cent. Pac. R. R. Co, 262 Knapp 2. Railroad Co., 591 Kneeland »v. Gilman, 614 Knickerbocker Life Ins, Co. 0. Ecclesine, 269 Knight v. Carrollton R. R. Co. 287 Kniskern », Lutheran Church, 678 Knoop ». Piqua Bank, 668 Knorr ». Germantown R. R. Co. 75 Knowlton v. Ackley, 656 —— 2. Congress &c. Sprin Co., 154, 409 Knox Co. », Aspinwall, 430 Koehler », Black R. Falls Iron Co., 388, 400 Kramer 0. C.&P.R.R.Co, 279 Kyle 2. Laurens R. R. Co., 675 er 0. Northern Mo. RR. 286, 287 Lafarutie Ins. Co. . French, 681 La Grange R. R. Co. »v, Mays, 152 v, Rainey, 646 Lake». Virginia & Truckee R. R. Co., 1S Lake Ontario R. R. Co. ». Ma- son, 148, 445, 504 L’Amoreux 0. Gould, 381 Lancaster Nat. Bank ». Smith, 625 Lance’s Appeal, 286, 288 Land Grant Co, ». Coffey, 681 Lane ». Brainerd, 851 Lang v. Smith, 178 Langley v. Boston & Maine R. R. Co., 805 Langston ». 8. O0.R. R.Co., 179 Lathrop o. Commercial Bank of Scioto, 9, 865: Laudenschlager ». Benton, 128 Lauman v. Lebanon Valley R. R. Co., 108, 124, 311, 538, 540, 542, 555, 568 Lawrence v. Gebhard, 420 Lawson ». Kolbenson, 673 Lawyer v. Cipperly, 673 Lea 2, Amer. Canal Co., 648, 654, 657 Leach ». Hale, 624 Leary v. The Hannibal & St. Jo. R. R. Co. %5 Leasun 2. Hillegas, 387 Leavitt v. Blatchford, 123 —— v. Conn, Peat Co., 488 — ». Palmer, 618. Le Couteulx ». City of Buffalo, 29 Lee v. M. E. Church of Ft, Ed- ward, 631 —— ». Village of Sandy Hill, 246, 263, 269 Leech ». Harris, * @ 45, 46 Lefler v, Field, 251 Legrand ». Hampden Sidney Goll, 182, 865» Lehigh Bridge Co. v. Lehigh Coal Co., 647 Leitch v. Wells, 142 Leland ». Hayden, 131, 136. Lenox v. Roberts, 124 Leonardsville Bank ». Willard, . 182, 437 Le Roy v. Globe Ins. Co.. 139 Lester o. Foxcroft, 383 —— v. Webb, 899 Levering ». Mayor, 388 Leviston 0. Junction R. R. Co. 75 Levy Court ». Coroner, 19 Lewey’s Island R. R. Co. ». Bol- ton, 445: Lewis 0. Watson, 673, TABLE OF AMERICAN CASES. Lexington ». Butler, 122, 179, 180 Lexington, Trustees of, ». "Me. Connell, Lexington & Ohio R. R. Co. ». Applegate, 302 Lexington R. R. Co. 2. Bridges, 409 Lexington & W. Cambridge R. R. Co. vo. Chandler, 106, 111, 152, 182 445 License Tax Cases, 670 Lichbarrow ». Mason, 248 Life & Fire Ins. Co. ». Mechan- ics’ Fire Ins. Co., Life Ins. Co. ». Mech. Ins. Co., Lightner v. Boston & Albany R. R 241 115 546 . Co., Lime Rock Bank »o. Hewett, 425 Lindell », Benton, 648 Linder ». Carpenter, 402 Litchfield Bank v. Peck, 247, 248 Litchfield v. Vernon, 285 Little Miami R. R. Co. , Wet- more, Littleton Mfg. Co. v. Parker, Livingston v. Lynch, Lloyd v. Brewster, Loan Asso. 0. Topeka, Lockhart ». Van Alstyne, Lockwood »v. Mer. Nat. Bank, 262 105 80, 553 586 282 147 13, 458, 459 | Lodge ». Phila. &. R. R. Co., 298 Long Island R. R. Co., in re, 354, 606 Loper v. Brookline, 375 Lord ». Veazie, 596 Louisville R. R. Co. v. State, 276 Louisville & Nashville R. R. Co. v. Covington, Louisville & New Albany R. R. Co. v. State, Lovett ». German Reformed Church, Low ». Conn. & Pass. R. R. Co., 212, 425, 477, 478 Lowell v. City of Boston, 282 Lowell & Lawrence R. R. Co. ». Boston & L. R. R. Co., Lowell Savings Bank v. Win- chester, Lucas ». Case, —— ». Johnson, —— 2. Pitney, 121, 122, 156 Ludlow ». Hurd, 125, 687 Luling 2. ‘Atlantic Mut, Ins. Co. 35 187, 140, 142 654 311 687 435 300 396 673 182 Lum ». Robertson, li Lumbard 2, Aldrich, it —— », Stearns, 283 Lutheran Church v. Grisgau, 673 Lyman». B. & W. R. R. Co., 77, 669 Lyman ». Bridge Co., 263 Lyndeborough Glass Co. 2. Mass. Glass Co., 95, 469 Lyon v. Mitchell, 234. McAleer v. McMurray, 574, 593 McAuley ». W. Vt. R.R.Co., 318 McCall v. Byram Mfg. Co., 435, 679 McClellan v. Scott, 246 McClure v. Bennett, 633. — ». Man. & Law. R. R. Co., 305, 374, 675. McCord 2. Ochiltree, 50 McCoun ». Ind. &c. R. R. Co., 247 McCoy v. Washington Co., 179 McCracken o. San Francisco, 471, 623 McCray v. Junction R. R. Co., 80, 81, 542 McCulloch », Mayor, 314 McCullough »v. Moss, 379, 395) —— v. Sommerville, 553, ee vo. Myers, 652, —— _ ». Rogers, 637, 643 McCutcheon ». Steamboat Co., 375 McDaniels ». Flower Brook Mig. Co., 351 McDuffee ». Railroad, 348 McElhenny’s Appeal, 404, 484, 504 McElrath’s Case, 670 McFarlan ». Triton Ins. Co., 40 McGargell ». Hazelton Coal Co. 435 McGary »v. People, 4 McGee v. Mathis, 667 McGenness v0. Adriatic Mills, 425. McGinnis v. Watson, 673. McGoon ». Scales, 654 McGregor v. Erie R. R. Co., 549: McKeon ». Citizens’ R. R. Co., 272. McKim v. Odom, 182, 27% —— v. Mason, 687 McIntire Poor School v. Zanes- ville Canal'Co., 21, 647, 651, 656 McIntire v, Preston, 122 McIntire ». Western N. Carolina R. R. Co., 15 McLairen o, Pennington, 553, 651 McLaughlin v, Det. & Mil. R. R. Co., 184, 147, 469 'McLellan ». Cumberland Bank, 268 McMahan ». Morrison, 538, 541 McMillan v, M. 8..& N.I.R.R. Co., 3st lii McNeil v. Tenth Nat. Bank, , 141 McVea 2. Port Royal R. R. Co., 298 McVicker ». Ross, 544 Mabey v. Adams, 250 Macon v. Macon & W.R.R.Co., 66 Macon & W. R. R. Co.v. Parker, 687 Maddox vo. Graham, 179 Madison &c. Plank R. Co. ». Watertown &c. Pl. Rd. Co., 66,90 Magee v. Badger, 108 ». Mokelumne Hill Canal Co. 115, 121 Mahaska Co. R. RB. Co. ». Des Moines Valley R. R. Co., Mahony ». Atlantic & St. Law. R. R. Co., 305, 374 -——— ». Bank of the State, 22 “anderson v. Com. Bank, 568 Mandeville v. Riggs, 587 Mann ». Butler, 581 103 —— v. Cooke, 107, 153 ». Currie, 107, 153 v. Pentz, 151, 153, 387 Manney v. Motts, 182 Marbury v. Madison, 199 March », Eastern R. R. Co., 325, 565, 568, 581 139 625 334, 335 654 Marine Bank 2. Biays, ». Chandler, ». Ogden, Mariners’ Bank »v. Sewall, Marlborough Manuf. Co. o. Smith, 219, 412 Marr 7. Bank of Western Ten- nessee, Marsh v. Falkner, Marshall o. Balt. & Ohio R. R. 654 251 Co., 112, 212, 284, 504 — ». Gray, 251 Martin ». Branch Bank, 11 —— 2. Mayor of Brooklyn, 193 —— . Mobile &. R. R. Co., 681 —— . Pensacola Coal Co., 152 — ». Pensa. & Ga. R. R. Co. 80 —— ». Zellerbach, 467 Marvine v. Hymers, 416 Maryland ». Northern R. R. Co., 4 Mason v. Kennebec & Portland’ R. R. Co., 75 — »v. York & Cumberland R. R. Co. 581 Matheny 2. Golden, 668 Matter of enc 84 Matteson 0 N. Y. Cent. R. R. Ca., 425 Matthews ». Mass. Nat. Bank, 625 ‘TABLE OF AMERICAN CASES. Matthews v. Theological Sem., 680 Mauran »v. Smith, 199 Maynard »v. Firemen’s Ins. Co. 269 Mayor &c. v. Bailey, 288 Mayor of Baltimore »v. Pittsburg & Carmelsville R. R. Co., 667 Mayor ». B. & O. R. R. Co., 95 —— », Cummins, 187 —— ». Ray, 42, 160, 613 614 — of Worcester v. "Norwich & W.R. R. Co. 305 Meach », Smith, 636 Mead v. Bunn, 643 —— »v. Keeler, 115, 121 Meadow Dam Co. ». Gray, 80, 84 Meads v. Mer. Bank of Albany, 248 Means v. Swormestedt, 632 Meason’s Estate, 140 Mechanics’ Asso. ». Conover, 55 Mechanics’ Bank ». Bank of Co- lumbia, 368, 438 — oN. Y. & N. H.R. R., 112, 141, 394, 395 Mechanics’ Banking Assoc. ». White Lead Co., 121, 122 Mech. & Traders’ Bk. v. Debolt, 668 v. Thomas, 668 Medbury vo. N. Y. & Erie R. R. Co., 487, 474 Medomak Bank ». Curtis, 474 Medway Cotton Co. ». Adams, 3 Melledge v. Boston Iron Co., 3 Memphis v. Dean, 186, 572, 588 Memphis Freight Co. o. Mem- phis, Mendelssohn v, Anaheim Lighter 284 Co., 272 Mercer Co. v. Hacket, 177 Mercer v. McWilliams, 15 Merchants’ Bank v. Central Bk, 474 ». McColl, 634 vo. Marine Bank, 415 vo. Spaulding, 425 ». State Bank, 241, 248, 415 Merchants’ Bank of Alexandria ». Bank of Columbia, 865 Merrick 2. Burlington Plk. R. Co., 368, 438 —— o». Peru Coal Co., 401 — ». Van Santvoord, 4, 680 Merrill ». Plainfield, 192 0. Tauff Mfg. Co., 267 Merritt o. Farris, 853 —— », Lambert, 160 — 2 Millard, 372 TABLE OF AMERICAN CASES. Messenger ». Penn. R. R. Co., 348 Methodist Uhapel Co. o. Her- rick, 365 Metropolitan Bank 0. Godfrey, 11 Meyer v. Amidon, 643 —— v. City of Muscatine, 179 Miami Coal Co. 0. Wigton, 288 Michigan Bank v. Gardner, 64 ». Hastings, 668 Mich. Cent. R.R. Co. v, Anderson, 77 v. Gougar, 425 Middlesex Husband. & Man. Ass. 2. Davis, 41, 351, 438 Middlesex R. R. Co. v. Boston . Rut. & W. R. RB. Co., 124, 179, 181, 412, 684 & Chelsea R. R. Co., 103 Middlesex = Tomp. Co, v. Locke, 80 vo. Swan, 80 Middletown 0 0. McCormack, 3 Milford Turnp. Co. 0. Brush, 3 Mill-dam Foundry o. Hovey, 387, 388 Miller ». Chance, 123 o. Craig, 283, 305 —— v. Ewer, 678 —— »v. Gable, 673 — v. Ill, Cent. R. R.Co., 126, 424 —— v. Lancaster, 545, 546 —— v.N.Y. & Erie R. R. Co., 669 —— ». Porter, 9, 50 —— ». Race, 179 — v —— v. Second Building Ass., 151 Mills v. Jefferson, 180 — 2». Mills, 234 — »v. Williams, 668 Milner », N. Y.& N. H.R. R. Co., 676, 681 Milwaukee & Miss, R. R. Co. 0, Finne Field, 107 Miners’ Bank 0. U. 8., 648, 668 Miners’ Ditch Co. 0. Zellerbach, 12, 42, 43, 611 Minnesota Co. vo. St. Paul Co., 683 Minor v. Mech. Bank, 106, 107, er 35 Minot ». Curtis, 8, 182 —— »v. Paine, 130, 139 —— ». Phila. R. R. Co., 285 Miss. R. R. Co. 0. Cross, 152, 247 — o. Gastre, 445 Miss. & Mo. R. R. Co. v. Ward, 606 Mitchell », Leeds, 546 lik Mitchell 1, Rome R. R.Co., 40, 425° vo. Winslow, 682 Mobile R. R. Co. 2. State, 651 Mobile &c. R. R. Co. 0. Talman, 126 Mobile & Ohio R. R. Co. 2. Franks, 29 Mohawk Bridge Co. v. Utica & 8. R. R. Co., 63, 605. Mobawk & Hudson R. R. Co., in re, 435, 447 v. Niles, 836 643 Monroe v. Douglass, Monument National Bank ». Globe Works, 122, 611 Moody ». Corbett, 89 — wv Wright, Moore »v. Fitchburg R. R. Co., —— ov. Veazie, —— v. Whitcomb, 652 Moore’s Heirs v. Moore’s De- visees, 9 Moorhead v. Little Miami R. R. Co., 296, 606 Moran »v. Com’rs, 179 Morford v. Farmers’ Bank, 122 Morgan v. N.Y. & Alb. R. R. Co., Morrill 0. Noyes, Morris Canal Co. v. Lewis, 179 ». Townsend, 11 Morris Canal & B’k Co, v. Fisher, 178: Morris & Essex R. R. Co. 2. . 125 262 581 581 125 Blair, 294: — —— o. Cent. R. R. Co., 204, 296, 300: — — ». Miller, 668 —— —— v. Newark, 300 —_—— —— ov. Sussex R.R., 41, 221 Morse 2. Brainerd, 674 ». Switz, 250 Moss 2. ‘Averell, 70, 73, 89, 155, 156, 158, 464 —— ». Livingston, 633 —— ». McCullough, 447 —— v, Oakley, 121 2. Rossie Mining Co., 375, 464 Mott 0. Hicks, 121, 156, 633, 634 —— v. U.S. Trust Co., 375, 618 Mt. Holly &c. T. Co. v. Ferree, 141 Mower 2. Leicester, 274 Mowry ». Ind. & Cin. R. R. Co., 541, 548, 555, 670 Mumford » American’ Life Ins. Co., 680: liv Munford v. Hawkins, 360 Mumma v. Potomac Co., 647, ee Munn », Commission Co., 121 Murch ». Concord R. R. Co., 319 -Murdock’s Appeal, 4D Murdock v. Phillips’ Acad., 49 Murphy ». Bank of the State, 22 -Murray 2. Lardner, 179, 180 —— 2. Vanderbilt, 401 Muscatine Turn-Verein v. Funck, 654 Mussey 2. Eagle Bank, 415 Mussina ». Goldthwaite, 401, 565, 573 Mutual L. & F. Ass.v. McIntyre, 55 Mutual Savings Bank v. Meriden Agency Co., Myers v. York and Cumberland R. R. Co., 177, 180, 504 95 Najac v. Boston & L. R. RB. Co., 675 Narragansett Bank ». Atlantic Co., 365 Nashua Lock Co. ». Worcester & Nashua R. R. Co., 675 - Nashville Bank v. Petway, 656 Nathan v. Whitlock, 654 Nat. Bank »v. Colby, 657 —__». Norton, 423 Nat, Exch. Bank ». H. P. & F. R.R. Co., 180 Naugatuck R. R. Co. o. Water- bury Button Co., 319 Navigation Co. . Com’rs of New- bern, 108 Nazro . Merchants’ Mut. Ins. Co., 575 Neal v. Hill, 565 Neale v. Neale, 883 Nelson v. Cushing, 51 —— », Katon, 115, 123 —— v. Milford, 188, 192 ». Vt. & Canada R. R. Co., 305 Neuse River Nav. Co. v. Com’rs, 154 Nevitt 2. Bank of Port Gibson, 654 New Albany v. Burke, 151 New Albany P. R. Co. 2. Smith, 179 New Albany R. R. Co. ». MCor- mick, 445 v. Pickens, 153 New Albany & 8. R.-R. Co. ». Fields, New Albany & Salem R. R. Co. o. Tilton, 669 Newark Plankroad Co. ». Elmer, 75, 602 107 TABLE OF AMERICAN CASES. Newberry v. Garland, 250 New Boston ». Dumbarton, 21 Newburgh Turnpike Co. 2. Mil- ler, 279 Newburyport Bridge Co. 0. Story, 105 Newburyport T. Co. 0. Eastern R. R. Co., 299 Newby ». Oregon Central R. RB. Co., 555, 578 Newcastle & Richmond R. R. Co. v. Peru & Indianapolis R. R. Co., 84, 284, 295, 300 New Central Coal Co. v. George’s Creek Coal & Iron Co., 281 New England Car Spring Co. ». Balt. & Ohio R. R. Co., 687 New pages Express Co. v. M. C. R. R.Co., 344, 847 New England Fire & M. Ins. Co. v. Robinson, 667 New England’ Ins. Co. vo. De Wolf, 438 New England Ins. Co. 9. Schlet- tler, 425 Newhall ». Galena & Chic. Union R. R. Co. 555, 557 N. H. R. R Co., in re, 286 N. H. Central R. R. Co. v. John- son, 105 New Haven & Derby R. R. Co. ». Chapman, 80 New Haven & Northampton R. R. Co. v. Hayden, 220 New Hope & D. Bridge Oo. ». Phenix Bank, . 424, 463 | New Jersey 2. Wilson, 669 New Jersey Franklinite Co. 2. Ames, 591 New Jersey Midland Railway Co. o. Strait, 546 New Jersey Steam Nav. Co. 2. Merchants’ Bank, 347 New London ». Brainard, 598 New Orleans, &c. R. R. Go. » Bailey, "272 New Orleans, &c. R. R. Co. 2. Hurst, 272 New Orleans, &c. R. R. Co. 0. N. O., 287 New Orleans, J. & G. N. RB. R. Co. ». Harris, 80, 1038 Newport Mechanics’ Man. Co. ». Starbird, Newton, &c. Co. 2. White, 656 N. Y. Dry Dock Co. », Hicks, 11 TABLE OF AMERICAN CASES. New York Exchange Co. v. De Wolff, 95, 152, 248 N. Y. Fireman’s Ins. Co. 2. "Ely, 29 ». Sturges, 29, 40 N.Y. Floating D. Co. o. NJ. Oil Co., 680 N.Y.&HR.R. Co., in re, 64, 281, 286, 295 N. Y. & Harlem R.R. Co. ». Forty-second Street R.R. Co., 300 N. Y. & H.R.R. Co. ». Kipp, 287 New York & Harlem R. R. Co. v. New York, N. Y. & Hous. R. R. Co. ». Bos- ton, H. & E.R. R. Co., N. Y. Marbled Iron Works 2. Smith, N. Y. & N. H.R. R. Co. a. Ketchum, 477, 479 N.Y. &NvH. RR. Co, 0, Pix: 381 x v & N.H.R.R. 0. Schuyler, 111, 141, 241, 242, 248 New York and Sharon Canal Co. ». Fulton Bank, 334, 335 ‘Nicholas 4. Oliver, 632 Nichols o. Frothingham, 632 v. Som. & Ken. R. R. Co., 293 Nicoll o, New York & Erie R. R. 368 300 651 Co., 85 Nimmons »v. Tappan, 657 Noll », Dubuque, B. "& MRR. Co., 306 Norris 0. Mayor, 651 — », Trustees Abingdon Acad., 668 North Carolina R. R. Co. ». Leach, 152, 247 North Hempstead ». Hempstead, 22 ‘North Mo. R. R. Co. v. Gott, 298 ae », Lackland, 295 North River Bank ». Aymar, 249, 95; 423 Northampton B’k ». Pepoon, 414 ‘Northern Cent. R. R. Co. v. Bas- tian, Northern Penn. R. R. Co. 2. Adams, Northern R. R. Co. v. C. & C. R. R. Co., 279, 300 Northern Railroad Co. ». Miller, 84, 153 Northrop 2. Miss. Ins. Co., 425 Northumberland B’k 2. Byer, 3 Northwestern R. R. Co. v. Chic. & Pac. R. R. Co., 365 180 550 lv Norton v. Hodges, 182 Noyes ». Loring, 636, 637 —- 2» Rugland & B.R.R.Co., 674 Nugent v. Cin. &. R.R.Co., "247 v. Supervisors, 179, 539, 541, 542 Oakland R. R. Co. », Oakland & Brooklyn R. R. Co., val Oberlander v. Speiss, 643 O’Brien v. Chic. R. I. & Pac. R. R. Co., 154 —— ».Nor.& Wor. RB. RB. Co., 605 Occum Co. ». Sprague Co., "594 Odell v. Odell, 9 Ogden v. Murray, 400, 405 —— vo. Raymond, 686,637, 644 Ogdensburg, &. R. R. Co, 2. Frost, 158 Ogdensburg & Lake Champlain R.R. Co. v. Platt, Ogdensburg & L. C.R. RB. Co. 2. Vt. & Can. R. R. Co., 66, 279, 319 Ogilvie ». Knox Ins.Co., 248, 587 673 Ohio Ins. Co. v. Nunnemacher, 112 Ohio I. & I. R. R. Co. a, Cra- mer, 108 Ohio Life Ins. Co. 0. Merchants’ Ins. Co., 614 Ohio Life Ins. & Trust Co. 2. Debolt, 667 Ohio & Miss. R. R. Co. v. Dun- bar, 305 Ohio & Miss. R.R. Co. 2. Ind. & Cin. R. R. Co., 319 Ohio & Miss. R. R. Co, v. Mid- dleton, 474 Ohio & Miss. R. R. Co. ». Mc- Clelland, 670 Ohio & Miss. R. R. Co. v. Mc- Pherson, 435, 679 Ohio & Miss. R. R. Co. 2, Wheeler, 4, 547, 680 Olcott v. Supervisors, 281, 343, 670 — ». Tioga R. R. Co., 121, 156, 385, 402, 460, 464, 633 Old Colony R. R. Co. », Evans, 383 Oldtown & Lincoln R. R. Co. v. Veazie, 84, 105, 106 Oliver v. Mutual Ins. Co., 643 Olmstead v. Camp, 282, 283 Oneida Bank v. Ontario Bank, 623 Oregon Cascade Co. ». Bailey, 288, 300 Oregon Central R. R. Co. 2. Scroggins, 148, 247 lvi Ormsbee v. Davis,. 553 Ormsby ». Vermont Copper Mining Co, » 648, 679 Oroville R. R. Co. v. Plumas Co., 21, 125 Orr 2. Bank of U.8., 262 Osborn ». Bank of U. 8., 365 Osgood ».. Laytin, 139 —— »v. Manhattan Bank, 425 — ». Ogden, 553 ee Plank-road Co. ». Mur- ray, 623 Otter v. Brevoort Petroleum Co., 154 Ottowa ». People, ’ 316 Overmyer ». Williams, 70 19 15 564 643 365 Overseers, in re, Overseers of Poor 2. Sears, Owen v. Whittaker, Owings v. Hull, v, Speed, Owsley v. Montgomery R. R. Co. 263, 268: Oxford Iron Co. ». Spradley, 41, 121 Pacific. R..R..Co. v. Cass Co., 688 — — 2. Hughes, 81. — — ». Maguire, 669 — — ». Renshaw, 81, 84 — — ».8eely, 70, 402 Packer ». Sunbury & ErieR. R., 64: Page v. Heineberg, 9, 10 Paine v. Lake Erie & Louisville R. R. Co., 402, 545 Palley ». Ocean Ins. Co., 425 Palmer v. Forbes, 687 —— ». Lawrence, 153, 375, 618- Parish Ch. v. Cole, 11 Parish. ». Wheeler, 123, 128, 372, 374,375, 609 Parker ». May,. 602. —— »v. Rens. & Sar. R. R. Co., 319 Parsons 2..Goshen, 193 Partridge v. Badger, 115, 121 Paschall ». Whitsett, . 647, 654 Passenger cases, 670 Patten v.. North Cent. R..R.. Co., 804 Paul ».. Virginia, 680 Paup v. Drew, 667 Payne v. Baldwin, 668 Payson v, Stoever, 113, 258, 463, 466 Peabody ». Flint, 400, 565, 573, 581 Pearce 2. Madison & Ind. R. R. Co., Peavey: o, Calais R. R. Co., 296 78, 89, .160, 334, 429, 589. TABLE OF AMERICAN CASES, Peckham »v. Barber, . 383" v. Nor. Par. of Haver- hill, oh 684. Peik » Chic. & N. W. Co., * 670 Pemigewasset Bank ». Rogers, 425 Pendleton Co. ». Amy, 179- Penniman v. Briggs, 652 Pennock.». Coe, 68, 125. Penn. 0. Wheeling Bridge Co., 285, 601 Pennsylvania College cases, 667 Penn. Coal Co. v. Del. Hud. Canal’Co., 838 Penn. Del. & Md..Nav. Co. 2. Dandridge, 467 Penn. &c. Nav. Co. v. Dandridge, 29 Penn..R. R. Co... Canal Com., 23, 64, ». National Rw. Co., o N.Y. & L. R. R. Co., 294, 302 ». Riblet, 669: % Vandiver, 262 Penn. & Ohio Canal Co. 0. Webb,81 Penobscot Boom Corp. v. Lam- son, 64, 647, 651, 652, 656, 658 Penobscot & Ken. R. R. Co, 2. Dunn, 107, 412. Penobscot R. R. Co. ». Dummer, 105, 106, 148, 504 ’o. White, 105, 106, 107 People.v. Albany & Susq. R. R C 279 564 0. ». Albany & Vt. R. RB. Co. 71, 297, 311, 815, 817, 600, 658 — 2 Albany Hospital, 564 —— », Assessors, a" — »v, Bank of Hudson, 647, 8, 652 —— ». Bank of Niagara, 647 —— v. Batchelor, 350, 8538, 854, 355 —— ». Ben. Soc., 45 — ». Booth, 598 — ». Bristol T. R. Co., 649: —— v. Canal Board, 200, 210 — »v. Chic. & Alt. R. R. Co., 315, 348 — ». Chic. & Northwestern R. R. Co 315 ——. ». Collins, 816. —— v, Comm'rs, 138, 669 TABLE OF AMERICAN CASES. lvii People v. Cook, 447 | People v. Utica Ins. Co., 29, 122: —— »v. Corp. "of Albany, a —— », Vanderbilt, 601 —— ». Crockett, —— ». Washington Bank, 647,649. —— ». Dispen. & Hosp. Soc., ott —— »v. White, 85. —— 2. Geneva Col., 4| People’s Ferry Co. v. Balch, 106, —— ». Goshen Turn. Road, 274 107, 148 —— ». Green, 314 | People’s Ins. Co. », Westcott, 350, —— ». Halsey, 316 852, 355, 435 — ». Hanshaw, 21 | Peoria R. R. Co. v. Elting, 153 — ». Hills, 564| Peoria, P. & J. R. R. Co. 2. —— ». Ingersoll, 598] Peoria & 8. R. R. Co., 300 —— »v. Jackson & M. P. R. Peoria & R. I. R. R. Co. 2. Pres- Co., 670] ton, 106 —— ». Kerr, 301 Percy 0. Millaudon, 406, 414, 417 — v. Kingston &. T. R. Perin v. Carey; 9, 50 Co., 647 | Perkins v. Mo. K. T. R. R. Co., 'a72 — ». Kip, 13| ——— 2o.N. Y. Cent. R.R. Co., 246 —— ». Lowber, 598| —— »v. Portland & Saco R. -——— »v. Manhattan Co., 647, 668 R. Co., , 675 —— ». Manhattan GasCo., 315) —— 2. Washington Ins. Co., 365 — v. Mayor, 669 | Perrine ». Ches. & Del. Co.,° 63 —— 2. Mayor of Brooklyn, 285/Perry 0. Simpson Waterproof — »v. Mayor of N. Y., 804| Mfg. Co. 422 —— ». Mech. Aid Soc., 45 | Peru Iron Co. .» @ parte, 40. —— 2. Med. Soc., 45| Peters 0. St. L. & Iron Mt. R. —— ». Miner, 598) RB. Co., 670 —— 2. Nearing, 283 | Petersburg 0. Matzker, 29: — v.N. Y. Com, Asgo., 45 | Peterson 0, Mayor of N. Y., "5, —— »v. Peck, 352, 447 378, 462, 474. —— v. Plank Road Co., 668 | Pettibone ». La Crosse & Mil- — ». Railroad Co., © 598; waukee R. R. Co., 75 —— »v, Runkle, 447 | Pettigrew v. Challis, 251 —— »,Sailor’s Snug Harbor, 45, | Pettingill ». McGregor, 636 49 | Petty o. Tooker, : 673 — . St. Franciscus Ben. Phelps v. Farmers’ &c. Bank, 139 Soc., 45| —— v. Townsend, 375. — »v. St. Stephen’s Church, 45 | Phila. R. R. Co. v. Derby, 262, 266 —— »v. Salem, 280, rae Phila. & Read. R. R. 0. Yeiser, 77 —— ». Schermerhorn, Phila. Sav. Bank’s Case, 13 —— », Smith, 2) Phil. v, Sunbury R. R. Co., 179 — Society for Prop. of Phila. & Trenton R. R. Co., in re, Gospel, 648 301 — ». State Ins. Co., 814 | Phila. & Westchester R. R. Co. — ». Steele, 673| »v. Hickman, 107, 108 — », Stockton & Visalia Phila, Wil. & Balt, R. R. Co. R. R. Co., 108} Bowers, 668, 670 —— ». Sturtevant, 587 | Phila. Wil. & Balt. R. R. Co. — ». Supervisors, 131, 645 | ». Cowell, 139 — ». Supervisors of Che- Phila. Wil. & Balt. R. R. Co. nango, 814| ». Howard, 546 —— »v. Thompson, 648 | Phila. Wil. & Balt. R. R. Co. — 2. Troy House, 108| ». Maryland, 545 —— »v. Troy & Boston R. R. Phila. Wil. & Balt. R. R. Co. Co., 317] 0. Quigley. 241, 269 —— v. Tweed, : 598 | Phila. Wil. Me Balt. R. R. Co. —— », University Regents, 3816) ». Williams, 287 lviil Phila, Wil. & Balt. R. R. Co. ». Woelpper, 125 Phila. &e. R. R. Co. v. Wilt, 262 Philips Ac. 2. King, 51 ‘Phillips 0. Coffee, 387 v Covington Bridge Co., 106, 107, 168 —- _ », Wickham, 13, 656 ». Winslow, 126, 687 Phillipsburg Bank v, R. R. Co., 549 Phenix Ins. Co. 2. Common- wealth, Pickett, ex parte, 680 199 Pierce v, Emery, 124, 125, 126, 684 — »v. Mill. & St. P. R. R. ‘ Co., 125, 128 ». Partridge, 3 Piemental 0. San Francisco, 623 Pike v. Middleton, 193 Pindleton Co. 2. Ames, 179 Pingrey ». Washburn, 218, 481 Piqua Bank v. Knoop, 667, 668 Piscataqua Bridge Co. ». New Hampshire Bridge Co., 84, 279, 284, 667 Piscataqua Ferry Co. v. Jones, 152 247 Pitcher ». Hennessey, 643 Pittsburgh & Connelisville R. R. Co. v. Stewart, 107, 108, 154 Pittsburgh & Steubenvile R. R. Co. ». Biggar, ‘Pittsburgh & Steubenville R. R. Co. v. Wodrow, Pittsburgh, C. & St. L. R. R. Co. v. Kain, Pittsburgh &c. R.R. Co. o. Alle- gheny Co., Planters’ Bank v. Sharpe, 107 107 305 147 416, 474, 667 Planters’ & Merchants’ Bank ». " Leavens, Platt . Archer, Plitt o. Cox, Plymouth ». Jackson, Plymouth R. R. Co. v. Colwell, Polar Star Lodge ». Polar Star Lodge, 402, 652 Police ‘Jury v. Britton, 155, 160, 179 141 657 86 51 687 Polk v. Plummer, 19 Polly vo. Sar. & Washington R. R. Co., 75 Pomeroy v. Bank, 654 vo. Wells, 19 Pondville Co. ». Clark, 657 TABLE OF AMERICAN CASES. Pontchartrain R. R. Co. ». New Orleans &c., R. R. Co., 668 Pontchartrain R. R. Co. » Paulding, 409 Pope ». Brandon, 124 Port Clinton R. R. Co. ». Clev. & Tol. R. R. Co., 317 Port v. Russell, 401 Porter ». Androscoggin & Ken- nebec R. R. Co., 387, 388 ». McCollum, 179 ». Nekervis, 182 Portland Dry Dock &c. Co. 2. Portland, 651 Potter ». Bank of Ithaca, 4, 619 —— v. Thornton, 9,11 Poughkeepsie & Salt Point Plank-road Co. ». Griffin, 80, 149 Powell ». Newburg, 365 ». Northern Missouri R. R. Co., 539, 546 Powers v. Skinner, . 233, 234 Pratt v. Pratt, 90, 186, 137 —— »v. Swanton, 375 Preachers’ Aid Soc. v. Rich, 50 Presbyterian Church » John- son, President &c.»v. Trenton Bridge Co., Price ». Grand Rapids & Ind. R. R. Co., - Proprietors "of Bridges vo. Ho- boken Land Co., "8 Proprietors of Locks & Canals vo N. & L. R. RB. Co., 88, 286 Proprietors v. Towne, 80 Protzman 0. Indianapolis &e. R. R. Co., "287 Prouty 0. Lake Shore & M. 8. R. R. Co., —oMSB&NLBRR . Co., ¢ 147 Providence Bank ». Biliings, 667, 669 Pruden 2. Morris & Essex R. R. Co., Pullan ». Cin. & Ch. R. R. Co., 124, 125, 684 Pumpelly v. Green Bay Co., 285, 289 ». Phelps, 631 Putnam ». City of New Albany, 473 —— 0. Sweet, 581 678 649 459 546 330 Quinby o. Vt. Cent. R. R. Co., 85 Racine Co. Bank »v. Ayers, 107 TABLE OF AMERICAN CASES. icine & Miss. R. R. Co. o, Far- mers’ Loan & Trust Co., 546, adcliffe 7. Mayor, _R. Com’rs 0. P. & O. C. R. R Co., 315, 342 R. Co, ». Harris, 4, 547 —— vv. Howard, 3874, 400 —— », James, 682 —— ». Kennedy, 284 — ». Kip, 279 —— 2. Letson, : 4 — ». Mfg. Co., 673 —— 2». Rodrigues, 248 — ». Seeley, 29 —— 2». Soutter, 125 —— ».Transportation Co., 074 — ». Whiton, 547 — ». Winans, 805 w. Co. v. Allerton, 112, 113, 393, 416 amsden ». Boston & ‘A. R. R. Co., 262 amsey 7. Erie Rw. Co., 407, 595 and ¢. Hubbell, 131 andall », Van Vechten, 365 ». Elwell, 686 .& D. B. BR. R. Co. v. Del. & ‘Rar. O. Co., 278 ansom 2. Stonington Bank, 387 ead vo. Frankfort Bank, 654 eading R. R. Co, ». Penn, 285 eciprocity Bank, in re, 668 eddall ». Bryan, 283 edmond v. Dickerson, 401, 484 387 582 eed v, Bradley, —— ». The Evergreens, eese v. Bank of Montgomery Co., eeves v. P. R. Co., eformed Prot. Dutch Church 0. Brown, egents of Univ. v. Williams, eichard ». Warren Co., eid ». N. W. R. R. Co., eiser ». Wm. Tell Asso., en. & Sar. R. R. vo. Davis, 112 152 148 668 376 arr 55 63, 70, 92, 279, 288, 288, 289, 291, 293| ensselaer & Washington Pl. Rd. Co. ». Barton, 148, 482 ensselaer & Washington PI. Ra. Co. v. Wetsel, 106 evere v, Boston Copper Co., 651, 652 exford v. Knight, 86 eynolds ». Stark Co., 66, 70, 103 ice ». Rock Island & Alton R. R. Co., 81 lix Rice v, R. R. Co., 63 Richards ». Merrimack & Conn. R. BR. R. Co., 128, 125 Richards ». New Hampshire Ins. Co. 400 Richardson v. St. John Ins. Co., 365 —— _»v. Sibley, 124) 125 — ~». Vt. & Mass, R. R. Co., 184, 549 Richmond F, &c. R. R.v. Snead, 155 Richmond R. R. Co. v. La. R. R. Co., 63, 84, 284 Riddle », County of Bedford, 435 Ridgway v. Farmers’ Bank ‘of Bucks Co., 115, 392, 415, 421 Riley v. Rochestér City, 10 Risby v. Ab. Soc., 375 Risley ». Ind. B. & W. R. R. Co., 395, 401 Rivanna Nay. Co. v. Dawsons, 99 Rives v. Montgomery 8. P. R. Co., 247 Robbins ». Embry, 124 Roberts v. Button, 636 — ». Ohio & Mobile R. R. Co., 150 Robertson v. Bullions, 673 v. Rockford, 546 Robie v. Sedgwick, 21 Robinson v. Beale, 415 — wP.&C.R.R.Co, 107 — ». Smith, 565,572,573,581 Rochester ». Barnes, 573 Rochester White Lead Co. ». Rochester, 804 Rockford, R. I. & St. L. BR. RB. Co. v. Sage, 479 Rockville & Washington Turn- pike Co. v. Van Ness, 435 Rockwell v. Elkhorn Bank, 115, ae 38 Rogers, ex parte, 435 Rogers v. Danby Univer. Soc., 3 — ».8t. Joseph, 179 Rogers Locomotive Works ». Erie R. R. Co, 316, 348 Rollins ». Clay, 1038, 412, 657 Roosevelt v. Bevan, 98 — _ ». Draper, 598 Root ». Goddard, 160 —— v. Great Western R. R. Co., 325, 674 ——¥v. Wallace, 160 Rorke ». Thomas, 517 Rose vo. Truax, 233 —— v. Turnpike Co., 656 lx Ross v. Adams, 11 v. Crockett, 453 —?. Lafayette & Ind. R. R. Co., 150 ——». Union Pac. Rw. Co., 386 Ross County Bank v. Lewis, 668 Rounds v. Smith, 248 Rowe v. Granite Bridge Co., 600 Roxbury 2. Boston & Provi- dence R. R. Co., 667 Royce ». Allen, 636 Runyan 0. Coster, 4, 9, 680 Russel v, Branham, 645 v. Clarke, 583 — »v. McClellan, 656 ». The Mayor, 805 Rutland & Burlington R. R. Co. ». Proctor, 73, 90 Rutland R. R. Co. o, Thrall, 112, 147, 445 Ryan 0. Dunlap, 415 Ryder v. Alton & Sangamon R. R. Co., 140, 153 Sacketts Harbor Bank ». Codd, 623 Sacketts Harbor Bank v. Lewis Co. Bank, 619 Sadler ». Langham, 281, 283 Safety Life Deposit Ins. Co. o. Smith, — 479, 487 Safford 0. Wyckoff, 40, 122,488,442 Sage v. Dillard, 668 Sagory v. Dubois, 151, 153 Salem Bank v. Gloucester Bank, 392 396, 398, 429, 466 Salem Mill Dam Co. v. Ropes, 105, 106, 112, 480, 504 Salisbury Mills x Townsend, 142 Sampson v. Bowdoinham Steam Mill Corp., 358, 855, 485 Samuel o. Express Co., 573 — ». Holladay, 3, 184, 452, 565, 568, 578, 588, 589, 593 San Antonio o, Lane, 180 Sanborn ». Freeman’s Ins. Co., 488 Sanderson o. White, 48, 49, 51 San Diego 0. San Diego & La. R. R. Co., 402, 411 Sands v. Sanders, 445 Sandusky City Bank 0. Wilbor, 668 Sanford », R. R. Co., 347, 594, 606 San Francisco, A. & 8. R. R. Co. 0. Caldwell, 281 San Francisco & N. Pac. R. R. Co, vo. Bee, 401 Sanger v. Commissioners, 316 Sargent 0. Franklin Ins, Co., 577 TABLE OF AMERICAN CASES. Sargent 0. Webster, 351, 401, 412, 458, 459 Saterlee », San Francisco, 623 Savannah, Albany & Gulf R. R. Co. v. Shields, 302 Savings Bank v. Davis, 358, 355, 365, 368 Sawyer v. Hoag, 139, 140 —— 0. Methodist Ep. Soc., 3 —— ». Rutland & Burlington R. R. Co., Sayre 2, Louisville U. B. Asso., Schenectady & Saratoga Pl. Rd. Co. v. Thatcher, 80, 84, 106, 445 Schoff v. Bloomfield, 854 Schumm »v, Seymour, 458, 474 Schurtz v. Schoolcraft R. R. Co., 106 Scott ». Central R. R. Banking Co. of Ga., 181 — ». De Peyster, 400, 408 —— ». Eagle Ins. Co., 180, 131, 187 319 13 — »v. Gr. Tr. R. R. Co., 305 ». Nat. Bank, 625 v. Warren, 438 Scudder v. Trenton D. F.Co., 280 Sears 0. Hotchkiss, 407, 565, 584 Seaver v. Coburn, 631 Sedgwick v. Stanton, 234 Selden v, Del. & Hud. C. Co., 75, 90 Selma, Rome & D. R. R. Co. 2. Harbin, Selma & Tenn. R. R. Co. v. Tip- ton, 148, 153 Seneca County Bank ». Lamb, 13, 430: 546 Sewall v. Brainard, 181 Sewanee Mining Co.'», McMa- hon, 425 Seymour »v. Can. & N. Falls R. RB. Co., 125, 126, 687 Seymour ». Sturges, 153: Shannon 2. Frost, 673. Sharp ». Mayor, 248, 265 Sharpe 0. Bellas, 632 Shaver v. Bear River Co., 468 Shaw v. Norfolk County R. R. Co., 124, 125, 594 Shaw e. Old Colony R. BR. Co., 546 Shawmut Bank ». Plattsburg & Montreal R. R. Co., 29, 73, 90 Sheffield v. Ladue, 636 Shelbyville &c. T. Co. 0. Barnes, 542 Sheldon v. Hudson R. R. R. Co., 77 Shepley o. A. & St. L. R. RB. Co., 124, 125- Sherman ». Carr, 192 TABLE OF AMERICAN CASES. Sherman ». Fitch, 387, 469 — ». McKeon, 3138 — wN.Y.0.R.R.Co., 632 ». Smith, 667 Sherwood 2. American Bible Soc., 12 Shields 2. Barrows, 583, 586 Shinkle v. First Nat. Bank, 625 Shipper ». Penn. R. R. Co., 348 Shoe & Leather Bank v. Thomp- son, 269 Shoemaker v. Nat. Mech. Bank, 625 Shortz v. Unangst, 453 Shuter v. Smith, 284 Silcox ». Harper, 52 Silk Mfg. Co. ». Campbell, 584 Sill». Corning, , 199 Silver Lake Bank v. North, 11, 619 Simons v. Vulcan Oil Co, 404, 484 Skelly v. Jefferson Bank, 668 Slaughter ». Commonwealth, 681 Slaughter House Cases, 670 Slawson v. Loring, 632, 633 Slee v. Bloom, 13, 151, 649, 651, 652 Sleeper 0. Franklin Lyceum, 45 Sleighmaker ». Gettysburgh Bank, 141 Small v. Herkimer Mtg. Co., 153 Smead 2. Indianapolis R. R. Co., 121, 668 Smith v. Alvord, 680 v. Board of Water Com- missioners, 422 v. Clarke Co., 179 —— ». Erb, 435 —— %. Eureka Flour Mills, 156 — ». First Nat. Bank, 625 —— ». Hurd, 572, 574, 579 — 2. Indiana R. R. Co., 445 —— v. Junction Rw. Co.; 596 —— », Lansing, 401 —— vv. Law, . 115, 354 —— v. Lockwood, 601 ——. ». Nelson, 673 —— »v. North Car. R. BR. Co., 425 — v.N. Y. & H.R.R.Co., 319 —— ». Old Colony R. R. Co. 77 —— v. Payne, 565 —— », Plank-road Co., 3, 445 —— v. Prattsville Man. Co., 187, 409 —— v. P. BR. Co, 152 —— ». Sac Co., 179 —— ». Smith, 45 —— wv. Swormstedt, 580 Society 1. Commonwealth, oe 3 lxi Soc. for Estab. Usef. Manuf. ». Mor. Canal & Bkg. Co., Soc. for Savings 2. City’ of N, London, Somerset R. R. Co. v. Clarke, Somerset & Kennebec R. R. Co. ». Cushing, 111, 112 Somerville, City of, v. University, 668 Soper ». Buff, & Roch. R. R. Co., 425 South Amboy Turnpike Co. ”, C. & A. R. R. Co., 77 South Baptist Society v. Clapp, 387, 402 649 179 111 South Bay Co. ». Gray, So. Carolina R. R. Co. v. Blake, 291, 296 ex parte, 291, 296 Southern Life Ins. Co, o. Lanier, 372, 619 Southern Pik. Rd. Co. ». Hixon, 45, 555 113 South Royalton Bank 2. Suffolk Bank, 268 Southwestern R. R. Co. 2. Paulk, 670 Sparhawk ». Union Pass, Rw. Co., 578, 594, 601 Sparrow o. Evansville &. BR. R. Co., 81, 543 Spear v. Crawford, 70, 84, 153 v. Ladd, 414 Speer ». Blairsville, 281 Spelman », Fisher Iron Co., 425 Sperry’s Appeal, 408 Spooner v. Holmes, 180 —— ». McConnell, 601 Sprague v. Hart, Prov. & F. R. R. Co., 549 — ». Ill. B. R. R. Co, 80, 81, 555 Springfield v. Conn. R. R. R. Co., ‘8, 284, "299 St. Andrews Bay Land Co. ». Mitchell, St. James Church », Church of The Redeemer, 402 St. John v. Erie R. R. Co., 131, 147 St. Louis v. Alexander, 401 St. Louis, A. & C. R. R. Co. 0, Dalby, 262 St. Tore Pub. Schools 2. Risley, 388 St. Luke’s Church v. Matthews, 13 St. Mary’s Church, re, 555, 673 St. Mary’s Church 2. Cagger, 368 St. Paul & Pac. R. R, Co. v. Parcher, 365 128 7 | Staats v. Hudson R.B.R. Co., 298, 669 lxii 288 Stacey v. Vt. Cent. R. R. Co., 633 Stackpole ». Arnold, Stainsby 2. Frazier’s Metallic Life Boat Co., 478, 487 Stamford Bank ». Benedict, 365 Stanley v. Colt, 51 0. C. C. &C.R.R. Co, 319, 335 Stanton v. Alten, 328 —— ». Wilson, 148 Stark Bank ». U.S. Pottery Co., 404 Starr o. Bennett, 643 o. Cam. & Atl. RB. R. Co., 800 State o. Adams, 49, 394, 599 —— ». Alkins, 15 ». Bailey, 103, 108, 542, 654 v. Balt. & Ohio R. R. Co., 136, 139, 140, 285 —— », Bank of La., 140, 399, 555, 557 —— ». Bank of Md., 124, 652 —— ». Barksdale, 74 —— ». Bradford, 647, 648 —— »v. Bull, 652 —v.B. C0. &M.R. R. Oo, 11, 279 —— ». Canterbury, 279 ». Cape Girardeau & St. L. R. R. Co., 668 —— vv. Chamber of Commerce, 45 —— », Cincinnati, 648 —— v, Commercial Bank, 395, 396, 415, 416, 430, 466, 647, 649 —— ». Commissioners, 669 —— », Conklin, 13 —— v. County Judge, 316 —— ». Crowell, 673 —— v, Curran, 648 —— ». Delafield, 179 ——». Del. L. & W.R. RB. Co, ee —— ». Delesdernier, —— 0, Ferguson, 850 —— ». Flavell, 649 —— v. Fosdick, 681 — ». Franklin Bank, 141 ». Georgia Med. Soc., 45 —— ». Gilmore, 277 —— ». Gorham, 316 — ». Governor, The, 199 —— »v. Grand Trunk R. R. Co., 276, 277 ——v. Great Works &c. Co., 275 —— 2. Halliday, 317 — . Hartford & N. H.R... R. Co., 71, 311, 315, 328, 339 TABLE OF AMERICAN CASES, State 0, Heyward, 665 —— »v. Jersey City, 286, 298, 460, 474, 669 . Kirkwood, 668 . Lathrop, 681 . Lusitanian Soc., 45, 46 . Maine Cent. R. R. Co., 277 . Mansfield, 11, 287 . Mathews, 670 . Mayor, . Mer. Ins. Co., . Metz, . Mexican Gulf R. R. Co., 126 . Montclair R. R. Co., 300 . Moore, 668. . Morris & Essex R. R. Co., 262, 274, 276 . Morristown Fire Ass., 113 . Murfreesboro, 274 . Newark, il . N. Y. Cent. R. R. Co., 125 . Northeastern R. R. Co., 316, 317 . Northern Central Rail- way Co., 126, 549, 687 . Noyes, 84,.667, 669 ». Ohio & Miss. R. R. Co., 278, 275, 276 . Paterson & Hamb.T.Co., 648 . Paup, 645 . Pawtuxet Turnp. Co., a 647 316 276, 815 234 v.. Rahway, . Railroad Co., . Reed, . Southern Minnesota R. R. Co., . Tombeckbee Bank, . Turnpike Co., ‘ . Urbana Ins. Co., 649 . . Vt. Cent. R. R. Co, 276 . Vincennes Univ., 652, 656. —— v. Wilmington Bridge Co., 317 —— ». Woram, 15, 619 —— ». Zanesville Turnpike Co., 315 668 316 State Bank of Augusta o. Peters, 677 State Bank o. Fox, 99 v Knoop, 669 », State, 647 ». U.8.'Pottery Co., 121 State Bd. of Agriculture o. Citi- zens’ Street Railway, 607, 615 State Nat. Bank ». Robidoux, 657 State Treasurer 7. Somerville & Easton R. R. Co., 687 TABLE OF AMERICAN CASES. xamboat Co. v. McCutcheon, 10, » 11,°619 2am Nav. Co. 0. Weed, 375, 619 zarns 0. Bedford, 673 abbins 2. Jennings, 22, 673 0, Merritt, 351, 352, 387, 388 eed 2, McAulay, 673 ein ». Ladow, 553 einers’ Appeal, 123, 124, 128 etson v. City Bank, 654 —— »v, Kempton, 193 evens 2. a &N.Y.R.R. 125, 685 — » pace “Meeting House Soc., 353 —— v. Erie Rw. Co., 283 —— ». Hill, 414 —— ». Paterson & Newark R. R. Co., 301 —— v. Rutland & B. Rw. Co; 80, 90, 151, 204 —— ». Watson, 125 eward v. Nat. Union Bank, 625 ewart o. Erie & Western Trans- portation Co., 324 ockbridge ». West Stock- bridge, 21 oddard v. Shetucket F.Co., 189 okes 2. Saltonstall, 266 oneham Branch R. R. Co. ». Gould, 105 oney v. Amer. Life Ins. Co., 680 oops v. Greensburgh Pl. R. Co., 106 ory v. Jersey City & Bergen Point Plank Rd. Co., 200 ow v. Wyse, 358, 355 oystown & Greensburg T. Co. 0. Craver, rang v. Holmes, rasburg R. R. Co. ». Echter- 453 508 nacht, 149,221 ratton 2. Allen, 401 rauss 0. Hagle Ins. Co., 108 rickland ». Prichard, 652 Tider v. Western College, 469 rohecker v. Ala. R. R. Co., 287 urges v. Bank of Circleville, 415,425 —. »v. Knapp, 591 —— ». Stetson, 154 urtevant v. City "of Alton, 388 imner 2. Marcy, 95, 122 Ipervisors v. Tweed, 598 », United States, 311 isquehanna & Bath T. Co. 2. People, 274 Susquehanna Bridge & Bk. Co. lxiit 388 687 329 11 v. Gen, Ins. Co., 123, 887, Susquehanna Canal Co. v. Bon- ham, 124, Sussex R. R. Co. 0. Morris & Es- sex R. R. Co., 324, Sutton a; Cole, Suydam v. Moore, ing Co., Swan v. Williams, Taber v. Cincinnati R. R. Co., Taft v. Hart. Prov. & F. R. R. R. Co., Taggart v. Northern Central R. R. Co., —— ». West Maryland R. . Co., Talbot ». Hudson, Talmadge v. N. A. Coal Co., Talmage »v. Pell, Tappan 2. Deblois, Tar River Nav. Co. 2. Neal, Tatem 0, Wright, Taylor v, Cedar Rapids R. R. Co., — ». Griswold, 13. —— 2.Miami Exporting Co., —— v. Railway Co., —— v. Robinson, —— 2. Shelton, Tenney ». Lumber Co., Terre Haute Gas Co. v. Teel, Terrett v. Taylor, 21, 647, 648, Thayer 2. Boston, —— ». Middlesex Ins. Oo., Thigpen v. Miss. Cent. R. R. Co., Thomas v. Dakin, —_ ». Dickinson, - Thompson 2. Erie Rw. Co., 147, — ».LeeCo., 179, — ». Tioga R. R. Co., — __». Young, Thornburg ». Newcastle R. R. Co., Thorpe 0. Rut. & Bur. R. R.Co., 667, Thrasher 2, Pike R. R. Co., Tide Water Canal Co, ». Coster, Tinkham ». Borst, Tippets 0. Walker, Titus 0. Catawissa R. R. Co., 280, 98, 95, 636, 669 v. Morris Canal & Bank- 619 281 124 147 546. 148. 283 41 623 50 153 681 402 853 99, 565 272 4v1 637 387 263 667 241 365. — 375 557 180 634 414 152 285, 669 149 84, 280. 654 140 474, 487 lxiv TABLE OF AMERICAN CASES’ Titus ». Einheimer, 688 Turnpike Co. 2. ie 8 —— v. Kyle, 633 —- Thorp, 4295 —— v. Mabell, 688 —-— . State, 648 Todd », Austin, 282, 283 —— ». Birdsall, 19} Underhill ». Gileson, _ 686 Toledo Bank v. Bond, 668 | Underwood o. Newport Lyceum, 41, Toledo & Wabash R. R. Co. 2. 63, 614 Daniels, 296 — o.N.Y.&N. H.R. Toledo, Wabash & Western R. R. Co., 137 R. Co. ». Fisher, 425] Union Bank ». Ellicott, 103, 412 Toll Bridge Co. ». Betsworth, 425 —__—». Jacobs, 121 Tomlinson v. Branch, 545 — v. Ridgely, 365, 414, —— », Jessup, 669 435 Tonica R. R. Co. ». McNeeley, 148 — ». State, 141 Tonica & Petersburgh R. R.Co., 504 | Union Branch R. R. Co. v. East Topping »v. Bickford, 67, 8365| Tennessee R. R. Co., 550 Torrey 2. C. & A. R. R.Co., 802 | Union Bridge Co. ». Troy & L. v. Dustin Monument Asso.,399; R. R. Co., 289 Town v. Bank of River Raisin, 108, | Union Ins. Co., matter of, 447 651, 652} Union Locks Co. ». Towne, 151 Town of Pawlet a. Clark, 21] Union Mutual Fire Ins. Co. ». Townsend, in re, 11} Keyser, 429 Townsend v. Brown, 64 | Union Pac. R. R. Co., in re, 402 —— N.Y. Cent. & Hud. Union Pac. R. R. Co. », Lin- R. R. R. Co., 272| colin Co., 104 Township of Pine Grove 2. U. S. »..Baltimore R. R. Co., 276 Talcott, 607 | —— ». Bank of Columbus, 415 Tracy v. Talmage, 372, 619| ——. ». Bridge Co., 299 Treadwell v. Salisbury Mfg. Co., 71,| —— »v. Devereux, 4 108, 315, 555, 652, 658 —— »v. Hart, 13 ‘Trenton Ins. Co. 2. Perrine, 269 | —— ». Kirkpatrick, 429, 438 Trenton Water Power Co., in re, 817 | —— v. New Orleans R. R. Co., 125, Trenton Water Power Oo. o 684 Chambers, 383 | —— 2. Union Pac. R. R. Co., pe Tripp v. Swanzey rye Co., 421 603 Troy v, Cheshire R. R. Co., 300 |—— ». Van Zandt, 429, 435, pe Troy & Boston R. R. Co. »v. —— ». Vaughan, 577 Tibbits,’ 107, 149, 153, 504| U. S. Ins. Ca ». Shriver, 423 Troy Ins. ‘Co. » Carpenter, 425 | U. 8. Trust Co. », Brady, 28 Troy & Rutland R. R. Co. 2. United Society of Shakers ». Kerr, 80, 124, 153, 555; Underwood, 401, 406 Troy R. R. Co. 2. ‘Newton, "105, 111 | Unity Ins. Co. v. Cram, 43 Troy T. Co. ». McChesney, 153 | University of Md. », Williams, 49, Trunnick », Smith, 687 648, 652 ‘Trustees o. Park, 3| Updike v. Doyle, 586 —— » Peaslee, 29| Upton », Hansbrough, 248, 258 Trustees of Lexington ». McCon- Utica ». Churchill, 182 nell, 182 Trustees Wabash & Erie Canal Vance ». Erie Rw. Co., 266, 268 Co. v. Beers, 667 | Vandall 0. 8. 8. F. Dock Co., sn Tuckahoe C. Co. ». Tuckahoe R. Van Dorn »v. Robinson, R. Co., 279 | Van Hook ». Somerset Mfg. Co., tot Tucker Mfg. Co. v. Fairbanks, 682) Van Keuren 2. Johnson, 19 Tundy o, Farrar, 365 | Van Kirk », Clark, 19 Turner v. N. B, & M. R. R. Co., 271, | Van Kuren ». Trenton Locomo- 2721 tive &. Co., 834 i TABLE OF AMERICAN CASES. . Leuven 2. First National ank of Kingston, 623, 624 sant 0. Roberts, 3 | Winkle 0, R. R. Co., 286 rterv. Ohio & Miss. R. R.Co., 247 zie 0, Mayo, 669 able ». Coffman, 51 mont Central R. R. Co. o. layes, 108, 504 mont R. R. Co. ». Trans, Co., 674 mont & Mass. R. R. Co. 2. itchburg R. R. Co., 339 non Society: . Hills, 435 plank v. Mercantile Ins. Co., 99, 600, 649 ksburg R. R. v. McKean, 108, 247 ksburg & J. R. R. Co. 0. ‘atton, 272 cennes Univ. v. Indiana, 656, 667 cent ». Chicago & Alton R. 1. Co., 348 cent ». Nantucket, 192, 198 ginia & Truckee R. R. Co. ». ovejoy, . 296 scher o. Hudson R. R. R. Co., 298 lxv Washington &c, Road 2. State, 647 Washington University ». Rouse, 669 Wash. & Balt. T. R. 0. Md., 648 Washington Society v. Bacher, 45 Waterbury v. Mer. Un. Exp. Co., 46, 595 — 0» RR. Co. 294 Waterford & Whitehall T. Co. v. People, 274 Waterman v. Troy & Greenfield R. R. Co., 184 Waterworks Co. », Burkhart, 280 Watkins v. Eames, 148 —— 2». Wilcox, 51, 673 Watson vo. Avery, 673 —— v. Bennett, 263 —— ». Farris, 673 —— », Jones, 670 Watts 2. Carroll Parish, 816 —— ». McLean Imp. Co., 78, 90 Wayne & Ontario Collegiate Inst. ». Blackman, 504 Weare »v. Gove, 636, 645 Weaver »v. Barden, 141 Webb ». Portland &c. R. R. Co. 319 1 Schmidt », Huntington, © 652| Weckler v. National Bank, 623 Weed ». Panama R. R. Co. 266 Weeks ». Milwaukee, 304 dsworth v. Henniker, 193 | Weet v. Brockport, 304 ite ». Windham Mfg. Co., 460; Weir». St. Paul R. R. Co., 281 keman ». Dalley, 250, 643 | Weld ». May, 673 ldo v. Chicago, St. Paul & Weller v. Cowles, 140 ‘BR. R. Co., 93, 247 | Welles v. Marsh, 553 Idron v. Rens. & Sar. R. R. Wells ». Burbanks, 22 '0., 669 | —— Canton Co., 687 les ». Stetson, 667 | ——»v. Rahway Rubber Co., 458 Iker v, Bank of N. Y., 636, 637 | West o. Randall, 581, 583 -— ». Devereaux, 106, 437, 589 | Westchester & Phila. R. R. Co. —— v. Mobile & Ohio R. R. ». Jackson, 147 Co., 152, 487 | Western ». Hunt, 15 — », Wainwright, 673 | Western Bank 2. Gilstrap, 360, 414 Tlace 2. Mayor, 272 | Western Stage Co. v. Walker, 553 lworth Co. Bank v. Farmers’ Western Tr. Co. v. Scheu, 4 1 &T Co., 474 | Western R. R. Co. v. Nolan, 572, rd v, Chase, 251 591 — v. Griswoldville Mfg. Co. 153 | Weston ». Foster, 85 — »v. Sea Ins, Co, 649, 651 | West River Bridge ». Dix, 84, 284 — ». Societies of Attorneys, 215| West Wisconsin R. R. Co. 2. rdrobe v. Cal. Stage Co., 272| Trempeleau, 670 ring ». Catawba Co., 3| Wheaton 2. Gates, 673 mer v, Mower, 124, 353, 354, 355, 387 ren 2. Etna Ins. Co., 681 — », Ocean Ins. Co., 365 shington Bank ». Lewis, 423 shington Bridge Co. ». State, 669 BE Wheeler, in re, * 186, 392, 447 o. San Francisco & Al. R. R.. Co. 78, 89, 90, 675 Wheeler v, Smith, 50 Wheelock v. Moulton, 141 White v. Brownell, 45 lxvi 372 636 636 White v. Franklin Bk., v. Madison, —— v. Skinner, — 2. pseaeuey & U. R. R. 84, 95 179 — 2 Seen R. R. Co., —— 2 Westport Manufactur- ing Co., 474. White’s Bank v. "Toledo Ins. Co., 29 White Mts. R. R. Co. v. East- man, 107, 111, 152 ” White "River T. Co. v. Vt. "Cent. R. R. Co., 84, 284 White Water Valley Canal Co. v. Vallette, 21, Whiteman v. Wil. & Susq. R. R. 124 Co., 263 Whiting v. Sheboygan & Fond du Lac R. R. Co., 670 Whitman Mining Oo. v. Baker, 11, 29 Whitney ». Atlantic & St. L. R. R. Co., 305 Whitney o. Mayor, 581 Whittaker v. Hart. Prov. & Fish. R. R. Co., 180 Whittenton Mills 2. Upton, 335 Whitwell ». Warner, 392, 401, 412, 474, 480 Wight v. Shelby R. R. Co., 152, 247, 248 Wiggin v. Free Will Baptist Church, 358, 354 Wild o. Bk, of Passamaquoddy, 395, 16, 430 Wildy »v. Collier, 234 Wiley v. First Nat. Bank, 623 Willcocks, ew parte, 447, 458, 459 Williams v. Gregg, 409 —— v. Pearson, 50 Williams o. Savage Man. Co. -, 100, 118 —— ».8chool District, 282 Williamson », New Albany’ &e. R. RB. Co., Williamson », N. J. Southern R. R. Co., 126, 591 Willink 2. Morris Canal Co. » 125 Willis 1. Henderson, 581 Williston », Michigan Southern & Northern Indiania R. R. Co., 137, 147, 581 Wilmington R. R. Co. 2. Reid, 669 Wilson v. Blackbird Creek Co., 285 — ». Wills Valley R. R. Co., 80 —— ». Prop. Central Bridge, ‘97, 103, 652 125 TABLE OF AMERICAN CASES. Wilson v. School Dist., 32, 875 Wiltbank’s Appeal, 181, 136 Winchester & Lexington Turn- pike Co. 0. Vimont, 124, 687 Winebrenner v, Colder, 673 Winfield v. City of Hudson, 179 Winona & St. Peter R. R. Co. ». Waldron, 670 Winsor, Henry, ex parte, 553 Winter v. Muscogee R. R. Co., 29, 80 Wiswell v. Congregational Church, 673 Wiswall o. Greenville & R. P. R. Co., 48, 90 Withers 0. Buckley, 285 Witman », Lex, 50 Witmer ». Schlatter, 480 Witte v. Derby Fishery Co., 442, ee Wolf». Goddard, Wood »v. Bedford R. R. Co, ing —— ». Davis, 583 —— »v. Draper, 565 —— »v. Dummer, 112, 151, 400, 654 —— »v. McCain, 471 — »v. McCann, 284 Wood Hyd. H. M. Co. o. King, 680 Woodes v. Dennett, 636 Woodman v. York & Cumber- land R. R. Co., 388 Weodruff », Trapnall, 667 Worcester & N. R. R. Co. a. Newton, 111 Worcester 0. Western R. R. Co., 315 Worcester & Nashua R. R. Co. v. Hinds, 105 Worcester Turnpike Corp. 2. Willard, 357 Worral ». "Judson, 98 Wright v. Bundy, 679 — ». Carter, 64 — », Lankton, 365 %. Orville M. Co., 570 Wylde ». Northern R. R. Co., 306, 319 Wyman ». Hallowell & Augusta Bank, 896, 412 Wyman »v. ‘Pen. & Ken. R. R. Co., 805 Yarmouth v. North Yarmouth, 667 Yates v. Van De Bogert, 40 Yellow Jacket Mining Co. 2. Stevenson, 453, 471 York & Cumberland Rw., in Tre, 124 TABLE OF x & Cumberland R. R. Co. Pratt, k & Cumberland R. R. Co. Ritchie, k & Maryland R. R. Co. 2. Tinans, k Co. 2. Small, ng v. Harrison, ng o. Paul, AMERICAN CASES. Ixvii Zabriskie v. Hackensack & N. 106| Y.R. RB. Co, 79, 84, 544, 555, 652, 668 150 | Zabriskie v. OC. C. & C. RR. Co., 95, 355, 374, 429, 480, 449, 124 466, 588 485 | Zack ». Penn. R. R. Co., 286 668 | Zinc Co, ». Franklinite Co., 517 381 | Zoltman v. San Francisco, 376 A TREATISE ON THE DOCTRINE OF ULTRA VIRES. PART I. INTRODUCTORY. SECTION I. THE LEGAL STATUS OF CORPORATIONS. A corporation is a person which exists in contem- ation of law only, and not physically. “It is a col- ‘tion of many individuals united into one body, under special denomination, having perpetual succession der an artificial form, and vested by the policy of the v with the capacity of acting in several respects as individual, particularly of taking and granting prop- iy, of contracting obligations, and of suing and. being ad, of enjoying privileges and immunities in common, d of exercising a variety of political rights, more or s extensive according to the design of its institution, the powers conferred upon it, either at the time of creation or any subsequent period of its existence.” isis the definition given by Kyd (1 Kyd, Law of rp. 13), and it is a fairly accurate description of the aeral nature of a corporation, but sufficient stress ,is 1 2. INTRODUCTORY. not laid upon that which is its real characteristic in the eye of the law, viz., its existence separate and distinct from the individual or individuals composing it.* Considered as a tangible fact, it is a fiction, a shade, a nonentity, but a reality for many legal purposes. A corporation aggregate is only im abstracto—it is invis- ible, immortal, and rests only in intendment and con- sideration of law. This is the description given by Coke in the Case of Sutton’s Hospital (10 Rep. 32 6), and though exception has sometimes been taken to it, and more especially to the statement that a corporation is immortal, probably no better definition at once brief and accurate can be given. The essential part of the notion involved in the term corporation is its abstrac- tion, the intangibility of its existence, its being com- posed of a physical being, or beings, through which it manifests its capacities and powers, but from which it is totally distinct. This is the one important fact. The members of a corporation aggregate, and the one in- * See C. J. Marshall’s definition of a corporation, in Dartmouth Col- lege ». Woodward, 4 Wheat. 636. “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 transact- ing some kind of business like a natural person.” Bronson, J., in People ». Assessors, 1 Hill, 620. “A corporation is a legal institution devised to confer upon the in- dividuals 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 other- wise in the corporators or members of the corporation. It conveys per- haps as intelligible an idea as can be given by a brief definition, to say that a corporation is a legal person with a special name, and composed of such members and endowed with such powers, and such only, as the law prescribes.” 1 Dillon on Municipal Corp. 91. INTRODUCTORY. 3 dividual who is constituted a corporation sole, may, from their connection with such, have rights and priv- ileges, and. be under obligations and duties over and above those affecting them in their private capacity, but they get them by reflection, as it were, from the corporation. They individually are not the corporation * —cannot exercise the corporate powers, enforce the cor- porate rights, + or be responsible for the corporate acts. { It is usually laid down that a corporation must have a name,| a common seal, and a perpetual identity. * As an inference from the statement that the corporators are not the corporation, the rule is established that the corporation may sue the cor- porators, and the corporators sue the corporation. Culbertson ». Wabash N. Co. 4 McLean, 547; Samuel ». Halliday, 1 Woolw. 418; Sawyer ». Meth- odist Hp. Soc. 18 Vt. 405; Rogers ». Danby Univer. Society, 19 Vt. 187; Waring v. Catawba Co. 2 Bay, 110; Gifford o N. J. R. R. Co. 2 Stock. 171; Pierce ». Partridge, 3 Metce. 44; Barnstead ». Empire Mining Co. 5 Cal. 209; ex parte Booker, 18 Ark. 338. + As to suite by corporators in equity to enforce corporate rights, see pt. II, chap. v, sect. 1, and pt. IV, chap. 1, sect. 2. { The course of legislation in the United States indicates a general intent not to grant special charters. The more modern constitutions of the several States direct the passage of general laws providing for the for- mation of corporations, Unless the requirements of these general laws are complied with, members become responsible for the corporate liabilities. See Angell & Ames on Corporations, chapter xvii, and notes. || A corporation may be known by several names. Minot v. Curtis, 7 Mass. 441; Melledge v. Boston Iron Co. 5 Cush. 158; Conro o. Port Henry Tron Co, 12 Barb. 27. A corporate name may be acquired by usage. Smith v. Plank Road Co. 30 Ala. N. 8. 650. Where the corporate name consists of several descriptive words, the transposition or omission of some of them, or an interpolation, is not a material variance, so long as there is no doubt as to the body intended. to be designated. Trustees o. Park, 1 Fairfield, 441; Newport Mechanics’ Man. Co. 2. Starbird, 10 N. H. 123; Medway Cotton Co. v. Adams, 10 Mass, 360; First Parish ». Cole, 3 Pick. 282; Commercial Bk. v. French, 21 Pick. 490; Kentucky Seminary v. Wal- lace, 15 B. Mon, 45; Turnpike Co. o. Myers, 6 8. & R. 12; Northumberland Bk. v. Eyer, 60 Penn. St. 486; Milford Turnpike Co. v. Brush, 10 Ohio, 111; Middletown ». McCormack, 2 Pennington, 500; Alloway’s Creek 2. String, 5 Halsted, 323; Vansant ». Roberts, 3 Md. 119; Hagerstown Turn- 4 : INTRODUCTORY. Other attributes and faculties may or may not belong to it, but these are essential. It must undoubtedly possess some designation by which to identify it, but there is no necessity, even at common law, that it should “be described by metes and bounds, or by any particular locality.’ * The common seal is an unquestionable incident of every corporation, and evidence that there was a time when a borough had not a common seal has. conse. quently been held evidence that it was not then a cor- poration.” It has been said that it may, by common consent, change its seal at any time, and consequently it may validly affix to an instrument any seal whatever, - provided it purport to be the corporate seal.’ But con- sidering the embarrassment and doubts that would arise from constant change in the corporate seal, and also the fact that the legislature has by statute ex- pressly authorized limited lability companies to alter from time to time their common seal,* and that in some ? Case of Sutton’s Hospital, 10 Rep. * Sheph. Touch, 57. 29a. 44 & 8 Vict. c. 110, s, 25. 2 Bailiffs of Ipswich v. Johnston, 2 Barnard, 191. pike Co. »v. Creeger, 5 H. & J. 122; Bower ». Bk. of the State, 5 Ark. 234; African Soc. v, Varick, 13 Johns. 88; McGary v. People, 45 N. Y. 153. * As to location or domicile of corporations. Potter v, Bank of Ithaca, 5 Hill, 490; s. c. 7 Hill, 580; People ». Geneva Coll. 5 Wend. 211; U.S. v. Devereux, 5 Cranch, 84; Runyan v. Coster, 14 Peters, 122; R. R. Co. 2. Letzon, 2 How. 497; Ohio & Miss. R. R. Co. v, Wheeler, 1 Black, 286; Ins. Co. v. Francis, 11 Wall. 216; R. R. Co. o. Harris, 12 Wall. 83; Androscoggin R. R. Co. v. Stevens, 28 Me. 484; Blackstone Mf’g Co. 2. Blackstone, 13 Gray, 488; Crofut ». Brooklyn Ferry Co. 36 Barb, 201; Western Tr. Co. 2. Scheu, 19 N. Y. 408; Merrick v. Van Santvoord, 34 N. Y. 208; Maryland v. Northern R, R. Co. 18 Md. 198; Baltimore &c. R. R. Co. ». Glenn, 28 Md. 287; Crowley ». Panama R. R. 30 Barb. 99; Glaize v. So. Car. R, R. 1 Strobh. 70. INTRODUCTORY. 5 irters a similar power has been given, it may fairly questioned whether such:a power exists at common v. The possession and user of a seal purporting to be a nmon seal by a body does not necessarily show that xy are a corporation, * for many bodies not only have ‘common seal, but also take in perpetual succession, d yet are not corporations. Thus the Commissioners Lunacy have a common seal (8 & 9 Vict. c. 100, s. ,80 have the Inns of Court (Skinner, 684), but neither a corporation.” And of course, the assumption by a mber of persons of a common seal, and the affixing of e same to a contract, cannot confer on such persons y of the qualities of a corporation, or enable them to e collectively upon such contract.’ * . ‘Corporations enjoy to some extent the attribute of mortality. Jt is often said that they never die. But is expression is scarcely correct. Some corporations ve been, by special acts of parliament, created for aited and definite periods only—the East India Com- ny and the Bank of England were, at their origin, stances of this kind ; so was the South Sea Company.+ Moreover, the existence of a corporation may be ddenly determined in various ways, ¢. g., by the thdrawal or cancellation of its charter, by winding up ider statutory provisions, or the like. The better ex- 1 Stallingers of Sunderland’s Case, Merew & Steph. “Hist. of Boroughs,” 1d 2Q. B, 593. passim. 2 See many instances referred to in 5 Cooch v, Goodman, 2 Q. B. 580, * See post, pt. III, chap. m1, sect. 2. + There are but few corporations in the United States now in existence ose charters are perpetual; and since the doctrine of eminent domain s been applied to the condemnation of franchises as well as to other spe- sof property, it may be doubted whether any charter can be said to be imited in its duration. 6 INTRODUCTORY. pression is, therefore, that of continuous identity. This simply denotes that, notwithstanding the lapse of time or alterations in the constitution of a corporation, or the renewal many times repeated of all its members, or its reconstruction on a new basis, and with even different objects,'* the corporation itself remains the same—it does not import that it must or will continue forever.t SECTION II. THE ORDINARY INCIDENTS OF CORPORATIONS. The incidents of a corporation, as enumerated by Blackstone, 9th ed. bk. i, p. 475, are: 1. To have per- petual succession. 2. To perform all legal acts—to sue and be sued, to grant and receive, d&c.—in its corporate name, and to do all other acts as natural persons may.. 3. To purchase lands and hold them for the benefit of themselves and their successors. 4. To have a common seal. 5. To make by-laws or private statutes for the better government of the corporation, which are bind- ing upon themselves, unless contrary to the laws of the land, and then they are void. Now, in reference to the above, it may be observed, in the first place, as Blackstone himself points out, that the last two powers, though they may be practiced by, 1 See Att. Gen, », Kerr, 2 Beav, 420; Att. Gen. v. Corporation of Leicester, & Beav. 546. * This reconstruction on a new basis, or with different objects, can only be effected by the consent of all the members, or by compensation being awarded to those dissenting. Black v. D. & R. C. Co. 7 CO. E. Green; 8. ©. on appeal, 9 C. E. Green, 462. + See Appendix as to the power to. alter, amend and repeal charters in. the United States. INTRODUCTORY. a yet are very unnecessary to, a corporation sole: and secondly, that it is but a list, and that neither complete nor systematically arranged, 6 the incidents which ex- ist at common law. As to 1—Perpetual Succession. It would seem that this is by the common law an absolute essential of a corporation, and that the crown cannot of its preroga- tive create corporations having a limited duration. The 1 Vict. c. 73, however, has, by section 29, empowered ~ the sovereign in any charter of incorporation to be hereafter granted, to limit the duration thereof for any term or number of years, or for any period whatever. Reference has also been made to statutory corporations of a similar description. As to 2. The corporation, as a distinet and separate entity, being alone recognized in all legal matter affect- ing itself, it follows that the corporate property and and funds alone are liable for the corporate transactions, and that no responsibility for the same can be attached to any member of the corporation merely as such. The corporation exists; it enforces its own rights and priv- ileges—through agents, indeed, since it is invisible— and is liable on- account of any proceeding authorized or ratified by it; no private individual can enforce these rights, or be brought under any obligation for the results arising from their enforcement.* 1 Ante, p. 6. * This must be taken with the qualification that in certain contingen- cies shareholders may enforce the corporate rights in equity, on failure of directors to do so. See note, page 8. And also that in the United States, stockholders, on failure to comply with statutory requirements, similar in some respects to the joint stock and other acts of Great Britain alluded to in the text, become responsible for corporate liabilities. Sce Angell & Ames on Corporations, chap. xvii, and notes. 8 INTRODUCTORY. But the joint stock and other similar acts have not only allowed corporations to be created, the members of which are responsible for the contracts, &c., of the corporation up to the amount of the shares held by them in it; but also given the members power to trans- fer their interest to other parties, without asking per- mission of the general body. This is a most important modification of the doctrines of the old common law, . which in no case recognized the individual apart from the corporation, or deemed him to possess any interest in its funds or franchises, which he could at his absolute pleasure convey to another. Blackstone adds, that corporations may “do all other acts as natural persons may.” ‘This statement is manifestly wrong if taken in its full sense. A corpo- ration could not levy a fine, wage law, be outlawed, or perform fealty or homage, nor can it commit treason or felony, or be bound by statute or recognizance, or be summoned into the ecclesiastical courts, or be ex: ecutor, or administrator. But it is probable that their capacity was limited, in the opinion of even the older judges, to a much greater degree than these few dis- abilities. A corporation always forfeited its charter for abuse of its franchises—“if the trust be broken, and the end of its institution be perverted,” per Holt, in Rex v. Mayor, é&e. of London It is here, and in many other cases, distinctly recognized that a corpor- ation has a definite scope and limit, outside which it may not presume to act without risking its very ex- istence. This is but the germ of the doctrine of ultra vires, which has been so greatly developed by recent decisions. As to 8, “It is not correct to say that every corpo- 7] Show. 274, 280, INTRODUCTORY. 9 ration, aggregate, as such, has power to acquire lands as an incident to its incorporation; the proper mode of stating the law seems to be that, subject to the discretion of the crown or parliament as to. the grant of a license in mortmain, a corporation has a capacity to take and hold in perpetuity.” Grant, “ Corpora- tions,” 98.* * “We have not in this country re-enacted the statutes of mortmain, or geverally assumed them to be in force; and the only legal check to the acquisition of lands by corporations consists in these special restrictions contained in the acts by which they are incorporated, and which usually confine the capacity to purchase real estate to specified and necessary objects; and in the force to be given to the exception of corporations out of the statute of wills which declares that all persous, other than bodies politic and corporate, may be devisees of real estate. The statutes of mortmain are in force in the State of Pennsylvania. By the statute in Pennsylvania of 6th of April, 1833, all purchases of land by any corpora- tion, or by any person in trust for one, without the license of the com- monwealth, are made subject to forfeiture, and the same penalty extends to all lands held by corporations existing in other States, either directly or through the medium of trustees or feoffees. Purdon’s Dig. 350. The provincial statute of Massachusetts of 28 Geo. II was commonly called a statute of mortmain. It was virtually repealed by the statute of 1785, which was a substitute for it; and it has been held that a bequest in trust for pious and charitable uses was not void. Bartlet v. King, 12 Mass. 587. The Revised Statutes of Massachusetts of 1836 continue the same provision, and deacons and churchwardens of Protestant churches are made bodies politic competent to take donations for their churches and for the poor thereof. Revised Statutes, part 1, tit. 8, c. 20, sec. 39. The British mortmain acts were never recognized as the law of Virginia or Kentucky. Moore’s Heirs ». Moore’s Devisees, 4 Dana, 356; Lathrop ». Commercial Bank of Scioto, 8 Dana, 114. In Louisiana, substitutions and fidet commissa are abolished. Civil Code, art. 1507. The object was to prevent property from being placed out of commerce, but it does not apply to naked trusts to be executed immediately.” 2 Kent’s Com, (12 ed.) 356; see Runyon v. Lessee of Coster, 14 Peters, 122; Miller v. Porter, 58 Penn. St. 292; Potter v. Thornton, 7 R. I. 252; Perin v. Carey, 24 How. 465; Page » Heineberg, 40 Vt. 8i; Odell v. Odell, 10 Allen, 1. Corporations. for religious or charitable purposes cannot acquire or 1old real estate in any territory of the United States of greater value than ifty thousand dollars, under penalty of forfeiture and escheat to the United 10 INTRODUCTORY. From very early times, as is well known, the leg- islature, favoring the unfettered alienation of land, and seeing that this was greatly impeded by the transfer to corporations, who took in perpetuity and never died, passed numerous statutes interposing ob- stacles to such transfer. Of these the most important were, 7 Ed. I, st. 2, « 1 (De viris religiosis), and 18 Ed. L, st. 1, c. 32 (Westminster the second), which de- clared that no corporation, ecclesiastical or lay, should buy or sell, or in any way take land by gift, lease, or otherwise, under pain of forfeiture of the same, with power to the next lord of the fee within one year to enter, and if he do not, then the next lord has half a year to enter, and in default of all the mesne lords, then the king can seize: and 15 Rich. Il, «. 5, which ex- tended the provision of these statutes to all alienations to the use of corporations. The effect of these enact- ments is, that a corporation may, without license from the crown, acquire lands,* but the mesne lords or the ?The grant of such a license is have now become impossible to trace, it merely a waiver of the crown’s right to" in reality abolishes the penalties of enter ; it does not abrogate the statutes mortmain. Licenses are now granted of mortmain with respect to the mesne in pursuance of 7 & 8 Will. II, c. 87. lords; but as the titles of these latter States. 12 Stats. at Large, c. 126, sec. 8, p. 501; U. 8. Rev. St. sec, 1890, p. 884. The city of St. Louis cannot take real estate in New York, because by its charter it is not authorized to take or hold such real estate upon any trust, use or purpose, and because by a law of New York no devise to a corporation could be valid unless such corporation was expressly author- ized by its charter or by statute to take by devise. Boyce ». City Saint Louis, 29 Barb. 650; Clemens v. Clemens, 37 N. Y. 75; Chamberlain v. Chamberlain, 48 N.Y. 424; see Harris v. Slaight, 2 Abbott’s Ct. of Ap. Dee. 316; Downing v. Marshall, 23 N. Y. 366. * The power to acquire lands is unlimited unless restricted by express law. Page v. Heineberg, 40 Vt. 81; Central Gold M. Co. ». Platt, 8 Daly, 268.. Corporations cannot hold real estate beyond the authority conferred by their charter. Steamboat Co. 0. McCutcheon, 13 Penn. St. 15; Riley v. INTRODUCTORY. it . ‘ crown may, within the prescribed period, seize them. The alienation is good as against the grantor under any circumstances, and good as regards the title of the cor- poration, if those who have power to enter do not choose to do so.1* Trading corporations may of course alienate their lands in any way, and for any estate that may be most. conducive to their own interests; but it is very doubt- ful if other descriptions of corporations have this power. Coke was of opinion they might,? but modern authorities incline the other way.2+ The lands given to ecclesi- 1As to the property which may be ? Case of Sutton’s Hospital, 10 Rep.. held by corporations and the restric- 308. tions upon the same, see Grant on Cor- 5 See Rex v. Wharton, 2 T. R. 204; porations, pp. 98-153; Stephen’s Com- Mayor &c. of Colchester v. Lowton, 1 mentaries, bk. ii, pt. i, chap. xiv; and V. & B. 226; Evan v. Corporation of 9 Geo. II, ¢. 36.¢ Avon, 29 Beav. 144, Rochester City, 9 N. Y. 64; see Downing ». Marshall, 23 N. Y. 366; State 2. Mansfield, 3 Zab. 512; State o. Newark, 1 Dutch. 317; Parish Ch. v. Cole, 3 Pick. 232. In Pennsylvania, a foreign corporation may lawfully take a lease of an office in which to transact its business. Steamboat Co. v. McCutcheon, 13 Penn, St. 15. In Vermont, foreign corporations may take and hold lands. State v. B. C. & M. 25 Vt. 433. In New Hampshire. Lumbard » Aldrich, 8 N. H. 31. In New York. Silver Lake Bk. v, North, 4 Johns. Ch. 870; Boyce v. St. Louis, 29 Barb, 650. In New Jersey. Black vo. D. & R. C. Co. 7 C. E. Green, 422.. In Nevada. Whitman Mining Co. ». Baker, 8 Nev. 886; see N. Y. Dry Dock Co. v. Hicks, 5 McLean, 111; Bank of Washtenaw o. Montgomery, 2 Scam. 428; Metropolitan Bk. 2. Godfrey, 28 Ill. 579. The legislature may authorize a foreign corporation to take lands for a public improvement. Morris Canal Co. 7. Townsend, 24 Barb. 658; in re Townsend, 39 N. Y. 171; Ross ». Adams, 4 Dutch. 160; s. c. 1 Vroom, 505. * See Baird v. Bk. of Washington, 11 8. & R. 411; Martin ». Branch Bk. 15 Ala. N. 8. 587; Bk. of Michigan »v. Niles, 1 Dougl. 401. t Not in force in Georgia. Beall v. Fox, 4 Geo. 404. Nor in Rhode Island. Potter 0. Thornton, 7 R. I. 252. Nor in New York. Downing 2. Marshall, 23 N. Y. 392. { Independent of positive law, all corporations have the absolute jus disponendi of lands and chattels, neither limited as to objects nor circum- seribed as to quantity. 2 Kent’s Com, 12 ed. p. 355; First Parish in Sutton v. Cole, 3 Pick. 239; Barry 0. The Merchants’ Exchange Company, 1°. INTRODUCTORY. astical, charitable, municipal, and similar corporations, have, however, generally been given to enable them fitly to discharge the duties imposed on them. They consequently hold them under a trust; and the Court of Chancery will in all’ such cases interfere to prevent any disposition of the lands which would interfere with the proper performance of this trust.’ * As to 4—the need of a common seal. This requi' site has been considerably qualified by modern legislation and judicial decision, as will be seen in part III, chap. tr, section 2. As to 5—by-laws. Corporations aggregate, being as it were semi-political, though inferior communities, require the establishment of fixed and known rules, in accordance with which their internal government shall be carried on. The law has deemed it the more advis- able eourse to leave these rules for the most part to the discretion of the corporations and those composing them, who may be reasonably supposed to know what is most conducive to their own interests and welfare. Conse- quently corporations have inherent in them the power to make all such by-laws as are requisite for the due management of their affairs, and for determining the conditions of membership. “These by-laws must not be opposed to, or inconsistent with, the statute or common law of the realm, nor contradictory to the charter of Incorporation.? + "See Att.Gen. », Mayor dc. of Ply- cases cited post, part II, chaps, v and mouth, 9 Beay. 67; Reg. v.. Mayor &e. vi. of Liverpool, 9 A. & E. 485; and the * See Dunston v, Imperial Gas Com- * 1 Sandf. Ch. 280; Binney’s Case, 2 Bland Ch. 142; Burton’s Appeal, 57 Penn. St, 213; Sherwood ». The American Bible Society, 1 Keyes, 561; Miners’ Ditch Co. », Zellerbach, 37 Cal. 548. * See Appendix as to the jurisdiction exercised by courts of the United States over ecclesiastical bodies. + By-laws must not be repugnant to the constitution or laws of the INTRODUCTORY, 13. Not unseldom, especially in the case of statutory corporations, they require, for complete validity, the ratification or approval of some official board or person- age; The above may be considered as a statement of the leading facts relative to the capacities of corporations, pany, 3 B. & Ad, 125; Elwood v, Bul- ‘See for example 3 & 4 Vict. c. lock, 6 Q. B. 383; Att. Gen. ». Myddle- 97, ss, 7-10; 8 & 9 Vict. c, 20, ss. 108— ton, ’3 Ves. 330; Everett v. Grapes,3 L. 111. T. N.S. 669. United States, or of the State creating the corporation, or of the State wherein it seeks to exercise its powers, nor repugnant to its charter, or in excess of the powers as to making by-laws granted to it. U.S. v..Hart, 1 Pet. C. C. 390; Bank v. Lanier, 11 Wall. 369; Kennebec R. Co. v. Kendall, 31 Me. 470; Jay Bridge Co. 2. Woodman, 31 Me. 573; People v. Kip, 4 Cow. 382; Auburn Academy ». String, Hopk. Ch. 278; Phillips ». Wickham, 1 Paige, 590; Seneca Bank v. Lamb, 26 Barb. 595; Case of Phila. Savings. Bank, 1 Whart. 461; Butchers’ Ass’n, 35 Penn. St. 151; Taylor ». Gris- wold, 2 Green, 223; St. Luke’s Ch. v. Matthews, 4 Des. Ch. 578; Sayre v. Louisville U. B. Ass'n, 1 Duval, 143; Davis ». Meeting-house, 8 Metc. 321;, Carr v. St. Louis, 9 Mo. 190; State ». Conklin, 34 Wis. 21. Corporations cannot by by-laws impose any personal or individual lia- bility on third persons beyond such as is specified in their charter or in general laws of the State creating it. Free School v, Flint, 13 Metc, 589. A national bank, though having power to regulate the transfer of its. stock, cannot create a lien by a by-law on such stock. Bullard ». Bank, 18 Wall. 594; Bank o. Lanier, 11 Wall. 369; contra, Lockwood ». Mer. Nat. Bk. 9 RI. 308. By-laws must be reasonable, and not oppressive or vexatious. Com- monwealth », Gill, 3 Whart. 228; St. Luke’s Ch. 2. Matthews, 4 Des. Ch. 578, By-laws must not be retrospective. People v. Crockett, 9 Cal. 112; Howard v. Savannah, T. Charlton, 173, A by-law void as against strangers or non-assenting members may be good as a contract by assenting mem- bers. Slee v. Bloom, 19 Johns. 456; Davis ». Proprietors of Meeting-house, 8 Met.321; Amesbury ». Ins. Co. 6 Gray, 596 ; Cooper v. Frederic, 9 Ala. 788. * In the United States some classes of corporations, created under gen- eral laws, must have their charters approved by courts, or other officials; for example, in Pennsylvania, building associations, literary, charitable and religious corporations are required to exhibit their articles to the Court of Common Pleas. Purdon’s Dig. 180, pp. 129, 196. Charters of insurance companies in New York require the approval of the Attorney General. 4 R. S. Edmonds’ ed. p. 207. 14 INTRODUCTORY. but it is nothing more than a brief, imperfect enumera- tion. The most scientific method of treating their capac. ities and incidents, and the rights and liabilities result- ing therefrom, would probably be to take them in the following order: i. Common law incidents of every corporation— understanding by the term incident, all legal facts whatever coming within the category of right, power, privilege, capacity, immunity, duty, obligation, liability. ii. Incidents which cannot belong to a corporation, unless it be by the instruments creating and constituting it, expressly invested with the same, or with the possibility, on the happening of certain events, of acquiring them or being sub- ject thereto. iii. Incidents which do or may belong to a corpora. tion, impliedly and without any special words, being rendered necessary from a consideration of the nature and requirements of its business or undertaking. Such a treatment of the subject, if thoroughly and successfully carried out, would be exhaustive; but the difficulties in the way, arising from the multiplicity and diversity of topics, are too great. Therefore, it is pro- posed, having in the present chapter indicated in a gen- eral manner the various incidents of corporations, in the subsequent chapters to deal with these incidents sertatim in a less pretentious way, in connection with the particular facts—business, financial proceedings, and the like—to which they severally relate. INTRODUCTORY. . 15 SECTION Ill. VARIETIES OF CORPORATIONS. The first and primary division of corporations, and that which is the most characteristic of English law, is into sole and aggregate. The former are single persons who, for certain purposes, are considered to have a personality altogether distinct from that of ordinary. citizens. There are not many examples of these. The sovereign is one,* so constituted to prevent an abeyance of the crown between the death of one holder and the accession of another. All bishops of the Church of England, all parsons and vicars, and some deans and prebendaries are corporations sole.’ So is the queen regnant; so, at least for certain purposes, is the chamberlain of the city of London,’ and it would seem the chancellor of the University of Oxford is another instance.’ So the Regius professors of law and Hebrew, and the Lady Margaret’s Reader of Divinity in the University of Oxford are respectively corporations sole, having each a prebend attached to his office.* + ' As to the lands formerly vested in *See Howley v. Knight, 18 L. J. deans and prebendaries in their corpo- Q. B. 3, 7. rate capacity, see The Ecclesiastical ° Chase’s Case, 8 Hen. VI, fol. 18, pl.7. Duties and Revenues Act, 3 & 4 Vict. c. 4 See 13 & 14 Car. II, c. 4.8, 29, and 113, King v, Baylay, 1 B. & Ad. 761, 70. * The States of the Federal Union are corporations. State of Indiana ® -Woram, 6 Hill, 33; State ». Delesdernier, 7 Tex. 76. . The State is not a corporation within the meaning of the U. 8. internal reyenue acts. State of Georgia v. Alkins, 35 Ga. 315. + Sole corporations are not common in the United States. Minister of parish; Western v. Hunt, 2 Mass. 501; Brunswick ». Dunning, 7 Mass. 447, Public officers: Overseers of Poor 0, Sears, 22 Pick. 125; Jansen 2. Ostrander, 1 Cow. 670; Governor v. Allen, 8 Humph. 176. 16 INTRODUCTORY. The best arrangement of corporations, in order to exhibit the whole of them in their mutual relationship, is into ecclesiastical and lay. Ecclesiastical include all those whose members are spiritual persons only, and which exist in connection with and subordination to the Church of England. They may be thus sub- divided : I. Ecclesiastical corporations sole, which again admit of subordinate division into— (a) regular, te. those communities of religious per- sons who lived under some fixed rule, had a com- mon dormitory and refectory, and were obliged to observe the statutes of their order, as monas- tries, priories, and some canonries. These have died out at the present day. And (6) secular, 2. e. those associations who freely com- municated with the general world, ‘én seculo,” and took upon them the cure of souls, as bishops, deans, some canonries, parsons, _ Il, Ecclesiastical corporations aggregate, in some of which all the members were and are capable, e. g. dean and chapter, master and fellows of a college; while in others the head alone was capable, the remaining mem- bers being dead in law, ¢.g. abbot and monks. Of lay corporations, the better arrangement is into— I. Eleemosynary, such as hospitals for the mainten- ance or relief of sick persons, almshouses, colleges for the promotion of learning, and all similar institutions. And II. Civil, ie. established for distinctively tem- poral and worldly purposes, These may conveniently be divided into trading and non-trading corporations. Trading corporations may again be collected into the following classes :— INTRODUCTORY. 17 (a.) Those created by special statute or charter, and having all their capacities determined by such statute or charter. (6.) Those created by special statute, but also incor- porating therewith, wholly or partially, and, to that extent, falling under the provisions of other general acts; e.g. most companies for railways, gas works, d&e. (c.) Those created in accordance with the regulations of the general acts which have been passed in recent times for the purpose of facilitating the incorporation of individuals for particular pur- poses. These acts, the chief of which are enumer- ated post, pp. 26 ‘27, contain merely general rules, it being left to the persons proposing to in- corporate themselves to determine most of the powers and duties of the future corporation. These corporations differ widely in many respects from all others, except, perhaps, groups (c) and (d) of the next division. They all have a capital, divided into stock or shares, the latter of equal values, or ar- ranged into classes of equal values, and membership is constituted by the possession of some of such stock or shares. In consequence they are, and in this work will be, frequently styled “joint stock” or “public com- panies.” Non-trading corporations cannot be subdivided in accordance with any leading principle, or upon any scientific plan; but, perhaps, the most useful grouping of them will be into— (a.) Municipal and quasi-municipal corporations, in- cluding, under this head, both the various local government boards and the other municipal au- 2 18 INTRODUCTORY. thorities, whether they are or are not within the 5 & 6 Will. IV, ¢ 76. (b.) The many bodies which have been called into being and incorporated for the carrying out or the supervision of works and other matters of general or national importance, such as the com- missioners for river, sewage, navigation, and the like purposes ; dock or turnpike trustees; and SO On. (c.) Those whose aims are of a somewhat charitable nature, @¢. friendly and benefit societies. (d.) Anomalous associations, existing for worldly, as opposed to religious or charitable purposes, but not designed for the acquisition of gain, such as the council of law reporting, the corporation of foreign bondholders. Between these various and dissimilar societies there is no difference in legal consideration. Whatever be the aims of any group of men, in every case, if the group be endowed with the legal marks of a corpora- tion, it is such, having the privileges, but also subject to the incapacities of a corporation. But, besides these, various other bodies exist, hav- ing some, but wanting others of the characteristics of , true corporations. Such, for instance, are most of the commissioners instituted for public purposes, and which have been referred to above. These are either made corporations to all intents, or so far erected into cor- porations that the powers given to them, the duties imposed on them, and the rights of action acquired by them, descend to their successors." 1 See Conservators of River Tonev. §. 361; Mersey Docks and Harbor Ash, 10 B. & C. 349; Att Gen, v. Board 2, Gibbs. L. R. 1 H. Ld. 298; Andrews, 2 Mac. & Gor, 225; 2H. &T. see also 10 & 11 Vict. c, 16, The Com- 431; Hall v, Taylor, E. B. & E. 107; missioners Clauses Act. Hartnall v. Ryde Commissioners, 4 B. & INTRODUCTORY. 19 Of these quasi-corporations aggregate, churchwar- dens are another example. They have no common seal,” and therefore cannot bind themselves and their successors, covenants entered into by or with church- wardens being merely personal, and going to and against their executors. Like partnerships, they must all join in suing, and notice to or acquiescence by one is notice to or acquiescence by all* They may hold chattels, but not lands, and they are the proper persons to sue for injury done to the goods of the parish.6 The church- wardens and overseers have been together constituted a quasi-corporate body for certain purposes, by 9 Geo. I, ce. 7, and 59 Geo. III, c. 12.7. The guardians of the poor are another instance of quasi-corporations.® There are also quasi-corporations sole.* The Lord } Withnell v, Gartham, 6 T. R. 396. * Rex v, Austrey, 6 M. d& Selw. 319; See London and South-Western Company v. Jeakes, L. R. 12 Eq. 9; and Railway Company v. Blackmore, L. R, the many similar decisions. * The power of acquisition involves the power to make the property acquired a benefit. Reynolds v. Stark Co. 5 Ohio, 205; Overmyer 2. Williams, 15 Ohio, 26. This, however, does not authorize the acquisition ‘of property for the purpose of speculation. Moss 0. Averell, 10 N. Y. 449; Rensselaer & Saratoga R. R. . Davis, 48 N. Y. 187; Pacific R. R.v. Seely, 45 Mo. 212. A canal company may purchase more land than the precise quantity needed for the thread of the canal, and divide the excess among the stock- holders or dispose of it in any other lawful manner. Spear v, Crawford, 14 Wend. 22. . tIn most of the United States there are enactments limiting the amount of land and duration of tenure by corporations. { Assumed by Willard, J., in Moss o, Averell, 10 N. Y. 449. BUSINESS OF TRADING CORPORATIONS. ‘91 ‘devote all its attention to the latter. It is no abandon- ment of the objects of a company if, when established to accomplish three or four, it abandons one and carries on the others, provided such abandonment does not alter ‘the fundamental principle of the. company. The Nor. wegian Titanic Iron Company, Limited,! was formed for the purchase of certain .collieries in England, and iron mines in Norway, in order to bring over the iron ore from Norway and smelt it in England. After a time it was ‘deemed advisable to sell the collieries and to retain the moines. One of the shareholders thereupon presented ‘a petition to wind up the company, on the ground that it had failed to realize its objects; but the master of the rolls considered that the company was justified in -abandoning the collieries, and he therefore dismissed the petition with costs. * V. A corporation may, in the furtherance of its aims, enter into contracts and perform and concur in acts alien to its own undertaking and dehors its express powers, provided such contracts and 735 Beav. 228; compare Bank of Switzerland v. Bank of Turkey, 5 L, T. N.S, 549.. *“The act imports only an authority to the proprietors, not a com- -mand, They may desert or suspend the whole work and, a fortiori, any part of it.” Lord Mansfield in Rex v. Proprietors of Birmingham Canal, ‘2 W. Black. 708; see Treadwell ». Salisbury Man’f’g Co.7 Gray, 393. As to ‘the abandonment of an unprofitable branch of railway, see Com. o. Fitch- bury R. R. 12 Gray, 180. + : An agreement not to build a portion of a line, at instance of a rival line, is void. Hartford & New Haven R. R. Co. v. New York & New Haven R. R. Co. 3 Robert. 411; State », Hartford & New Haven R. R. Co. 29 Conn. 5388; Baltimore & Susquehanna R. R. Co. v. Compton, 2 Gill, 20. The franchise of a railroad corporation can only be legally exercised by its operating its entire road. People v, Albany & Vermont R. R. Co. .24.N. Y. 261; s.c. 37 Barb. 217. Can a franchise be dissevered except by legislative authority? Donelly 1. Vandenberg, 3 Johns, 27; Oakland R. -R. Co. v, Oakland & Brooklyn R. R. Co. 45 Cal. 365. 72 BUSINESS OF CORPORATIONS. acts are not directly forbidden, are essential to its existence, and could not have been foreseen and provided for at its inception. The principle is circumscribed within narrow limits, and it holds only when applied with great care, and to unexpected and material circumstances.* 7 In Wilson v. Furness Railway Company,’ the de- fendants were decreed specifically to perform an engage- ment entered into by them to construct a wharf and carriage road, upon certain terms, for the benefit of third parties. The act incorporating the defendant company subjected them to the necessity of obtaining approval of the admiralty to certain works to be done: by them. In consideration of certain ]andowners ob-- taining from the admiralty a waiver of this obligation, they agreed to make the wharf and road mentioned, but omitted to do so; and upon a bill being filed, de- murred on the ground of ultra vires, the said agree- ment being in no way expressly authorized by their act; but the demurrer was overruled. VI. A corporation may, in carrying on its business,. enter into all the usual arrangements with its customers and other parties, that private persons. enter into in the ordinary course of managing a 1L, B. 9 Eq. 28. * Whether this rule is founded on or supported by authority, depends on. the consideration of the question, whether the contract must be expressly forbidden, or if not forbidden, whether it can be repudiated if executed —as to which see Appendix. It is submitted, however, that whether the contracts ‘‘could have been foreseen and provided for at the inception of corporation,” is not an element in determining their illegality. The point. to be adjudged by the court, is not whether the corporation might not have obtained the power, but whether the power really exists. BUSINESS OF TRADING CORPORATIONS. 73 property or conducting a trade or other under- taking.* The business of a corporation can be conducted only in the manner in which other individuals are ac- customed to look after and conduct their own, and what is customary with the latter will generally be legal and allowable with the former. Thus a banking company may allow a customer to overdraw his account, and the court will neither restrain this at the suit of a shareholder, nor subsequently on losses thereby occur- ring hold the directors, who are guiltless of fraud, liable for the same, even though the defaulting customer be himself a director. A company in transacting its legitimate business, may deal liberally with its customers and waive the benefit of stipulations introduced for its own benefit, when the enforcement of the same would in the end be detrimental to itself and to the profitable carrying on of its business. Thus, where the directors of an insurance company had offered to pay losses caused by a gun- ? Turquand v, Marshall, L. R. 4 Ch. 376; 38 L. J. Ch. 639. * Moss o. Averell, 10 N. Y. 449; Barry o. Merchants’ Ex. Co. 1 Sandf. Ch. 280. See Camblos v. Phil. & Reading R. R. Co., 4 Brewster, 563; Watts ». McLean Imp Co. Leg. Gaz. Oct. 28, 1873. A railroad company cannot purchase steamboats to run in connection with its roads, although it is empowered to do all that is necessary to put in operation a railroad between the points named in its charter. Pearce v. Madison & Ind. R. R. Co. 21 How. 441; Hoagland o. Hannibal & St. Joseph R. R. Co. 39 Mo. 451. Contra, Shawmut Bk. ». Plattsburg & Montreal R. R. Co. 31 Vt. 491; Wheeler v. San Francisco & Al. R. R. Co. 31 Cal. 46; and see Rutland & Burlington R. R. Co. v. Proctor, 29 Vt. 95. A charter giving authority to make and keep in repair a road, to take tolls of passengers and for car- riages, to build and own toll-houses, and to take land for the road, does not authorize the company to establish stage and transportation lines, or to buy carriages and horses for such a purpose. Downing ». Mount Washington &c. Co. 40 N. H. 230; Wiswall v. Greenville &c. Co. 3 Jones Eq. 183. 74 BUSINESS OF CORPORATIONS. powder explosion, although their policies contained an express exception of such losses, and they at -the same time did not admit any legal liability to do so, on a bill by a shareholder to restrain the payments, it appearing on the evidence that it was usual and advantageous for companies to make such payments, although not strictly bound to do so, Page Wood, V. C., held, that this was a mode of carrying on the business with which the court could not interfere; and the bill was dis- missed with costs. “This is not a case of applying funds to purposes wholly foreign to the objects of the company, but it is an expenditure designed to secure to the company the largest possible amount of profits in its own proper business.” * VII. Corporations endued with special powers will have, in addition, an implied authority to do such acts as may be necessary for the full and complete utilization of such special powers.* Corporations, as will be seen hereafter, are, as re- gards most varieties of torts on a very similar footing to that of ordinary citizens, acts which are wrongful in the case of the latter being equally so if done by the former. But many corporations have given to them compulsory powers for entering upon land and the like. Proceedings carried on by them in pursuance of such powers are legal, and persons aggrieved thereby will be ousted of their common law remedy, and, if the statutes conferring the powers have not indicated a method of redress, will be without remedy at all.?+ "Taunton v, Royal Insurance Com- way Compan. , TE, & B, 660; 26 L, J. pany, 2 H. & M, 135. “Boon : *See Penny v. South-Eastern Rail- * See note, p. 29. } Private property cannot be taken for public use without just compen- BUSINESS OF TRADING CORPORATIONS. %5 Over and above the powers so expressly bestowed, cor- porations have, under some circumstances, impliedly the privilege to carry on other works, and to engage in other matters detrimental to their neighbors, without exposing themselves to legal proceedings for the same.* The principle unquestionably exists, but how far it ex- tends, and what the wrongs are which it legalizes, can- not be predicated with any degree of certainty. The recent decision in Hammersmith and City Railway Company v. Brand, well illustrates both the principle 'L. R, 4 H. Lds. 171; City of Glas- gow Union Railway Company v. Hunter, L. R. 2 Se. & D. 78. sation. Constit. U. 8. Art. 1, sec. 18. A railroad company may enter on land for the purpose of making surveys, without compensation. Polly o. Sar. & Wash. R. R. Co. 9 Barb. 449, and cases cited; Cushman ». Smith, 34 Me, 247; Mercer v. McWilliams, Wright’s (Ohio) Reps. 132. In some States the company is liable for damage occasioned by tempo- rary occupation, and, in general, is bound to make compensation for tem- porary use, if the land is not ultimately taken. Redfield on Railways, § 66. The statutory remedy for taking private property is not cumulative, put exclusive. Mason v. Kennebec & Portland R. R. Co. 31 Me. 215; Aldrich v, Cheshire R. R. Co. 21 N. H. 359; Henniker v. Contoocook Valley R. R. Co. 29 N. H.146; Knorr 0. Germantown R. R. Co, 5 Wharton, 256; Cumberland Valley R. R. Co. v. McClanahan, 59 Penn. St. 23; Hueston ». Eaton & Hamilton R. R. Co. 4 Ohio St. 685; McIntire ». Western North Carolina R. R. Co, 67 N. C. 278; Leviston v. Junction R. R. Co. 7 Ind. 597; Indiana Central R. R. Co. v. Oakes, 20 Ind 9; Col- cough v. Nashville & Northwestern R. R. Co. 2 Head, 171; Pettibone 2, La Crosse & Milwaukee R. R. Co. 14 Wis. 443; Davis» Same, 12 Wis. 16; Ford o. Ch. & N. W. R. R. Co. 14 Wis. 609; Baker v. Hannibal & St. Jo. R. R. Co. 36 Mo. 548; Leary v. Same, 38 Mo. 485; contra, Doe v. Georgia R. R. Co. 1 Ga. 524; Daniels ». Ch. & N.W.R.R.Co. 35 Iowa, 129. * Where one has the sanction of the State for what he does, unless he commits a fault in the manner of doing it he is completely justified. Radcliffe ». Mayor, 4 N. Y. 195; Bellinger v, N. Y. Central R. R. Co. 28 N. Y. 42; Selden o. Del. & Hud. C. Co. 29 N. Y. 634; Conhockton 8. R. Co. v. B. N. Y. & E.R. R. Co. 3 Hun, 528; Newark Plank-road Co. »v. Elmer, 1 Stockt. 754; Atty. Gen. v. Paterson & Hudson R. R. R. Co. 1 Stockt. 526. %6 BUSINESS OF CORPORATIONS. itself and the difficulties incidental to its application. Property of the original plaintiff (Brand), lying near to, but none of which was actually taken by the rail- way company, was seriously affected by the traffic on the railway after it was opened, and a jury summoned to assess this damage awarded “for vibration from the use of the railway after construction, £272.” A special case was then prepared, which stated, inter alia, that “it did not appear (¢. e. at the award) that any structu- ral injury was caused to the house or outbuildings by the construction of the railway ; but it did appear, and it was admitted for the purposes of this case, that, by reason of the working of the railway after it had been opened for traffic, the house and buildings were and would be subjected to vibration, noise, and smoke from passing trains, and were and always would be affected and depreciated and lessened in value thereby;” and the question asked was, “ whether the plaintiff was en- titled to have compensation for the injury so caused ?” The Court of Queen’s Bench decided in the negative against the plaintiff’s claim; this was reversed by a majority of the Exchequer Chamber; but finally a ma- jority of the House of Lords concurred in and main- tained the original decision. They held that neither the lands clauses consolidation act nor the railways clauses consolidation act contains any provisions under which a person, whose land has not been taken for the purposes of a railway, can recover statutory com- pensation from the railway company in respect of dam- age or annoyance arising from vibration occasioned (without negligence) by the passing of trains after the railway is brought into use, even though the value of the property has been actually depreciated thereby ; and further, that the common law right of action is, BUSINESS OF TRADING CORPORATIONS. vad under such circumstances, taken away. Lord Chelms- ford observed : “ We do not expect to find words in an act of parliament expressly authorizing an individual or a company to commit a nuisance, or to do damage to a neighbor. The 86th section (7. ¢, of 8 & 9 Vict. ¢. 20) gives power to the company to use and employ locomotive engines, and if such locomotives cannot pos- sibly be used without occasioning vibration and conse- quent injury to neighboring houses, upon this principle of law that ‘ Cuicumque aliquis quid concedit, concedere videtur et id sine quo res ipsa esse non potuit, it must be taken that power is given to cause that vibration with- out liability to an action. The right given to use the locomotive would otherwise be nugatory, as each time a train passed upon the line and shook the houses in the neighborhood actions must be brought by their owners, which would soon put a stop to the use of the railway.” * ; Another case, coming under this principle, is that of the Att. Gen. v. Cambridge Consumers’ Gas Company. 1L, R. 6 Eq. 282. * A turnpike company cannot complain of the use of engines on a rail- road, on the ground of injury or disturbance of its franchise. Bordentown & 8. A. Tumpike Co. v. C.& A. R. R. Co.2 Harr. 314 (1839). Where the law confers the right to use an element of danger, it protects the person using it, except for his abuse of his privilege. Therefore, a loss of property from sparks of a locomotive, apart from negligence or misuse, is damnum absque injuria. Frankford Turnpike Co. ». Phil. & T. R. R. Co. 54 Penn. St. 845; Phil. & Reading R. R. o. Yeiser, 8 Penn. St. 366; Sheldon ». Hudson R. R. R. Co. 14.N. Y. 218; Fero v. Buffalo &c. R. R. Co. 22 N. Y. 209; Burroughs 2. Housatonic R. R. Co. 15 Conn. 124; Lyman v. B. & W.R. R. 4 Cush. 288; Chapman 2. A'lantic R. R. 37 Me. 92; Jefferis 2. P. W. & B. R. R. Co. 3 Houston, 447; Mich. Centr. R. R. Co. ». Anderson, 20 Mich. 244; King 2. Morris & Essex R. R. Co. 3 C. E. Green, 397; Smith ». Old Colony R. R. Co. 10 R. I. 22. See Shearman & Redfield on Negli- gence, ch, xx, and Redfield on Railways, § 125. 78 BUSINESS OF CORPORATIONS, A local act of parliament passed in 1788 vested the property of all the streets of Cambridge in commission- ers, and empowered the commissioners from time to. time to cause the pavements to be taken up and the streets to be paved, relaid or altered, and to cause the streets to be lighted, and to contract with any persons for lighting the streets, and gave to the persons to be appointed by them for these purposes full power to do the same. The commissioners authorized a gas com- pany to take up the streets. Upon motion for an in- junction to restrain the company, it was held, that although for the purpose of lighting the streets in the only methods originally known, it was not necessary to break up the streets, the act enabled the commissioners to adopt every improved method of lighting, and conse- quently to break up, and authorize other persons to break up, the streets for the purpose of lighting them with gas.* SECTION II. THE EXTENSION AND DEVELOPMENT OF THE BUSINESS OF CORPORATIONS. Trading corporations can enter into no business, and corporations generally can engage in no transactions, so as to render the corporate assets liable for the results * Where the Legislature, in 1790, had given an exclusive privilege to build bridges over certain streams, an act passed in 1860, granting fran- chise of building viaducts for a railway over the same streams, does not interfere with the former grant. The language of the act of 1790 is to be. construed according to the state of knowledge and science at the time of its passage. Proprietors of Bridges v, Hoboken Land Co. 2 Beasley, 503}. 8. o. 1 Wall. (U. 8. Sup. Ct.) 116. See Lake ov. Virginia & Truckee R. R. Co, 7 Ney. 294. EXTENSION OF BUSINESS. ug thereof, other than those coming within the scope of their constitution. This is, indeed, but a restatement of the doctrine of ultra vires, but it is or has been not unseldom forgotten or misunderstood, and attempts have from time to time been made to break through it, or counteract its operations. Such attempts, whether made openly or covertly, will always, on the applica- tion of parties affected thereby, be restrained by the court; and even if not restrained—if by the indolence or fraud of the parties concerned in them they are persisted in—yet they will not, save under special cir- cumstances (see post, part IV, chapter mz), entail upon the corporation itself any responsibility for the conse- quences, I. A corporation can neither engage in any under- takings, nor render its property liable by being engaged in any undertakings, other than those for which it has been expressly created.* * 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 the original fundamental intention. Nothing is more clearly settled, than that any fundamental alteration of a charter, or material deviation from or exten- sion of a road in the case of road companies, interferes with the rights of the corporators, and that no majority, however large, can compel individual stockholders to submit. Kean v. Johnson, 1 Stockt. 401; Black »v. Dela- ware & Raritan C. Co. 7 C. E. Green, 130; 8. c. on appeal, 9C. E. Green, 455. The business of a corporation cannot be changed, or abandoned, or sold out without the consent of all the corporators; one corporator, however small his interest, can prevent it. Zabriskie ». Hackensack & New York R. R. Co. 8 C. E. Green, 178. When a person takes stock in a corpora- tion, he enters into @ contract with the company, that his interests shall be subject to the direction and control of the proper authorities of the cor- poration, to accomplish 1 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 pleasure of a ma- jority of the stockholders, so that new responsibilities, and it may be new hazards, are added to the original undertaking. But it is not every un- 80 BUSINESS OF CORPORATIONS. This is well shown by the decision in Att. Gen. v. Great Northern Railway Company,’ where, upon an ‘ . N.S, 1006; compare Na- tional Manure Company ». Donald, 4 cones : - H. & N.8; 281. J. 1 important change which would work a dissolution of the contract. It must be such a change that a new and different business is superadded to the original undertaking. Clearwater . Meredith, 1 Wall. 25; Hartford & New Haven R. R. Co. v. Croswell, 5 Hill, 388. The relation ‘pebwren a corporation and a stockholder is one of contract, and any legislative enact- ment which, without his assent, authorizes a material change in the powers or purposes of the corporation, not in aid of the original object, if acted upon by the corporation, is not binding upon him. McCray o. Junction R. R. Co. 9 Ind. 858; Winter ». Muscogee R. R. Co. 11 Ga. 438. This contract cannot be changed without consent of both contracting parties, If any substantial change be made, the shareholder may say, non hac in JSedera vent, Middlesex Turnpike Co. v. Locke, 8 Mass. 268. The change must be a substantial one. Sprague». Illinois R. R. R. Co. 19 Tl. 177. But there will, of course, be considerable diversity of opinion, as to what con- stitutes a substantial or material change. Thus in Proprietors ». Towne, 1 N. H. 44, the increase of the amount of land which the company was authorized to take, from six to one hundred acres, was held substantial, while in Gray ». Monongahela Nav. Co. 2 W. & S. 156; Clark 0, Same, 10 Watts, 864, and Irvin v. Turnpike Co. 2 Penn. St. 466, an alteration of the charter granting additional privileges, though these may extend the lia- bilities of the company, was not considered an invasion of the contract. See also Meadow Dam Co.» Gray, 30 Me. 547; Stevens v. Rutland & B. Rw. Co. 29 Vt. 545; Middlesex Turnpike Co, 0. Swan, 10 Mass. 384; Agricultural Branch R. R. Co. ». Winchester, 13 Allen, 29; Danbury & Norwalk Co. 2. Wilson, 22 Conn. 485; New Haven & Derby R. R. Co. v. Chapman, 38 Conn. 56; Livingstone’ Lynch, 4 Johns. Ch. 573; Hamilton & Deansville Plank-rd. Co, v. Rice, 7 Barb. 157; Troy & Rutland R. R. Co. o. Kerr, 17 Barb. 581; Poughkeepsie & Salt Point Plank-rd. Co. ». Griffin, 21 Barb. 454; Buffalo, Corning & N. Y. R. R. Co. ». Pottle, 23 Barb. 21; Schenec- tady & Saratoga Plank-rd. Co. v, Thatcher, 11 N. Y. 102; Buffalo & N. Y. City R. R. Co. o, Dudley, 14 N. Y. 336; Bailey ». Hollister’ 26 N. Y. 112; Delaware & Atlantic R. R. Co. », Irick. 3 Zab. 321; Everhart v. West Chester & Phila. R. R. Co. 28 Penn. St. 389; Bedford R. R. Co. 0. Bowser, 48 Penn. St. 29; Delaware R. R. Co. 2. Tharp, 1 Houst. 149; Greenville & Columbia R. R. Co. ». Coleman, 6 Rich. Law, 118; Wilson ». Wills Valley R. R. Co. 33 Ga. 466; Martin 0. Pensacola & Ga, R. RB. Co. 8 Fla. 370; Eppes ». Mississippi &e. R R. Co. 35 Ala. N. §, 33; New Or- leans J. &G. N. R. R. Co. o. Harris, 27 Miss. 517; Hawking 4; Miss. & Tenn. R. R. Co. 35 Miss. 688; Champion 2, Memphis & Charleston EXTENSION OF BUSINESS. 81 information sat the suit of the Attorney General as representing the public, Kindersley, V. C., restrained the defendants from carrying on, without special au- thorization in their act, a trade in coal. He observed: “Ts such an act an ‘legal act? Now here again it ap- pears to me that the case is hardly arguable on this point. * * * Although the act of parliament, which constitutes and incorporates the company, contains no prohibition in express terms against engaging in any other business except that of making and maintaining and using the railway, there is implied in every such act of parliament a prohibition or (looking at it as a contract) a contract against ever engaging in any other business than that of a railway company.” Another and much earlier case equally well known, is that of Natusch v. Irving.’ The plaintiff was one of the original subscribers to a company formed for grant- ing fire and life assurances; shortly after its incorpora- tion, the act of 6 Geo. I, c. 18, was repealed, which had prohibited companies from engaging in marine insur- ance, and the company then proposed to grant marine in- surance, and issued advertisements to that effect. To this the plaintiff objected, and he was told he might have his subscription back, and a policy which he had effected in the company Ganeeled and the premium returned. 1Gow on “ Partn.” App. 398; also reported in 2 Cooper Ch, Cases, Part 2, p. 858. R. RB. Co. Ib. 692; Fry ». Lexington &. R. R. Co. 2 Metc. (Ky.) 314; Sparrow 2. Evansville &c. R.R. Vo. 7 Ind. 369; Banet v. Alton & Sangamon R. R. Co. 13 Il. 504; Sprague ». Il]. R. R. R. Co. 19 Tl. 174; Til. R. R.R. Co. », Zimmer, 20 Ill. 654; Rice ». Rock Island & Alton R.R. Co. 21 Iil. 93; Il. R.R R. Co. o. Beers, 27 Ill. 185; Joy ». Jackson & Michigan Plank-rd. Co. 11 Mich. 155; Penn. & Ohio Can. Co. o. Webb, 9 Ohio, 136; McCray o. Junction R. R. Co, 9 Ind. 858; Kenosha &. R. R. Co. ». Marsh. 17 Wis. 13; Pacific R. R. Co. 0, Renshaw, 18 Mo. 210; Same o. Hughes, 22 Mo. 291. 6 82 BUSINESS OF CORPORATIONS. These offers he refused, and, after some further negotia~ tions, filed his bill against the company to restrain the issue of policies of marine insurance. Lord Eldon granted the injunction, being fully of opinion that the plaintiff was entitled thereto. Not only may corporations be restrained beforehand from entering into engagements of this nature, but also- such engagements when entered into are not obligatory upon or enforceable against the corporation ; and secu- rities given and contracts made in consideration of them are invalid. Balfour v. Ernest‘ is the leading authority upon this point. The directors of a joint stock insur- ance company, registered under 7 & 8 Vict. c. 110, who were authorized by the deed of settlement to draw bills on account of the company only when they were so drawn forthe purposes of the company, drew a bill on behalf of the company in payment of a claim due to the plaintiff on a policy effected by him with another com- pany, the business of which was attempted to be as- signed to the first-mentioned company by a deed of amalgamation of the two companies. The amalgama- tion failed, and the deed of amalgamation was illegal and void, but the bill was given to and received by the plaintiff upon the supposition that such deed was valid. The issuing of the said bill was no part of the ordinary business of the first-mentioned company. It was held, that the plaintiff could not recover against such com- pany on the bill, as the directors had no authority to ‘draw it, and the plaintiff (being taken to have had knowledge of the contents of the deed of settlement) must be considered to have had notice of the want of such authority. ‘5 C. B. N. &. 601; 28L. J.C. P. Stonehouse Grinding and Baking Com- 170. Compare Ridley v. Plymouth and pany, 2 Ex, 711; 171. J. Ex, 252, EXTENSION OF BUSINESS. 88 This was a case at common law, but the decision is the same in chancery, at least until the corporation is held—if it ever can be held—bound by acquiescence. Thus, in Ae the Phoenix Life Assurance Company, Burges and Stock’s Case,' the company had _ been estab- lished for granting assurances upon lives, and, at an extraordinary general meeting, it was resolved to extend the business to marine insurance. A supplemental deed, professing to confirm this extension of business, was executed by several of the shareholders, and in the annual return to the joint stock company’s registry ‘office, the extension was notified. The reports of the directors several times alluded to the extension, and on one occasion such a report accompanied the dividend warrant. The business, as extended, was carried on for a year and a half, when the company was ordered to be wound up. The Vice Chancellor, Page Wood, decided that these circumstances were not sufficient to bind the general body of shareholders, by acquiescence, to the ex- tension, which could be effected only by a new deed, executed by all. He said: “I need not refer to the cases that show that you cannot bind a single dissen- tient shareholder to any purpose which is not the original purpose of the company, and that if there was a single dissentient shareholder, it would be quite sufficient for the official manager appearing for all the shareholders to say that no such claim could be supported against the company.” * 12 J. & H, 441; 31 L, J. Ch. 749; Natusch v. Irving, Gow on Partn, App. 398. * Considerable discussion has taken place in American courts as to whether provisions (allowing the legislature to modify, amend or alter charters) inserted in constitutions, general laws relating to corporations, and special charters, will authorize a change of the objects and purposes of such cor- ‘ 84 BUSINESS ' OF CORPORATIONS. II. As corporations may not engage in business other than that for which they have been created, so also, if they acquire lands, easements or other rights, to be devoted to certain specified pur- poses, they cannot employ such in or towards the furtherance of other purposes.* porations against dissenting stockholders. The courts of Massachusetts and New York hold that the reserved right to alter authorizes the corpo- ration, by the cousent of the legislature, to engage in a new enterprise or extend the old one without the consent of all the shareholders. Durfee v. Old Colony R. R. 5 Allen, 230; Northern R. R. Co. o. Miller, 10 Barb. 260; White v, Syracuse & Utica R. R, Co. 14 Barb. 559; Sch. & Sar. Plank Road Co. v. Thatcher, 11 N. Y. 102; Buff & N. Y. City R. R. Co. v. Dudley, 14 N. Y. 336. And this rule would seem to obtain in Illinois and Missouri. Banet v. Alton & Sang. R. R. bo, 13 I. 504; Pacific R. R. Co. v. Renshaw, 22 Mo, 291. In Maine, New Jersey and Wisconsin, the opinion prevails that, while the legislature may grant the power, the stockholders cannot be com- pelled to exercise it, nor can the legislature authorize a majority to adopt alterations or enter upon enterprises not contemplated by the original charter against the dissent of any one stockholder. Meadow Dam Co. ». Gray, 30 Me. 547; Oldtown & Lincoln R. R. Co. 2. Veazie, 39 Me. 571;. Zabriskie 2, Hackensack & N. Y. R. R. Co, 8 C. E. Green, 178; Kenosha, Rockford & R. I. R. R. Co. v. Marsh, 17 Wis. 13; sce Delaware R. R. Co. ». Thorp, 1 Houston (Del.), 149; Same », Same, 5 Harrington (Del.), 454. It follows, however, from the doctrine that the right of eminent do- majn extends to every species of property, that where a public benefit is to be accomplished, a change in the management or an extension of the enterprise may be enforced by the legislature, provided compensation is. made in due form for thé extinguishment of the rights of dissenting stock- holders. West River Bridge v. Dix, 6 How. 507; Richmond R. R. Co. 2. ‘Louisa R. R. Co. 18 How. 71; White River Turnpike Co. ». Vermont Cent. R. R. Co. 21 Vt. 590; Enfield Bridge Co. v. Hart. & New Haven R. R. Co. 17 Conn. 40; Central Bridge Co. v. City of Lowell, 4 Gray, 474; State o. Noyes, 47 Me. 189; Piscataqua Bridge ». New Hampshire Bridge, 7 N. H. 35: Crosby v, Hanover, 36 N. H. 404; ‘Boston Water Power Uo 2. Boston & Worcester R. R. Co. 23 Pick. 360; Springfield », Conn. River R. R. Co. 4 Cush. 68; Tide Water Canal Co. ». Coster, 3 C. E. Green, 521; Matter of Drainage, 6 Vroom, 497; Black ». Del. & Raritan Co. 9 C. E. Green, 470; Chesapeake & Ohio ©. Co. », Balt. & Ohio RB. R. Co. 4 Gill & -J.1; Newcastle R. R. Co. ». Peru & Ind. R. B. Co. 3 Ind. 464. * Imlay 2. Union Branch R. R. Co. 26 Conn. 255. In Binney’s Case, 2 Bland, 142, Sept., 1829, the chancellor says: “ This is the first in- EXTENSION OF BUSINESS. 85 Not unseldom corporations obtain, compulsorily or otherwise, rights more or less limited, either of property or of the user of property, in order to enable them the better to compass their aims. In course of time, from change of circumstances, the corporation becomes desir- ous of employing such rights in a manner different from that originally contemplated. It would appear that it’ cannot do so—that even though it acquires the absolute property in land, yet if it acquired such land for certain purposes, its user thereof is restricted to those pur- poses.* On this point, Bostock v. North Staffordshire stance, in this court, in which a member has charged the body politic itself with making expenditures. not for corporate purposes, and, on that ground, prayed to have it prevented from doing so by injunction. * * * If property be givén to a body politic for certain specified and limited pur- poses, any application of it to an obviously different object is a violation of the law ; and consequently expenditures not for corporate purposes, in what- ever way they may have been authorized by the body politic, may be enjoined and prohibited.” * Where a corporation purchases more land than is needed, it may di- vide or dispose of the surplus. Spear v. Crawford, 14 Wend. 20; see Nicoll 0. New York & Erie Railroad Company, 12 Barb. 460; s. c. 12 N. Y. 121. But where property is taken in inodtum, unless the statute contemplated the taking of a fee simple, the right acquired is a mere easement or servi- tude. Barclay 0. Howell’s Lessee, 6 Pet. 498; Jackson v. Rut. & Bur. R. R. Co. 25 Vt. 151; Jackson ». Hathaway, 15 Johns. 447; Adams ». Rivers, .11 Barb. 390. And where the use is abandoned, the title reverts to the former owner. Hooker v. Turnpike Co. 12 Wend. 871; People v. White, 11 Barb. 26; Dean »v. Sullivan R. R. Co. 22 N. H. 821; Blake v. Rich, 34 N. H. 282; Quimby »v. Vermont Central R. R. Co, 23 Vt. 387; Weston v. Foster, 7 Met. 297; Henry ». Dubuque & Pacific R. R. Co. 2 Iowa, 288; Giesey v. R. R. Co. 4 Ohio St. 308. And no more property can be compulsorily appropriated than the legislature has declared to be necessary for the accomplishment of the public purpose contemplated. Matter of Albany Street, 11 Wend. 148; Embury ». Con- ner, 2 Sandf. 98; 8. c.3 N. Y. 511; Dunn v. Charleston, Harper (Law) 189. Modern legislation hav modified the odious rule of the common law, that, upon the dissolution of a corporation, its remaining real estate unsold reverts to the grantor and his heirs (see Angell & Ames on Corporations, 86 BUSINESS OF CORPORATIONS. Railway Company? is a leading case, and the judgments delivered in it merit very careful attention. By various acts a company—represented at the time of the suit by the defendants—had been incorporated for making an inland navigation, ard had compulsorily acquired. cer- tain lands in fee simple, “to and for the use of the navigation, but to be for no other use or purpose what- soever.” The acts reserved to the grantor of the lands purchased, his heirs, &ec., the minerals, the right of fishing, and the right to use pleasure boats over the whole canal and reservoir. A special case having been stated by the Court of Chancery for the opinion of the 145, & B. 798; 241. J. Q. B. 225; J. Ex. 185; and Badger v, South York- Compare National Guaranteed Manure shire Railway Company, 1 E, & E. 347; Company v. Donald, 4 H. &N.8; 28L. 28L.5.Q. B, 118. 88 179, 195), and the courts, in similar spirit, hold that where a corpora- tion is authorized to acquire a fee simple to lands belonging to private persons, for public use, and such acquisition is had and compensation ac- cepted, no reversionary estate remains, but the property may be used for any purpose, or may be disposed of by the corporation. Heyward ». Mayor, 7 N. Y. 314; Rexford v. Knight, 11 N. Y. 308; Brooklyn Park Com. », Armstrong, 3 Lans, 429; 8. c. 45 N. Y. 234; Dingley o. City of Boston, 100 Mass. 544; De Varaigne v. Fox, 2 Blatch. 95; Com. ». Fisher, 1P. & W. 462; Plitt », Cox, 48 Penn. St. 486; Haldeman »v. Penn. R. R. Co. 50 Penn. St. 425, This subject has frequently been considered in the United States, in connettion with the construction of railways upon public highways. Judge Dillon, in his treatise on Mun, Corp. §§ 556, 557, re- marks: “Ifthe jee in the streets or highways is in the public, or in the municipality in trust for public use, and is not in the abutter, the doctrine seems to be settled that the legislature may authorize them to be used by a railroad company in the construction of its road, without compensation . to adjoining owners or to the municipality, and without the consent, and even against the wishes, of either. But where the public have only an easement in the street or highway, it has been generally, but not always, held that against the proprietor of the soil the use of the street or high- way, for the purpose of a steam railroad, is an additional burden which, under the constitution of the different States, cannot be imposed by the legislature, without compensation to such proprietor for the new servi- tude.” See Cooley on Cons, Lim, p. 549; Redfield on Railways, § 76. EXTENSION OF BUSINESS. 87 ‘Queen’s Bench, the questions in which were, first, whether the defendants could lawfully let out boats for hire on the reservoir ; and secondly, whether they could lawfully use the reservoir for any other purpose than for supplying the canal with water; it was held by Lord Campbell, C. J., that, under the statutes, there was not a prohibition against the defendants using the reservoir for any other purpose than that of feeding the canal, but that all’ uses of it, whereby the grantor of the land, his heirs, &c., were prejudiced, were unlawful. Coleridge and Wightman, JJ., decided that the defend- ants could not lawfully let out boats for hire upon the reservoir, or use it for any other purposes of profit but those contemplated by the statutes, since the land was vested in them for the use of the navigation only (7. e., any other use would be ultra vires in the strict sense) ; and also because such use of the reservoir would dero- gate from the rights of adjacent landholders ; and, lastly, because it involved a disposition of the corporate funds to a purpose foreign to the object of the incorporation (4.¢., would be ultra vires in the secondary sense ; but this point was immaterial, since plaintiff was not a share- holder). Erle, J., said that “the company took the fee with all usual incidents, and also the superadded. duty both of using it for the purpose of navigation, and of not using it for any other purpose inconsistent with or tending to defeat that purpose; and that so long as the company perform this superadded duty, they may exercise all rights of ownership consistent with such performance, and so may use pleasure boats thereon ‘which do not impede the performance of that duty.” It will be seen that a majority of the court decided that the letting boats for hire was gud the plaintiff— 88 BUSINESS OF CORPORATIONS. she being the representative of the grantor—unlawful ;* but that upon the question of ultra vires the judges were equally divided. Where land had been sold to a railway company, one of the sections of whose act provided that the whole of the land so sold should be “appropriated to and used solely for the purposes of the said railway and the buildings connected therewith,” and the company erected on this land a building, which was used as a custom-honse, for the examination of the luggage of persons coming from the continent, of whom a portion only went on by the railway, Turner, V. C., considered this to be no infringement of the above provision.” The building was used principally and primarily for a “purpose connected with the railway,” and the vice: chancellor thought that the employment of it for other purposes not radically different from or inconsistent with this one, constituted no breach ‘of the statute.* 1 Accordingly, Stuart, V.C., grant- 489. Compare Astley v. Manchester,. ed a perpetual injunction to restrain Sheffield & Lincolnshire Railway Com- such letting. 25 L. J. Ch, 325. pany, 2 D.G. & J. 463, and East & West 2 Warden &c:, of Dover Harbor v. India Docks &c. Railway v. Dawes, 11 South-Eastern Railroad Company, 9 Ha. Ha, 363. * Tn respect to lands taken by railroad corporations, although the dis- cretion of the direttors is unlimited as to the mode and extent of the use or occupation, for the purposes for which the corporation was created, yet it is definitely limited by those purposes, Any uses of the land con- fessedly for other purposes, or not apparently for purposes permitted by its charter, are not protected by its authority. For such uses the owner may have his redress by any appropriate.action. It was therefore held in Proprietors of Docks and Canals v. Nashua & Lowell R. R. Co. (104 Mass. 1), that the surrender by a railroad corporation into the exclusive: use and occupation of private traders or manufacturers, for their trade or manufictures, as tenants for rent, of land taken by right of eminent domain for the location of a railroad, and buildings erected thereon by the corporation as freight-houses or engine-houses, is a misappropriation of the. land, which entitles the owner of the fee to maintain a writ of entry to- establish his right therein and recover damages or mesne profits for the EXTENSION OF BUSINESS. 89 III. Corporations may transact, in addition to their main undertaking, all such subordinate and con- nected matters as are, if not essential, at least very convenient to the due prosecution of the former. Though corporations may not undertake new busi- ness foreign to their primary work, yet, under many circumstances, they are in a manner necessitated to engage in business which is not within the mere letter of their constitution. Thus, railway companies will be permitted to erect refreshment rooms,’ or bookstalls,’ and to adopt other similar measures for both providing for the comfort of their customers and adding to their own receipts. * See Rigby v. Great Western Rail- * Holmes v, Eastern Counties Rail- way Company, 4 R. 0.175, 491; Flana- way Company, 3 K. & J. 675. gan v. Great Western Railway Com- pany, L. R. 7 Eq. 116, unauthorized use of it, although the corporation derives advantages in its freighting business from the carriage of merchandise for the tenants, and the receipt and delivery of it at these buildings instead of at the regular station-houses, and the buildings remain adapted: to the purposes for -which they were erected, and the corporation does not intend permanently to abandon the use of the premises for the railroad. On the subject of reverter, attention may. profitably be directed to land clauses consolidation act, 1845, 8 & 9 Vict. c.18. Section 127 provides that “lands acquired by the promoters of the undertaking, and not re- quired for the purposes thereof, must be sold within a prescribed period, or shall, at the expiration of such period, vest in, and become the prop- erty of, the adjacent owners.” See Moody ». Corbett, 5 B. & 8. 859; 7 B. & §. 544; L. R. 1 Q. B. 510; also May v. Great Western Railway Co., L. R. 7 Q. B. 364; L. R.8 Q. B. 26; L. R. 7 H. L, 284, 293, 800; Goddefroi & Shortt, Railway Companies, p. 92. * A corporation created for the purpose of mining and transporting coal, with power to purchase goods, chattels and effects needful for that purpose, has power to purchase avd use a steamboat to transport and de- liver coal. Callaway Co. o. Clark, 832 Mo. 305; see Moss», Averell, 10 N. Y. 449; Pearce v. Mad. & Ind. R. R. Co. 21 How. 442; Wheeler v. San 90 BUSINESS OF CORPORATIONS. IV. Corporations may so far develop and extend their operations, as to engage in matters not primarily contemplated by their founders, * provided these matters come fairly within their scope, and pro- vided also that in so developing and extending their undertaking, they employ direct and not - indirect means. Corporations may extend their sphere of business; + Francisco & Al. R. R. Co. 31 Cal. 46; Rutland & Bur. R. R. Co. v. Proc- tor, 29 Vt. 93; Shawmut Bk. ». Plattsburg & Montreal R. R. Co. 31 Vt. 491; Downing o. Mt. Washington &c. Co.40 N. H. 230; Wiswall v. Green- ville & Raleigh Plank Road Co, 3 Jones Eq. 183; Watts». McLean & Elk Improvement Co. Sup. Penn, Legal Gazette, Oct. 28, 1874. Alterations of charter only auxiliary to the main design of the original organization, and not fundamental in their nature, are lega! (Stevens . Rut. & Bur. R. R. Co. 29 Vt. 545), and therefore amendments of charter to facili- tate the attainment of existing purposes and objects may be accepted by a majority. Joy v, Jackson & Michigan Plank Road Co. 11 Mich. 155. See note page 79. “The rule is, that if the means employed are reasonably adapted to the ends for which the corporation was created, they come within its implied or incidental powers, though they may not be specifically designated by the act of incorporation.” Madison &c. Plank Road Co. v. Watertown &c, Plank Road Co. 5 Wis. 173. Where the terms of the charter embrace proposed business, courts will not interfere. Pratt v. Pratt, 833 Conn. 446. * It is suggested that the only way in which the question can be deter- mined, whether the operations of a corporation are primarily contemplated by its founders, is by reference to the constating instruments, and in this view the rule is but an amplification of rule I, on page 79. The same ob- ‘servation may be made as to rule V, page 94. _ +A company authorized to build a canal of suitable dimensions, to be determined by the corporation, has the power to alter its canal by widen- ing and deepening whenever, in the judgment of the company, the dimen- sions previously adopted should, by reason of the increase of business, be- come unsuitable. Selden v. Del. & Hud. C. Co. 29 N. Y. 684; 8.0, 24 Barb. 362; Bruce v. Same, 19 Barb. 871. Power granted to a railroad company to acquire lands is not exhausted by an apparent completion of its road, if an increase of business demands more work. Chicago, Bur. & Quin. R. R. ». Willson, 17 Ill. 128. EXTENSION OF BUSINESS. 91 but there are limits beyond which they cannot go. These limits are vague and obscure, and the above state- ment is only an attempt to indicate them roughly. The Master of the Rolls, in Gregory v. Patchett,’ in reference to this subject, thus observed: “The difficulty in this case is, to define the limits of deviation which will justify the interference of this court. It is very easy to point out many cases in which the right to in- terfere is unquestionable, as if the directors of a railway company should embark the funds of the company in carrying on a brewery or a steamboat company, or speculate in the purchase or sale of stock; or where, as in Beman v. Rufford,? the directors proposed to transfer the whole business to another company.” In a subse- quent case his lordship referred at greater length to the same question. “As an illustration of the manner by which a railway company might legitimately embark in projects apparently inconsistent with its means and ob- jects, it was suggested that coals might be necessary for the purpose of the railway, and that thereupon the com- pany might work a coal mine for that purpose, if, by so doing, it could obtain coals cheaper than by the pur- chase of them, and that by so doing, it would be fair and proper and not really inconsistent with the objects of the company; and that if it did work a colliery for this purpose, it would be foolish to prevent the com- pany from obtaining a profit by the sale of such coals as were raised and not required for the company. The answer to this argument appears to me to depend upon the facts of each particular case. If, in truth, the real object of the colliery was to supply the railway with cheaper coals, it would be proper to allow the acciden- ? 33 Beav. 595, 606. 5 Lyde v, Eastern Bengal Railway 21 Sim. N.S. 550. Company, 36 Beav, 10, 16. 92 BUSINESS OF CORPORATIONS. tal additional profit of selling coals to others; but if the principal object of the colliery was to undertake the business of raising and selling coals, then it would be a perversion of the funds of the company, and a scheme which ought not to be permitted, however prof. itable it might appear to be. The prohibition or per- mission to carry on this trade would depend on the conclusions which the court drew from the evidence. The same observations apply here; if the use of the boat is really to assist the traffic on the existing rail- way, it is lawful and proper; but if the object be to extend the traffic to places beyond the railway, which the railway is never intended to reach, then it is illegal and beyond the powers of the company.” These expressions of Lord Romilly are so lucid and explicit as to need’ nothing additional by way of explanation. Whatever be a company’s legitimate bust- ness, the company may foster it by all the usual means; but it may not go beyond this; it may not, under the pretense of fostering, entangle itself in proceedings with which it has no legitimate concern. In the next place, the courts have, however, deter- mined that such means shall be direct, not indirect ; @.@, that a company shall not enter into engagements, as the rendering assistance to other undertakings, from which it anticipates a benefit to itself, not immediately, but mediately, by reaction, as it were, from the success of the operations thus encouraged *—al] such proceed- * The acquisition of lands to prevent interference by competing lines or methods of transportation, or in aid of collateral enterprises remotely connected with the running or operating of a railroad: although they may increase its revenues and business, are not within the power of a rail- way corporation. Rensselaer & Sar. R. R. Co. o. Davis, 43 N. Y. 187. A corporation cannot engage in a distinct branch of business not author- EXTENSION OF BUSINESS. 93 ings inevitably tending to breaches of duty on part of the directors, to abandonment of its peculiar objects on part.of the corporation. Such is the rule of law, but great difficulties arise in its application. In Colman v. Eastern Railway Company,! the de- fendants were, at suit of a shareholder, restrained from guaranteeing the dividends of a steam packet company, to be started in connection with their line, from Har. wich, and from which they expected great profit would result to the railway. The limitation involved in this decision applies, how- ever, only where the transaction to be assisted or engaged in is in reality and fact something beyond the corporation’s primary undertaking. Consequently, where a company, whose railway terminated at Milford Haven, entered into a contract with the defendant for steam vessels to run between that*place and Ireland, it was held that the contract was not ultra vires, and that the defendant, having provided an unseaworthy vessel, was liable in damages. Erle, C. J., thus distinguished this from the last case: “So far from a contract by this company to facilitate the forwarding of passengers and goods to Ireland being illegal, I rather gather that the legislature contemplated and intended that a railway terminating at Milford Haven: should forward traffic to and from Ireland, and therefore this contract would be 110 Beay. 1; 16L.J.Ch.73; Cohen G. 486; 18 L. J. Ch. 378, 411. Com- v. Wilkinson, 12 Beay, 184; 1 Mac. & pare Logan v. Courtown, 13 Beay. 22. ized by its charter, for the purpose of raising funds to accomplish the ob- ject for which it was created. Waldo o Chicago, St. Paul & F. R. R. Co. 14 Wis. 575. A New York banking corporation cannot buy State or other stocks for sale again, or as a means of raising money. Talmage 2, Pell, 7 N. Y. 328. 94 BUSINESS OF CORPORATIONS. entirely within the scope and object of the company’s incorporation and extension.” ** It is not ultra vires of a railway company to con- tract to carry beyond their own line. In Wilby v. West Cornwall Railway Company,’ this point was raised for the defendants, though not pressed; but Watson, B., said that such a contract was not ultra vires, whether the extra distance were by sea or land; and the legal- ity of such contracts has since been expressly decided.’ + V. A corporation may extend its undertaking so as. to include within its operations business not perhaps contemplated by its originators, but be- come essential to its existence, and growing out of its primary and special business. 1 South Wales Railway ea ies Ex, 346; Coxon v. Great Western Rail- Redmond, 10 C. B. N.S, 675. way Company, 5 H.& N. 274; 29 LJ. 20H. & N, 703. Ex. 165; Le Conteur v. London and 3See Blake v. Great Western Rail- South Western Railway Company, L, R. way Company, 7 H. & N.987; 31L.J. 1Q.B, 54, * The two decisions in the text are not easily reconcilable. Equal difficulty will be found in attempting to reconcile the American cases cited in the note to p. 90. + The question whether it is ultra vires of a railroad company to con- tract to carry beyond its own line, has led to some of the most learned. and elaborate discussions in the American courts on the powers of cor- porations. The rule is now well settled in this country, that a railroad company may contract as a common carrier for transportation beyond its own line. See Appendix for cases, } A company newly incorporated for the purpose of manufacturing and selling glass, contracted to purchase glassware for the purpose of keeping up their stock, and supplying customers, until the works they had bought from a company preceding them were put in repair. It was held that this contract was not ultra vires. It was important that the company Should retain the old customers, and to do this it was necessary to keep: up their-stock, and enable them to fill orders from their customers, until they could supply themselves from their own manufactory. Such purchases sare auxiliary and incidental to the main purpose of their, incorporation, ‘and are fairly within the scope of the powers conferred upon them by law. EXTENSION OF BUSINESS. 95. This rule seems to be established, but it certainly conflicts with many other of the principles of ultra vires, and must be applied with great care, and under particular circumstances only. The memorandum of association of the British and Foreign Cork Company stated that the objects for which the company was es- tablished were “the purchasing and selling of cork, and also the cutting of cork by the improved machinery for which letters patent were granted toR. B.C.” It was determined not to be ultra vires for the company to purchase the patent.’ This decision was acquiesced in, but it will prob- ably be considered to have somewhat restricted the doctrine. There is certainly a broad distinction between dealing in cork and cutting cork and purchasing the patent of a cork-cutting machine. VI. A corporation may deal in the shares of other corporations, without express power so to do, provided the nature of its. business be such as to render such transactions conducive to its pros- perity.* 1 Re British & Foreign Cork Com- Compare Gleadow v. Hull Glass Com- any, Leifchild’s Case, L. R. 1 Eq. 281. pany, 19 L. J. Ch. 44. pany, 4. pany, Lyndeborough Glass Co. 0. Mass. Glass Co. 111 Mass. 315. See Durfee o. Old Colony R. R. Co. 5 Allen, 230. * In the United States corporations cannot purchase, or hold, or deal in the stocks of other corporations, unless expressly authorized to do so. by law. Zabriskie v. C. C. & C. R. R. Co. 23 How. 381; Mutual Savings Bank ». Meriden Agency Co. 24 Conn. 159; Hodges ». Screw Co. 1 R. I. 822; White v. Syracuse & Utica R. R. Co. 14 Barb. 559; Berry v. Yates, 24 Barb. 199; Conn. Mut. Life Ins. Co. 0. C. C. & C. R. R. Co. 41 Barb. 9; Talmage 2. Pell,” N. Y. 848; New York Exchange Co. v. De Wolf, 5 Bos. 593; Mayor». Balt. & Ohio R. R. Co. 21 Md. 50; Central R. R. Co. ». Col- lins, 40 Ga, 582; Hazlehurst vo. Savannah R. R. Co. 43 Ga, 18; Sumner v. Marcy, 8 Woodb. & Minot, 105. 96 BUSINESS OF. CORPORATIONS. Till quite, recently it was doubted whether one company could be a shareholder in another; indeed, the weight of authority was in the negative. In Great Western Railway Company v. Metropolitan Railway Company, the facts were: The Great Western Rail- way had been authorized, by act of parliament, to hold 17,500 shares in the Metropolitan Railway, and had placed. these in the hands of nominees; and it was pro- vided that, on an extension of the Metropolitan Rail- way, additional shares should be offered to the original shareholders. An extension was made and new shares issued. The Great Western Railway Company claimed its proportion of these. Page Wood, V. C., decided that the Great Western Railway was not eathorized to take, &c., nor claim these; but, on appeal,.it was held that they might take, shoiigh perhaps not hold, such shares; and, therefore, a demurrer to their bill was over- ruled, reserving the benefit for the hearing. In subsequent cases the possibility of corporations . possessing such a power impliedly and without express provision has been fully admitted. It was so admitted by Lord Cairns, L. J.,in Ae Barned’s Bank, ex parte the Contract Corporation,’ and also most unreservedly by Selwyn, L. J.,in Le Asiatic Banking Corporation, Royal Bank of India’s Case? “ As to the capacity of a trad- ing corporation to accept shares in another trading cor- poration, it is sufficient for me to say that I entirely agree with the judgment of Lord Cairns, in the case of Barned’s Banking Company, viz., that there is not, either by the common or statute few anything to pro- hibit one ueaing corporation from taking or accepting 32 L. J. Ch, 382; 9 Jur. N.S, 562, Asiatic Banking Company, L, R. 7 Eq. R. 3 Ch. 105. 91. : R. 4 . 4 Ch, 252, 257; compare Re EXTENSION OF BUSINESS, 97 shares in another trading corporation. There may, of course, be circumstances which prohibit or render it improper for a company so to do, having regard to its own constitution, as defined by its memorandum and articles.” The last sentence contains a qualification—impor- tant, indeed, but arising from the general doctrines. Accordingly, in Joint Stock Company v. Brown,! a case six months later, before James, V. C., where the directors of a company established for inter alia, “the making advances and procuring loans on, and the investing in, securities,” had taken 3,000 £10 shares in another com- pany (banking), it was held that the directors had no power to take these shares, and that the payment of the deposit (£30,000) was a breach of trust on their part, for which they were to be personally liable. This was the ratio decidendi ; but the Vice Chancellor, fol- lowing Page Wood, V. C., before whom the case had also been, considered that “the transaction was not an “investment in securities,” and consequently was ultra vires of the company as constituted by its articles. When a company purchases shares, they are very generally transferred into the name of a trustee for itself. In such case the trustee is, under the companies acts, the person immediately liable in respect of the shares so standing in his name.* The trustee of a private in- dividual is under the same liability, as well appears by Chapman and Barker’s Case.’ Here a shareholder in a company borrowed money of it, and transferred some shares to a nominee of the company as a security for the loan; and he was placed on the list of contributo. 1L, R.8 Eq. 381. 71. R. 3 Eq, 361. * Matter of Empire Bank, 18 N. Y. 226; Wilson »v. Prop. Central Bridge, 9 R. I. 590. 98 BUSINESS OF CORPORATIONS. ries without prejudice to any right which he might have to be indemnified by the company.* Mortgagees will also similarly be responsible for the payments due on account of the mortgaged shares.' But the trustee is entitled to be recouped by his cestud que trust for any payments which he may have to make on account of the same ;? and in the event of a winding up, he can prove for all his liabilities, present and future, arising from the said shares, without regard to his indebted- ness to the company on other grounds.’ VII. Corporations cannot, whatever the nature of their business, without an express and.very clear power in that behalf, deal in their own shares. There is a great difference between dealing in the shares of other companies and in its own. The former is ordinary business, attended only with the usual risks’ of ordinary transactions, but the latter tends inevi- tably to breaches of their duty on the part of the direct- ors, and to fraud and rigging the market on the part of the corporation itself. Consequently, a corporation, to possess such a power, must have it conferred by the 4 Price & Brown’s Case, 3 Dr. and placed on the list. ‘With this case the ‘Sm, 1463; Royal Bank of India’s Case, L. R. 4 Ch. 252. Compare Re Patent Paper Manufacturing Company, Addi- sou’s Case, L. R. 5 Ch. 294, where shares bad been issued to Addison as a secu- rity for a loan to the company, and on repayment they were transferred to a trustee for the company, but the com- pany having no power to buy its own ‘shares, Addison was eight years later decision in Re Southeastern Railway Company’s Claim, L. R, 14 Eq. is scarce- ly reconcilable, See as to the non- liability of equitable mortgagees of shares, Sichell’s Case, LL R, 8 Ch. 119. ? Hoare’s Case, 2 J. & H. 229; Cruse v. Paine, L, R. 4 Ch, 441. ® Re National Financial Company, ex parte Oriental Commercial Bank, L.. R. 8 Ch, 791. * Crease v. Babcock, 10 Metc. 525; Grew ». Breed, Ibid. 569; Hol- yoke Bank ». Buroham, 11 Cush. 183; Matter of Empire Bank, 18 N. Y. 226; Roosevelt 0. Bevun, 11 N. Y. 148; Worral ». Judson, 5 Barb. 210; Adderly o. Storm, 6 Hill, 624, EXTENSION OF BUSINESS. 99 plainest and most explicit language in its constating instruments.* * American authorities hold, that there is at common law nothing to prevent a corporation from taking its own stock in payment or satisfaction of debt, or from holding and selling its stock thus acquired; Barton ». P. J. & U. F. Plank-road Co. 17 Barb. 397; Cooper ». Frederick, 9 Ala. 738; and some even hold that at common law a corporation may pur- chase its own stock; Verplanck v. Merc. Ins. Co. 1 Edw. Ch. 84; Hart- ridge v, Rockwell, R. M. Charlton, 260; provided, in all cases, that the transaction is bona jide, and not in fraud of creditors; Gillett 0. Moody, 8 Coms. 479. An Ohio bank may receive its own stock in payment of a debt, and may hold it as it does its other corporate property. Taylor ». Miami Exporting Co. 6 Ohio, 176; State Bank v. Fox, 8 Blatch, 431; Bank of Columbus 2. Bruce, 17 N. Y. 507. In Virginia, a bequest to a corpora- tion of its own stock was held valid. Rivanna Nav. Co. 0. Dawsons, 3 Gratt.19. The N. Y. revised statutes putit out of the power of a moneyed corporation to apply any portion of its funds, except surplus profits, to the - purchase of shares of its own stock; or to receive any such shares in pay- ment or satisfaction of any debt, save that, if any shares of its own stock shall be hypothecated or pledged to any such corporation, and the debt secured thereby shall not be paid when due, the directors shall, within sixty days thereafter, cause such shares to be sold; and if they be not sold within that period, and the debt remain unsatisfied, the shares shall be charged at the amount actually paid thereon, as a reduction of the cap- ital stock, and no dividends shall thereafter be made until the deficit so created be made good. 1.8. Edmonds’ ed.) 548, 549; Jn re Empire City Bank, 18 N. Y. 226. See Crease v. Babcock, 10 Met. 595. Stock taken by a corporation as security for, or payment of a debt, is not to be voted upon. “It is not to be tolerated, that a company should procure stock in any shape which its officers may wield to the purposes of an elec- tion; thus securing themselves against the possibility of removal.” zr parte Holmes, 5 Cow. 426; Brewster 0. Hartley, 37 Cal. 15. “Cases have been cited to show, that, if the shares of an incorporated company are transferred to the corporation, they merge, and are extin- guished. In the case of Hx parte Holmes, 5 Cow. 426, which involved the right of voting on certain shares of stock which stood in the names of trustees for the corporation, it was said by the court, that the corporation may, from necessity, take their own stock in pledge or payment, and that they may keep it outstanding to prevent merger, and convert. it to their security— implying, of course, that a transfer to the corporation itself would operate as a merger; and, I presume, unless there is some provision in the charter to the contrary, that a transfer of its own stock directly to a corporation would have that effect, But it does not follow that they may 100 BUSINESS OF CORPORATIONS. This limitation was settled by the decision in Zu- lueta’s Claim, Re London, Hamburgh, and Continental Exchange Bank! The memorandum of association fills half a page in enumerating the various objects of the company, viz, “the making of purchases, investments, sales, or any other dealings im any of the above-named articles or securities ;” but in the list are not contained its own shares. Lord Justice Giffard accordingly de- cided that the purchase of these was not within the ordinary scope of the company, nor could be brought within it by any reasonable construction. “Jam clearly of opinion that this transaction is ultra vires; and if it is ultra vires, it is not a mere voidable transaction, but it is wholly and totally void; it is a transaction which no general meeting could confirm, because it was alto- gether beyond the power of the company in every sense.” Whether a company having power to deal in its own shares may, without express authority to that ef- fect, hold them in the names of trustees, is uncertain. In one case the trustee was held liable, several years after he had parted with the shares, apparently on the ground that he had, by accepting the shares, held him- self out as a shareholder.? In a later case, a dissatistied shareholder transferred his shares, in accordance with . an agreement to that effect, to a nominee of the com- pany, and the Master of the Rolls considered the trans- action valid, chiefly on account of the wide powers of contracting and action given to the directors 1 LR. 5 Ch. 444, * Re National Provincial Marine In- *? Re Marylebone Banking Compan inger’ W.N. ex parte Davidson, 8 D. G. & Sm. ou 1869, p. a. ene not subsequently be revived. It is believed, that but few banks in this State are not authorized to take their stock in payment or pledge, and it has always been supposed that it could be reissued.” Williams 0. Savage Man. Co, 3 Md, Ch, 417, EXTENSION OF BUSINESS. 101 VIII. A corporation may not, without express author- ity in that behalf contained in its constating instruments, purchase, or by other means ac- quire, the whole concern of another corporation.* It might fairly have been thought that such an ar. rangement would be valid, if only upon the ground that it is the simplest and shortest means of enabling the purchaser to acquire a business or to amplify its own. But from the dicta in Ernest v. Nicholls‘ the reverse would seem to be the case. Here the sale by the direct- ors of a joint stock company registered under 7 & 8 Vict. c. 110, of the whole of its trade, business, good- will, stock, etc., was, from special circumstances, deemed to be invalid; but in reference “to a special contract to do the very unusual thing of purchasing by one com- pany the trade of another,” Lord Wensleydale said: “Such a contract clearly does not bind, unless it is authorized by the deed, and it is made strictly in ac- cordance to its provisions.” Similarly, per Cranworth, L. C., “the transaction in question was a purchase by the one company of the good-will and the whole concern of theeother. That would, ordinarily speaking, be a transaction in which no company would be justified in engaging, because it cannot be said to be within the or- dinary scope of one company to purchase the good-will of another.” If one company cannot purchase the business, good- will, ete. of another, it is evident that practically this 16 H. Lds, 401. Compare Balfour surance Company ®. British Provident vy. Ernest, 5 C. B, N.S, 601; 28 L.J.C. Insurance Company, 8 Giff. 521; 8 Jur. P, 170; and Part ITI, chapter VIII, on N.S, 628, where the defendants were “Amalgamation of Corporations.” See bound by acquiescence. also Anglo-Australian Life & Fire As- * See note at the end of this chapter. 102 BUSINESS OF CORPORATIONS. latter cannot sell, apart from any consideration, whether theoretically it has or has not the ability to do so. IX. Though the sale or purchase of a corporation’s business or good-will is invalid, the sale or pur- chase of the whole of a corporation’s goods and chattels is not so. This was expressly so decided in Wilson v. Miers.’ This was an action against the directors of a joint stock company for an alleged breach of warranty arising thus: The defendants employed the plaintiffs to find a purchaser for the whole of the company’s vessels. They (the plaintiffs) accordingly negotiated a sale with one C.; the negotiation, however, went off upon an objec- tion raised by C.'s solicitors, that the directors had no power to sell the whole of the vessels; and, thereupon,. the plaintiffs brought their action for their commission, £3,000, against the directors, averring an implied war- ranty on the part of the latter that they had power to sell, although, in fact, they had not. A verdict was entered for the plaintiffs for the full amount claimed, but the Court of Common Pleas set it aside. * Erfe, C.J., said: “I am of opinion that the plaintiffs fail because as to the contract between the company and C., I think it was a contract binding on the company, being made under the general authority given to the directors to sell their ships. The authority extended to sell some ships, and if some, there is no rule of law limiting it to less than twélve [the whole], or to a part only. The directors have the duty to protect the general interests. of the shareholders according to their judgment. If the ships could only be navigated at a loss, they may let, 10 ©. B, N.S. 848. Compare Feath- L. RB. 1 Eg. 318: Gr hett erstonhaugh v, Lee Moor. eens 22 Raaw mie a aa EXTENSION OF BUSINESS. 103 cease to navigate, or lay them up, or, if it would be more profitable, sell.” * | * Upon the subject discussed in the last two sections the American au- thorities are not in harmony. Sharswood, J.,in Wood v. Bedford R. R. Co. & Phil. 94, says that a “ corporation, unless specially restricted by its charter, or some statute, has general power to dispose of its property, the whole or part, but that it has no right to sell or assign its franchise, either in whole ‘or in part, unless authorized by law.” Of similar effect are Middlesex R. R. Co. ». Boston & Chelsea R. R. Co. 115 Mass. 347; Enfield Toll Bridge Co. ». Conn. R. Co. 7 Conn, 29; Abbott 2. Hard Rubber Co. 33 Barb. 578; Kean v. Johnston, 1 Stockt. 401; Chapman v. Mad River R. R. Co. 6 Ohio St. 119; Fisher v. Evansville, 7 Ind. 407; State o. Bailey, 16 Ind. 46; Buf- fett vo, Great Western R. R. Co. 25 Il. 353; Hatcher v. Toledo, W. & W. R. R. Co, 42 Ill. 477; Mahaska Co. R. R. Co. v. Des Moines Valley R. R. Co. 28 Iowa, 437; Town v. Bank of River Raisin, 2 Doug. (Mich.) 441; but see contra, Wilson »v. Central Bridge, 9 R. I. 590; Dana vo. Bank of U. 8.5 W. & 8. 224; Bank Com’rs v. Bank of Brest, Harring. Ch. 106; Union Bank of Tenn. v. Ellicott, 6 G. & J. 363; Arthur ». Com. & R. R. Bank, 9 8. & M. 394; Reynolds v. Com’rs of Stark Co. 5 Ohio, 204. A corporation may sell its whole property to a new corporation, taking pay- ment in shares of the new corporation, to be distributed among those of the old corporation who are willing to take them. Treadwell v. Salisbury Mfg. Co. 7 Gray, 393. A corporation may, with consent of the legislature, sell its whole property to another corporation; but a dissenting stock- holder cannot be compelled to accept stock in the other company in pay- ment for shares held by him in the first. Lauman v. Lebanon Valley R. R. Co. 80 Penn. St. 42. In like mann:r, one corporation may, with consent of the legislature, be consolidated with another; but a dissenting stock- holder cannot be compelled to take stock in the consolidated company in payment for shares held by him in the first. New Orleans, &c. R. R. Co. v. Harris, 27 Miss. 517. A corporation may, with consent of the legislature, lease for 999 years all its franchises and property, upon giving just compen- sation to dissenting shareholders; but it cannot lease or alien any franchise or property necessary to perform its obligations to the public, without legis- lative authority. Black ». Delaware and Raritan Canal Co. 7 C. E. Green, 130; s. c. 9 Id,-464; Conro v. Fort Henry Iron Co. 12 Barb. 27. The lease of all its property by one gas company to another is invalid as to non-assent- dng stockholders. Copeland »v. Citizen’s Gas Light Co. 61 Barb. 60. Di- rectors of a corporation cannot, without special authority, sell any portion of its property which is essential to the transaction of its customary busi- ness. Rollins v. Clay, 33 Me. 132. Story, J., in a dissenting opinion, con- curred in by Justices Baldwin and McLean, in Beaston v. Farmers’ Bank, 12 Peters, 102, says, “Independent of scme special and positive law, or 104 BUSINESS OF CORPORATIONS. provision in its charter to such an effect, I do exceedingly 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 assignment, so as to render itself incapable in future of performing any of its corporate func- tions.” A sale and transfer of the powers of one company to another, with- out the authority of the legislature, are against public policy, and the courts will do nothing which would promote the transfer, as it is in utter disregard of the duties and obligatious of the company. Hays v. Ottawa, O. & F. R. V. R. R. Co. 61 Ill. 422. See post, note, p. 124. Franchises are parts of the sovereign power delegated to a subject, and privileges to which other citizens are not entitled. In such grants the State regards the character of the grantee, if an individual, and the guards and restrictions placed upon the artificial body when the grant of a franchise is given to a corporation, the members of which are continu- ally changing by transfer of stock. The exercise of the franchise is, there- fore, a personal trust, which cannot be transferred without the consent of the sovereign power. See as to distinction between the alienability of the franchise of being a corporation and of the franchise of taking tolls, &c. Hall ». Sullivan R. R. Co: 21 Law Rep. 218; U. P. R. R. Co. 2. Lincoln County, 1 Dillon, 325. Quere. How far should this old theory of inalien- ability of franchises be changed in view of the policy of general laws for incorporations and for public works, making the granting of franchises no longer a special privilege, but open to all who comply with the terms required by such general laws ? Consult the Companies Act, 25 & 26 Vict. c. 89, 1862, sect. 161, and cases cited in notes to Buckley's Law and Practice under Companies Acts, 2d ed. p. 830. CHAPTER IV. THE FINANCIAL AFFAIRS OF CORPORATIONS. TuHE first two sections of this chapter have reference more especially to joint stock companies and other simi- lar corporations which possess a capital or money fund distinct from their lands, goods, and other assets. The remainder of the chapter will probably be found to apply, with proper qualifications, to all corporations. SECTION I. CAPITAL AND PROFITS. I. Corporations having the power to raise a definite capital may begin their business before that capi- tal or any portion thereof is obtained. * * The American rule seems to be the reverse of that stated in the text; where the number of shares and the amount of capital is jized, the whole stock must be subscribed before the corporation can begin business, unless the constating instruments expressly remove this restriction. This rule does not prevent the corporation from doing preliminary business or from making assessments for preliminary purposes, but the subscription of the whole amount is a condition precedent to laying an assessment for general purposes, or entering upon the general business for which the corporation was created. Oldtown & Lincoln R. R. Co. 0. Veazie, 39 Me. 571; Penob- scot R. R. Co. ». Dummer, 40 Me. 172; Same v. White, 41 Me. 512; Little- ton Mfg. Co. o. Parker, 14 N. H. 543; Contocook Valley R. R. Co. v. Barker, 32 N. H. 363; N. H. Central R. R. Co. v. Johnson, 30 N. H. 390; Salem Mill Dam Co. v. Ropes, 6 Pick. 23; Prop. of Newburyport Bridge e. Story, 6 Pick. 45; Salem Mill Dam Co. v. Ropes, 9 Pick. 187; Central Turnpike Co. ». Valentine, 10 Pick. 142; Stoneham Branch R. R. Co. ». Gould, 2 Gray, 277; Troy R. R. Co. 0. Newton, 8 Gray, 596; Cabot & W. Springfield Bridge Co. ». Chapin, 6 Cush. 50; Worcester & Nashua R. R. 106 THE FINANCIAL AFFAIRS OF CORPORATIONS. An extrajudicial opinion has been expressed to the effect that before a company is complete so as to be able Co. v. Hinds, 8 Cush. 110; Atlantic Cotton Mills » Abbot, 9 Cush, 423; Lexington & West Cambridge R. R. Co. 2. Chandler, 13 Met. 811; Har- lem Canal Co. v0. Seixas, 2 Hall, 504; Same v. Spear, 2 Hall. 510; Rens- selaer & Washington Plank Road Co. v. Wetsel, 21 Barb. 56; Hamilton & Deansville Pl. R. Co. v. Rice, 7 Barb. 157; Hughes». Antietam Mfg. Co. 34 Md. 816; Haun ». Mulberry & Jefferson Gravel R. Co. 33 Ind. 103; Hain v. G. W. G. Co. 41 Ind. 196; Fox »v. Allensville Co. 46 Ind. 31; Schurtz ». Schoolcraft R. R. Co. 9 Mich. 269; Peoria & Rock I. R. R. Co, ». Preston, 85 Iowa, 115. Parker, J., in Sch. & Sar. Pl. R. Co. v. Thatcher, 10 N. Y. 102, holds that ‘‘a subscription of the whole amount of stock has never been held a condition precedent to a legal corporate existence, except when it “was made so by the act of incorporation.” This must be taken to apply to cases where the corporation comes into existence for organization on certain subscriptions being made less than the whole amount, or where a corpora- tion is created in presenti, by naming commissioners to open books for sub- scriptions. Minor v. Mech. Bank, 1 Peters, 46. But it is believed that no case can be found in this country where a corporation has been held au- thorized to commence the business, to carry on which it is created, before the capital stock is subscribed, unless by legislative enactment to that effect. See Brower v, Appleby, 1 Sandf. 158; Walker ». Devereaux, 4 Paige, 229; Crocker v. Crane, 21 Wend. 211; Stoops v. Greensburgh Pl. R. Co. 10 Ind. 47, An express agreement between a subscriber and the corporation may remove this restriction, as far as liability for assessments is concerned, and allow calls at any time. Kennebec & Portland R.R. Co. ». Jarvis, 34 Me. 360; York & Cumberland R. R. Co. o. Pratt, 40 Me. 447; Peoples’ Ferry Co. ». Balch, 8 Gray, 314; Hamilton & Deansville Pl. BR. Co. ». Rice, 7 Barb. 157; Phillips 0. Covington Bridge Co. 2 Met. (Ky.) 219; Estell 0. Knightstown Turnpike Co. 41 Ind. 174; Iowa & Minn. R. R. Co. 0. Perkins, 28 Iowa, 281. The corporators cannot, by any act alleged to operate by way of waiver or estoppel, relieve the corporation from its obli- gation to have the capital required by its charter. Oldtown & Lincoln R. R. Co. 0, Veazie, 39 Me. 571. All the subscriptions upon which the right to assess depends must be actual and not merely colorable. Thus, -a subscription by one man for another, without authority, is not a real subscription, and must not be counted. Salem Mill Dam Co. 0. Ropes, 9 Pick. 187. The unpaid subscriptions of insolvent .persons, infants, or married women, are to be excluded. Phillips 0. Covington Bridge Co. 2 Met. (Ky.) 219. Subsequent insolvency, or mere inability to pay at the time of subscribing, will not, however, shut out the subscriptions. Penob- scot R. R. Co. ». Dummer, 40 Me. 172; Same 2. White, 41 Me. 512; Salem Mill Dam Co. v. Ropes, 9 Pick. 187, CAPITAL AND PROFITS. 107 to commence operations, at least a large portion of its capital must be subscribed. In Howbeach Coal Com- If any subscriptions are upon condition precedent, they cannot come in, unless it be proved that the conditions have either been complied with or waived. Central Turnpike Co. ». Valentine, 10 Pick. 142. If the sub- scriptions were fraudulently made (by collusion between the directors and the subscriber) to evade the provisions of the charter, the law will hold the parties bound by their subscriptions and compel them to comply with all the terms and responsibilities imposed upon them in the same manner as if they were bona jide subscribers. Minor v. Mechanics’ Bank of Alexandria, 1 Peters, 46. Likewise, private arrangements not expressed in the subscription papers, giving peculiar privileges to the subscriber, are fraudulent upon the other subscribers, and therefore null. White Mts. R. R. Co. v. Eastman, 34 N. Hamp. 124; Mann ». Cooke, 20 Conn. 178; Mann », Currie, 2 Barb. 294; Robinson v. P. & C. R. R. Co. 32 Penn. 8t. 884; Bavington v. P. & S. R. R. Co. 34 Penn. St. 858; New Albany & 8. R. R. Co. 2. Fields, 10 Ind. 187; Downie v. White, 12 Wis. 176. Under statutes in Pennsylvania, requiring that a certain amount be sub- scribed to commissioners appointed, before a charter is granted, a con- dition attached to a subscription made before organization is void, and the subscription is treated as absolute. Erie & Waterford Pl. R. Co. 3. Brown, 25 Penn. St. 156; Phil. & W. Chester R. R. Co. v. Hickman, 28 Penn. St. 318; Bavington +. Pittsburgh R. R. Co. 34 Penn. St. 358; Pittsburgh & Connellsville R. R. Co. v. Stewart, 44 Penn. St. 54; Pittsburgh & Steuben- ville R. R. Co. v Wodrow, 3 Phil. 271; Same ». Biggar, 34 Penn. St. 455; Bedford R. R. Co. ». Bowser, 48 Penn. St. 29. Under statutes in New York concerning railroad and turnpike companies, preliminary subscriptions must be absolute; conditional subscriptions are void. Troy & Boston R. R. Co. v. Tibbits, 18 Barb. 297; Butternuts & O. Turnpike Co. ». Worth, 1 Hill, 518; Fort Edward Pl. R. Co, v. Payne, 15 N. Y. 583. In general, however, conditional subscriptions may be received when not forbidden by the charter, and on performance of the conditions they become abso- lute. Chamberlain 2. Painesville R. R. Co. 15 Ohio St. 225; Penobscot R. R. Co. ». White, 41 Me. 512. Subscriptions may thus be qualified as to time, manner or means of payment, or made to depend upon the location of a road in a certain place, or within a certain time, or upon the subscription ofa certain amount to the capital stock. Subscriptions may be made to depend upon the amount subscribed, or be qualified as to the time of payment. Penobscot R. R. Co. ». Dunn, 39 Me. 587; Boody ». Rutland R, R. Co. 24 Vt. 660; Peoples’ Ferry Co. v. Balch, 8 Gray, 814; Phillips v. Covington Bridge Co. 2 Met. (Ky.) 219; Milwaukee & N. Ill. R. R. Co. ». Field, 12 Wis. 840; Racine Co. Bank v, Ayers, 12 Wis. 512. Subscriptions may be paid in 108 THE FINANCIAL AFFAIRS OF CORPORATIONS. pany v. Teague,’ the actual point decided was that the call sued upon was illegal, the directors making it not having been properly appointed ; but in reference to a second point raised, viz., whether calls could have been made before the whole capital was subscribed, Martin, B., observed: “If a company is to be formed, of which there are to be 240 shares, it cannot be competent for the directors, after only sixty or seventy, not one-third the number of shares, have been taken, to insist on the persons who hold this limited number of shares to pay calls.” But it is submitted that this is not good law. No statute has fixed a minimum of capital to be sub- scribed for as a condition precedent to the existence of 15 H. & N. 160; 29 L. J. Ex. 187. in Ornamental Pyrographic Company v. ‘Compare the opinion of Bramwell, B., Brown, 2 H. & CU. 63; 32 L. J. Ex, 193. materials or in labor, or services, or by taking contracts. Beach v. Smith, 30 N. Y, 116; Pittsburgh & C. R. R. Co. v. Stewart, 44 Penn. St. 54; H.& P. Plank-rd. Co. » Bryan, 6 Jones Law, 82; Cincinnati R R. Co.». Clark- son, 7 Ind. 595; Obio, I. & I R. R. Co. ». Cramer, 23 Ind. 490; Phillips o. Covington Bridge Co. 2 Met. (Ky.) 219; Eppes ». M. G. & T. R. R. Co. 35 Ala. 331; Vicksburg R. R. ». McKean, 12 La. Ann. 638. Special authority would seem to be necessary to authorize subscriptions payable in land. State v, Bailey, 16 Ind. 46; Junction R. R. Co. v. Reeve, 15 Ind. 236; Goodwin v. Evans, 18 Ohio St. 150; but see Hatch v. Boynton, 47 N. Y. 225; Amer. Silk Works ». Salomon, 4 Hun, 185. Payment may be re- ‘ceived in coal stock. East N. Y. & Jamaica R. R. Co. v. Lighthall, 6 Robt. 407. Subscriptions may be made payable, and in general payment may be received, in promissory notes, or notes and mortgages. Vermont ‘Central R. R. Co. v. Clayes, 21 Vt. 30; Ely v. Sprague, Clarke, 861; Magee v. Badgér, 80 Barb. 247; People ». Troy House Co. 44 Barb. 625; Strauss v. Eagle Ins. Co. 5 Ohio St. 59; Goodrich ». Reynolds, 31 Ill. 490; Clark ». Farrington, 11 Wis. 306; Blunt v. Walker, 11 Wis. 834. Payment in checks is good, only if the checks are good. Crocker ». Crane, 21 Wend. 211; People v. Stockton & Visalia R. R. Co. 45 Cal. 306, It is held, how- ever, in Navigation Co. 2. Com’rs of Newbern, 7 Jones Law, 275, that a corporation of limited powers can take nothing in payment of stock sub- scribed except money, unless by express provision of its charter, See Phila. & Westch R. R. 0. Hickman, 28 Penn. St. 318; Henry v. Vermillion R. RB. Co. 17 Ohio, 187; King ». Elliot, 5 8. & M. 428. CAPITAL AND PROFITS. 109 the company,’ nor has any case decided that such is a requirement at common law or in equity. It will gen- erally be found that shareholders have entered into such a contract as precludes them from raising this question,” and the decision in Ornamental Pyrographic Company v. Brown,’ is also against the above dic- tum—indeed, Martin, B., abandoned it—it being here held that a company, whose memorandum of asso- ciation had been duly signed, might, under section 2, table B, of 19 & 20 Vict. c. 47, make calls on the shareholders, although all the capital had not been taken up. Pollock, C. B., said: “If you take shares in a company, not guarding against the liability to be called on to pay the calls, you are liable to pay them, unless expressly exempted. The question then arises, does the act of parliament create any exemption? I-can find none. On the contrary, under tabie B, the govern- ing body is entitled to make calls the moment the com- pany is established; and the reason of that is, the sub- scribers for shares become liable to pay any call upon the shares subscribed for among themselves.” In re Imperial Steam & Household Coal Company,* Malins, V. C., considered it fraud for a company to com- mence its business with only one-fifteenth of its nominal capital subscribed. Unless, however, either the constituting instruments name the amount of capital to be first obtained,® or in- tending shareholders protect themselves before taking shares, they cannot repudiate them afterwards on the 1In the act (now repealed) 7 & 8 Vict. 118, there was a clause, sect. 5, to this effect, in reference to which see Railway Company v. Dalbiac, 20 L. J. Ex. 227, and London and Continental Assurance Society v. Redgrave, 4 C. B. Re London & Eastern Banking Corpor- N. 8, 524 ation, ex parte Longworth’s Executors, 29 L. J. Ch, 55. Compare Norwich & Lowestoft Navigation v. Theobald, M. & M. 151, and Galvanized Iron Company v. West- oby, 21 L. J. Ex. 302, with Waterfird ® Ubi supra, 437 L. J. Ch. 617. "See Pierce v, Jersey Waterworks Company, L. R. 5 Ex, 209; North Staf- fordshire Steel, &c. Company v. Ward, L. R. 8 Ex. 172, 110 THE FINANCIAL AFFAIRS OF CORPORATIONS. ground that the capital has not been subscribed? It seems clear that a company may begin operations im- mediately after its incorporation, with or without capital, although proceedings so begun without com- mensurate funds may be strong evidence of fraud on the part either of the company itself or its governing members. . There is a well known series of cases where persons successfully resisted the attempt to fix them with liabil- ity as being members of proposed partnerships or in- choate companies? But in the first place, these and similar cases were decided in accordance with principles of law relating to partnership, and not that relating to corporations. A partnership has no existence apart from those composing it, and the rights and liabilities of each member are determined by the contract which, upon his entry into the partnership, he makes with those already in it, and if any attempt be made to com- mence or to carry on businéss in any manner whatever different from that by such contract stipulated for, the member thereby affected is entitled to withdraw. The rights and liabilities of members of corporations as such, are, on the other hand, determined by a reference solely to the documents constituting the company, and do not depend.upon contracts entered into between the different members thereof. And, secondly, gven in the case of corporations, intending shareholders may pro- tect themselves by taking proper precautions; by ob- taining, for instance, such provisions to be placed in the constating instruments of the company as forbid it com- mencing business or making calls before a given part, :? Great Cambrian Mining Company, 128; Fox ». Clifton, 6 Bing. 776; 9 Bing. ex parte Hawkins, 2 K. & J. 253; 25 L. 115; re Dover & Deal Railway Com- J, Ch, 221. pany, ex parte Beardshaw, | Drew. 226 7 See Dickenson v. Valpy, 10 B. & C. CAPITAL AND PROFITS. 111 or, if thought fit, the whole, of the capital has been sub- scribed. II. Corporations may provide by their constating in- struments that their business shall not be com- menced till the whole or a defined portion of their capital is subscribed.* In Pierce v. Jersey Water Works Company;,' a clause in the articles of association provided that “when and so soon as 3,000 shares in the company shall have been subscribed for and allotted, the members of the com- pany for the time being shall be and shall continue associated for the objects of the company, and the regu- lations for the management thereof shall be in force and binding on such members;” and the memorandum of association stated the objects of the company to be, znter alia, “the doing of all such acts as the directors are authorized to do by the accompanying articles of asso- ciation of the company.” Before 3,000 shares were sub- scribed for the directors appointed the plaintiff engineer to the company. In an action against the company for 1L, R. 5 Ex. 209; North Stafford- shire Steel & Iron Company »v. Ward, L, BR. 8 Ex, 172. * Ifthe number of shares and amount of stock are not fixed, the pre- sumption is that they are to be fixed by the corporators, and this must be done, and the amount so fixed subscribed, before assessments can be made. Somerset & Kennebec R. R. Co. v. Cushing, 45 Me. 524. -Where the charter provides that the number of shares shall not exceed a certain limit, and shall. be determined from time to time by the directors, the directors cannot levy assessments before making such determination. Worcester & N. R. R. Co. v. Newton, 8 Cush. 110; Troy R. R. Co. o. New- ton, 8 Gray, 596; Lexington & W. C. R. R. Co. », Chandler, 13 Met. 311. Where the charter assigns two limits between which the capital must come, after the lower limit is reached by subscription, it is not necessary for the corporation to determine the ultimate amount, before making assessments. White Mts. R. R. Co. v. Eastman, 34 N. Hamp. 124; contra, Somerset R. R. Co. #. Clarke, 61 Me. 379. 112 THE FINANCIAL AFFAIRS OF CORPORATIONS. the plaintiff’s salary, it was held that until 3,000 shares were subscribed for, the directors had no power to make any contract for carrying on the business of the company; and that, therefore, the plaintiff could not maintain the action. III. Corporations have not impliedly the power to vary their capital when the amount thereof has been fixed in their constating instruments, semble. (But such powers have been given by statute to - certain corporations, see post, pp. 114, 115.) * * Where the charter fixes the amount of the capital stock, the number of shares and amount of capital cannot be changed, except as expressly authorized by the charter or articles of association or by a law passed sub- sequent to the.charter and accepted regularly by the stockholders, Chicago City R. R. Co. ». Allerton, 18 Wall. 233. A corporation with a fixed capital divided into a fixed number of shares can have no power, of its own volition, or by any act of its officers and agents, to enlarge its capital or increase the number of shares into which it is divided. ‘Phe supreme legislative power of the State can alone confer that authority and remove, or consent to the removal of, re- strictions which are part of the fundamental law of the corporate being; and hence, every attempt of the corporation to exert such a power before it is conferred, by any direct or express act of its officers, is void. N. Y. &N. H.R. R. vo. Schuyler, 34 N. Y. 80; see also Salem Mill Dam Co. 0. Ropes, 6 Pick. 23; Curran 2. Arkansas, 15 How. 304; Wood v..Dummer, 3 Mason, 308; Curry v. Scott, 54 Penn. St. 270; Mechanics’ Bk. v. N. Y. & N. H.R. R. 13 N, Y. 599. If the capital of a company is not limited, it may issue new stock, and may give the holders thereof a preference, this being deemed a mode of raising money. Rutland R. R. Co. ». Thrall, 35 Vt. 586. If the capital is only confined between two limits, the corporation may begin with the smaller capital and afterwards -increase to the larger. Gray v. Portland Bank, 3 Mass. 364; see alsc Somerset R. R. Co. v. Cushing, 45 Me. 524. In case of increase of stock, the holders of the old stock have a prior right to take the new, in proportion to the amount of their shares. Gray v. Portland Bank, 3 Mass. 364; Eidman ». Bowman, 58 III. 444; Reese v. Bank of Montgomery Co. 31 Penn. St. 78; but see, contra, Curry v. Scott, 54 Penn. St. 270; Ohio Ins. Co. » Nunnemacher, 15 Ind. 294. Where there is a power to change the capital, expressly given to the CAPITAL AND PROFITS. 1138 Whether public companies and similar corporations have impliedly the power to vary the amount of their capital as originally fixed, has not yet been positively. decided, but the weight of authority is in the negative. In Smith v. Goldsworthy,! the facts were as follows: The deed of settlement of a company incorporated by special act declared (clause 29) that it should be law- ful for “a special general meeting to amend, alter, or annul, either wholly or in part, any or all of the exist- ing provisions of the deed, and to make any new or other regulations in lieu thereof; and such new regula- tions, &ec.,” after certain confirmation should “ be bind- ing and conclusive upon the shareholders.” The deed provided that the capital should be £2,000,000 divided into 20,000 shares of £100. By resolutions passed and confirmed at meetings duly convened and holden, it was resolved that the capital should be reduced to £1,000,000 in £50 shares. The Court of Queen’s Bench held that such reduction was ultra vires of the company. Denman, C. J., said: “The amount of shares is properly part of the constitution of the company, and does not strictly depend upon any clause, regulation, or provision of the deed. The alteration of shares seems, therefore, not to come within the meaning of the 29th 14 Q. B, 480; 12 L, J. Q. B.192. corporation, it must be exercised by the stockholders, not by the directors. Railway Co. o, Allerton, 18 Wall. 233; Eidman ». Bowman, 58 Ill. 444, The assent of the stockholders can be shown by their conduct and acqui- escence without a formal vote. Payson »v. Stoever, 2 Dill. 428 Stock lawfully received by the corporation may be reissued. Williams , Savage Mfg. Co. 3 Md. Ch, 418; City Bank of Columbus ». Bruce, 17 N. Y. 507. The capital stock of a corporation is not necessarily the limit of its property. Barry v. Mer. Exch. Co. 1 Sandf. Ch. 280; South Bay Co. v. Gray, 80 Me. 547; State v. Morristown Fire Ass. 3 Zabr.195. 8 114 THE FINANCIAL AFFAIRS OF CORPORATIONS. clause. * * * The defendant further argues that the effect of the resolutions reducing the shares was to dissolve the company. We do not think any such effect followed, but rather that they were simply void and inoperative. We think the shares always were in point of law £100 shares.” Supposing this to be a de- cision merely that the amount of the separate shares cannot subsequently be lowered, it necessarily follows that neither can the capital (when this is divided into shares) be lowered. A strong opinion has also been expressed by the present Lord Chief Baron, that no corporations have, apart from express arrangement, such a power. “ If such a proceeding were permitted, the shareholders’ liability would be limited, not as was intended by the amount of their shares, but by the amount of the al- ready, paid-up portion of their shares.” * With regard to “companies,” which are merely large partnerships—e. g., one of the old joint stock com- panies, it is manifest that these, like other partnerships, may vary their capital or shares with or without pro- vision for so doing in their deed of settlement; but where these register under 25 & 26 Vict. c. 89, they be- come liable to all the disabilities imposed by that act, one of which is an implied prohibition against reducing the capital.’ Sections 9 to 20 of 30 & 81 Vict. c. 181, enable companies limited by shares by special resolution, if authorized so to do by their regulations as originally formed or as altered by special resolution, to reduce their LR. 3 Ex. 42, where the Lord as to all companies possessing a capital Chief Baron is apparently referring, divided into shares. not so much to a registered company, * Droitwich Patent Salt Company ». Curzon, L, R. 3 Ex, 85. CAPITAL AND PROFITS. 115 capital, certain conditions for the protection of creditors and others having to be satisfied.* The increase of capital is a somewhat different matter, tending to diminish and not to add to the risks of individual shareholders. It would nevertheless work such a radical change in the scope of a corporation, and in the extent of its operation, as well as in the po- sition of any one shareholder relatively to the whole body, that it can, under ordinary circumstances, be scarcely considered as other than ultra vires. How- ever, the 12th section of 25 & 26 Vict. c 89, provides that certain companies may so far modify their memoran- dum of association as to increase their capital. IV. Corporations may borrow without express au- thority in that behalf, provided the nature of their undertakings or concerns be such as to render borrowing, if not actually indispensable, at least very useful, for the proper conduct of the same.+ * In most of the States the power to increase or diminish the capital stock of corporations is granted by, and the mode in which the power is to be exercised is puinted out in general statutes. + Every corporation, unless prohibited by law, can incur obligations, as a borrower of money, to carry on the legitimate business for which it was incorporated, although not specially authorized to borrow by its charter. Curtis 2. Leavitt, 15 N. Y. 9. But the power to borrow should be limited to and for the appropriate business of the corporation. Beers ®. Phoenix Glass Co. 14 Barb. 358; see, however, Bradley v. Ballard, 55 Il, 418. On the general subject, see Mead v. Keeler, 24 Barb. 20; Part- ridge v. Badger, 25 Barb. 146; Clark . Titcomb, 42 Barb. 122; Life Ins. Co. ». Mech. Ins. Co. 7 Wend. 81; Barnes ». Ontario Bank, 19 N. Y. 152; Smith . Law, 21 N. Y. 296; Nelson v. Eaton, 26 N. Y. 410; Holbrook 2. Bassett, 5 Bosw. 147; Ridgway 0. Farmers’ Bank of Bucks Co. 12 8. & R. 256; Hamilton v. Newcastle R. R. Co. 9 Ind. 359; Rockwell o. Elkhorn Bank, 18 Wis. 653; Magee 0. Mokelumne Hill Canal Co. 5 Cal. 258; also cases cited in the next two notes. 116 THE FINANCIAL AFFAIRS OF CORPORATIONS. Between increasing capital and raising money are many important differences. The capital of a company must be considered one of the constituent facts of a company—change it and the company is pro tanto changed; but a corporation, like a private individual, cannot avoid occasionally running into debt, and how- ever great its debts it nevertheless remains the corpora- tion it originally was. The power of incurring debts for goods, and for carrying on a business, does not, how- ever, necessarily involve that of raising money to pay them. The latter may be turned to a wrong account. far more easily than the former, and consequently al- though in all ordinary partnerships any member will bind the firm by obtaining articles necessary to the firm upon the credit of the firm, yet it by no means follows that the firm would be liable for an advance of money obtained under the same circumstances.’ Whether, in fact, a partnership is liable upon loans. obtained for it, will have to be determined in each case by a consideration of the mode of carrying on, and the customs observed in the particular business engaged in, and by the same principles will be decided the liabilities of at least those joint stock companies which are not, and probably also of such as actually are, incorporated. “Jt is said that a mining company which, as was de- cided in Dickinson v. Valpy, is not necessarily formed with power to pledge the credit of individual members by the drawing of bills—is also not formed with power to bind each other by dealing on credit; but these are two very different propositions. Whether the directors have such a power, must depend on the general nature of the concern; it is a matter for the jury to decide upon * Compare Dickinson v. Valpy, 10B, Esp. 406, and Foster v, Mackreth, L. R. & OC. 139, and Brown v. Byers, 16M. & 2 Ex, 163, W., with Rothwell ». Humphreys, 1 CAPITAL AND PROFITS. 117 unless the party gives evidence to show that their au- thority was expressly limited; and if it had been left to the jury in this case, I think they would not have chad much difficulty in saying, that it is in the general nature of mining concerns to deal on credit for the pur- ‘pose of carrying on their business.” This was the opinion of Lord Abinger in Tredwen v. Bourne; and it has been recognized and followed in subsequent cases. In the Australian Auxiliary Steamship Company 2. Mounsey,’ mortgages of the company’s ships executed by the directors, who by the articles of association could “exercise and do all such powers, discretions, acts, deeds, and things, as the company might exercise and do,” were held valid, Page-Wood, V. C., observing, “the act complained of is this: the company being in want of a sum of money for the purposes of their busi- ness, application is made to the bankers, who, being already creditors of the company, require security for the advance. The question is, might not the bankers ‘stipulate that they should have a mortgage on the assets, and might not the company consent to that stip- ulation? It was first argued, that the company could not do it, because the majority had no power to bind the minority, the case being argued as if it were one of ordinary partnership ; but the case of a joint stock com- pany differs from that of an ordinary partnership, inas- much as it is a corporate body, and it is clear that, with regard to everything which is within the powers of the company, the majority have full power to deal with the assets of the company, in order to carry on their affairs and to bind the minority. The next question is, can the acts complained of be considered a legitimate exer- 16 M. & W. 465; and see Hawken Bryon v. Metropolitan Saloon Omnibus », Bourne, 8 M. & W. 703. Company, 8 D, G. & J. 123; 27 LJ. 94K, & J. 783; 27 L, J. Ch. 780; Ch. 685. 118 THE FINANCIAL AFFAIRS OF CORPORATIONS. cise of the powers of the company, they being ship- owners and not dealers in ships? I cannot see why it. should not be within their ordinary province to raise money by mortgage of their ships, either for the pur- pose of buying new ships or paying creditors.” To the same effect is the decision of Malins, V. C., upon Gibbs and West’s case, r¢ International Life Assurance Company: The deed of settlement of the- International Assurance Company contained no express. power of borrowing, but authorized the directors to do- and execute all acts, deeds, and things necessary, or deemed by them proper or expedient, for carrying on the concerns and business of the company, and to do, enforce, perform, and execute all acts and things in re- lation to the company, and to bind the company, as if the same were done by the express assent of the whole body of members thereof. It was decided, that the directors had acted within their powers in borrowing money from the bankers to meet pressing demands upon the company, and charging the proceeds of a call already made, but not immediately payable, with the repayment of the loan; and that two of the directors. who had become sureties for the company, and had re- paid the loan, were entitled to the benefit of the charge on the call. The Vice Chancellor, in the course of a. careful judgment, observed: “Now it has been very strongly urged in this case, that the company having no power to borrow, the borrowing was ultra vires and improper, and that therefore no debt was created. I should say—as, indeed, I have already said on many occasions—that in the ordinary course of transactions. of a mercantile concern, whether it be an insurance *L, R. 10 Eq. 312. Compare ex re Patent File Company, L. R. 6 Ch.. parte Birmingham Banking Company, 83. CAPITAL AND PROFITS. 119 office or anything else, where the possession of money is essential for the purpose of carrying on the business, if the company finds itself in temporary difficulties for waht of money, I cannot consider it beyond the powers of the directors to obtain money from their bankers or others who will temporarily lend it to them, for the purpose of preventing that which would be disastrous to all, namely, the stoppage of the company ; that is to .say, I cannot consider it beyond their powers to prevent that disaster by means of loans to a moderate extent, such as would not be unreasonable, having regard to the nature and extent of the business in which the com- ‘pany is engaged, for the purpose of carrying on the business of the company.” This judgment contains, perhaps, the clearest authoritative exposition of the cir- cumstances under which an implied power to borrow will be held to exist. To it we need add only that cer- tain kinds of business seem necessarily to require, that companies transacting them should have a power to raise money, not merely to meet their daily outgoings, but for the actual carrying on of their business ; such, for instance, is banking." | But if the business of the company be of such a kind that it is not necessary or usual in the conduct of it to borrow money, then it cannot do so without an express authority in that behalf. “This company is what is called a benefit building society. Until the recent decision of the court, in Laing v. Reed,’ it was doubted whether, even if you put a limited borrowing power among the rules of a society of this sort, that particular rule would be legal. But, what we have 1 Bank of Australasia v. Breillat,6 Forbes v. Marshall, 11 Ex, 166; 24 L. Moore P. C. 152; 12 Jur. 192. Com- J. Ex. 305. pare Royal British Bank v. Turquand, °L. R. 6 Ch. 4. 6E. & B. 327, 26 L. J.Q. B 317; and 120 THE FINANCIAL AFFAIRS OF CORPORATIONS. here is a limited benefit building society without any power to borrow, and the rules and very nature of that society show that it would be contrary to its constitu- tion to borrow money so as to bind the company, or to make the individual members of the company, as mem- bers, liable for borrowing money; because the whole constitution of the society is that the members are to make certain monthly payments, and in consideration of these monthly payments and the fines provided by the rules, they are to receive certain loans. “ After the rules had been certified and published, and the nature of the company had been fixed, a pro- spectus was issued, and by that prospectus the directors chose to say, ‘that they have made arrangements to borrow sums to be advanced to such members as desire to receive an advance before their turn for it regularly arrives, such members of course paying interest on the sum lent until thgir turn arrives.’ If we look at the nature of the company, that can only amount to this: that the directors have chosen to pledge their personal liability. It is not a statement that the company were liable, or that any person who was a member of the company was at all bound, or was per sonally made ° liable in respect of any debt of the company. “This being so, let us see on what ground this winding-up order was made. It was made upon the pe- tition of a creditor, and in order to support that peti- tion, the petitioner must have made out tbat he was a creditor either legal or equitable—either character would be sufficient. I have already said, that this benefit building society could not incur a debt by bor- rowing’ money upon loan. Indeed, the contrary has hardly been argued. It could not do so any more than a mining company, or any other of the companies which CAPITAL AND PROFITS. 121 have not authority or power to bind their members by borrowing money.” ! V. Corporations having the power to borrow, may exercise such power like ordinary individuals, and give securities upon their assets for the sums so borrowed.* *Per Giffard, L. J., in re National parte Williamson, L. R. 5 Ch, 309, 312, Permanent Benefit Building Society, ex 318. * Stat. 3 & 4 Anne, ch. 9; Story on Bills of Exch. § 79. If a corporation has power to borrow, it may give as evidence of in- debtedness a note, bond, or mortgage. A corporation, in order to attain its legitimate objects, may deal precisely as an individual who seeks to accomplish the same ends. If chartered for the purpose of building a bridge, it may contract a debt for labor, or materials, or the land upon which the bridge is abutted. Ifmore advantageous, it may borrow money to purchase such land or materials, pr to pay for such labor; and, as the evidence of the indebtedness, it may execute to the creditors a note, a bond, or a mortgage, whether the debt be for the money borrowed, or the work, materials, or land. Barry ». Merch. Exch. Co. 1 Sandf. Ch. 280. A corporation may, without special authority, make a note or draft, or accept a draft, for a debt contracted in its legitimate business. See Story on Bills of Exch. § 79; Edw. on Bills, 77; Fay v. Noble, 12 Cush. 1; Munn 0. Commission Co. 15 Johns. 44; Moss 0. Oakley, 2 Hill, 265; Mott v. Hicks, 1 Cow. 518; Mead ». Keeler, 24 Barb. 20; Partridge o. Badger, 25 Barb. 146; Olcott o. Tioga R. R. Co. 40 Barb. 179; Barker ». Mech. Ins. Co. 8 Wend. 94; Mech. &c. Asso’n ». White Lead Co. 35 N. Y. 505; Ketchum ». Buffalo, 4 Kern. 356; Lucas 2. Pitney, 3 Dutch. 221; Oxford Tron Co. v. Spradley, 46 Ala. 98; Com. Bank of N. O. 0. Newport Mfg Co. 1 B. Mons 14; Bank of Chillicothe ». Town of C. 7 Ohio, 81; Hamil- ton 7. Newcastle R. R. Co. 9 Ind. 359; Bradley v. Ballard, 55 Tl. 413; Rockwell v. Elkhorn Bank, 18 Wis. 653; Magee o. Mokelumne Hiil Canal Co. 5 Cal. 258. In like manner a corporation may indorse a note or bill, or give a certificate of deposit, as evidence of indebtedness. Barnes ». Ontario Bank, 19 N. Y. 152; Hardy », Merriweather, 14 Ind. 203; Union Bank v. Jacobs, 6 Humph. 515. It is ultra vires of a corporation to assume the debt of another, and issue a note in payment thereof. State Bank v. U. 8. Pottery Co. 34 Vt. 144. Nor can a corporation make or indorse accommodation paper. Smead 0. Indianapolis R. R. Co. 11 Ind. 104. ‘‘It is quite clear that the officers of a banking association or other corporation have no power to 122 THE FINANCIAL AFFAIRS OF CORPORATIONS. Supposing that a company has power to raise money—that is,to carry on its business in any other manner than by cash payments part passu with its pur- chases, the next question is as to the mode in which it may exercise this power. In the first place, it may be laid down as a general rule, that companies whose bust- ness necessitates the periodical purchases of articles, either for their own use or for purposes of trade, may, as and when convenient, open running accounts and ob- tain such articles on credit; in other words, that they may incur debts. Some companies, however, are dif- ferently placed—either their business only involves engage the institution, as the surety for another, in a business in which it has no interest. Such a transaction is without the scope of the busi- ness of the company.” Bank of Genessee 0. Patchin Bank, 8 Kern. 309; see, also, Central Bank v. Empire Stone Dressing Co. 26 Barb. 28; Bridge- port City Bank v. Same, 80 Barb. 421; Farmers’ Bank ». Same, 5 Bosw. 275; Morford ». Farmers’ Bank, 26 Barb. 568. In all cases of negotiable paper, however, if there is nothing on the face to indicate that its issue is ultra vires, that defense cannot be set up against a holder for value without notice. See Monument Bank ». Globe Works, 101 Mass. 57; Att. Gen. 0. Ins, Co. 9 Paige, 470; Bissell 0. Mich. 8. &N. LR. RB. Cos. 22 N. Y. 258; Mech. Banking Asso’n ». White Lead Co. 35 N. Y. 505; Lexington v. Butler, 14 Wall. 282; see, also, cases in the preceditig paragraph. A corporation may, as 2 rule, as an incident to its business, receive notes and bills; and what it can receive, it can transfer. McIntire o. Preston, 5 Gilman, 48; Lucas v. Pitney, 83 Dutch. 221; Hardy ». Merri- weather, 14 Ind. 203; Frye o. Tucker, 24 Ill. 180; Buckley ». Briggs, 30 Mo. 452. An insurance company cannot issue bonds in order to lend its credit, Ala. Life Ins. Co, 0. Smith, 4 Ala. N. 8. 558. The power to issue notes, etc., in the legitimate business of the corporation, cannot be extended so as to give banking powers. Att. Gen. v. Ins. Co. 9 Paige, 470; see, also, Safford ». Wyckoff, 4 Hill, 442; People ». Utica Ins, Co. 15 Johns. 358. Although a company may borrow money in order to carry on its legiti- mate business, it is not authorized to purchase stock of banks or to unite with others in that business in institutions already in existence, so as to be able in this way to lend to themselves. Sumner v. Marcy, 3 Woodb. & M. 105. CAPITAL AND PROFITS. 193 others in liabilities to themselves and not vice versd, or the legislature has expressly directed that all their operations shall be conducted on cash principles, or by custom this is so. Such, for instance, are building so- cieties, whether benefit building societies strictly so called,’ or freehold or other land societies.2 Such com- panies as may ordinarily incur debts may, it would seem, under the like circumstances overdraw their bank- ing account.® Morigages and Charges upon a Company's Property.* They have also an implied power to give existing creditors securities, whether by the execution of bills of Re Kent Benefit Building Society, Durham County dc. Society, Davis and 1Dr. & Sm. 417; re National Perma- Wilson’s Cases, L. R. 12 Eq. 516. nent Benefit Building Society, ex parte * Re Patent File Co., ex parte Bir- Williamson, L. R. 5 Ch. 309. mingham Banking Co. L. R. 6 Ch. 83; ? Grimes v, Harrison, 26 Beav. 4385; see also re Cefn Cilicen Mining Co, L. R. 4 Eq. 88. * Corporations having the power to borrow money may mortgage their property as security. Although it was at one time a question whether express legislative consent was not required in order to authorize a mort- gage of any corporate property, as, for example, in Steiner’s Appeal, 27 Penn. St. 318, where it was held that neither tolls nor real estate neces- sary for enjoyment of the corporate franchises can be mortgaged unless by special authority from the legislature (see also Coe z. Col. & Piqua R. R. Co. 10 Ohio St. 372), yet the rule now is, that a general right to borrow money implies the power to mortgage all corporate property except franchises, unless restrained by express prohibition in the act of incorporation or by some general statute. See Coe v. Pennock, 23 How. 117; Richards v. Merrimack & Conn. R. R. R. Co. 44 N. Hamp. 127; Miller ». Chance, 8 Edw. 399; Barry o. Mer. Exch. Co. 1 Sandf. Ch. 380; Far- mers’ Loan & T. Co. ». Hendrickson, 25 Barb. 484; Holbrook ». Bassett, 5 Bosw. 147; King v. Mer. Exch, Co. 1 Seld. 547; Curtis o. Leavitt, 15 N. Y. 9; Leavitt ». Blatchford, 17 N. Y. 551; Parish », Wheeler, 22 N.Y. 494; Nelson v, Eaton, 26 N. Y. 410; Burr », McDonald, 3 Grat. 206; Sus- quehanna Bridge Oo. v. Gen. Ins. Co, 3 Md. 805; Bardstown & Louisville R. R. Co. v. Metcalfe, 4 Metc. (Ky.) 199; Coe v. Johnson, 18 Ind. 218. The power to purchase lands and dispose of them implies the power to mortgage to secure the debts of the company. Jackson v. Brown, 5 124 THE FINANCIAL AFFAIRS OF CORPORATIONS, sale duly registered,’ or by way of the mortgage legal? or equitable* of the corporate property; or by the 1 Shears v. Jacob, L. R. 1 C. P. 518; Mounsey, 4 K. & J. 733; 27 L. J. Ch. Deffell v. White, L. R. 2 C. P. 144, 429. ? Australian Aux. Clipper Co. 2. ® Re Patent File Co, ex parte Bir- ‘ mingham Banking Co. wbi supra, Wend. 590; Gordon ». Preston, 1 Watts, 385; Taber ». Cincinnati R. R. Co. 15 Ind. 459. Corporations, as a rule, have power to mortgage their property, real and personal, for the security of their debts. Pierce 2, Emery, 32 N. Hamp. 484; see also opinion in Com. of Mass. », Troy & Greenfield Railway, 1 Redf. Amer. Railway Cases, 575; Commonwealth 2. Smith, 10 Allen, 448; Shaw 2. Norfolk R. R.Co. 5 Gray, 162; Robins ». Embry, 1 8. & M. 207. The form of the instrument may be either that of a mortgage or a trust deed; the usual practice in the United States now is to call the instru- ment ‘‘a deed of trust or mortgage.” White Water Valley Canal Co. ». Villette, 21 How. 414; Pullan v. Cin. & Ch. R. R. Co. 4 Biss. 85; Coe 2. Johnson, 18 Ind. 218; Coe ». McBrown, 22 Ind. 252; see, however, in re York & Conn. Railway, 50 Me. 552, as to construction of statute of that State. On the same principle, a corporation may assign its property for the payment of its debts. Haxton »v. Bishop, 3 Wend. 13; De Ruyter ». St. Peter’s Church, 3 Barb. Ch. 119; 8. c. 83 Coms, 288; Lenox a. Roberts, 2 ‘Wheat. 378; Flint v. Clinton Co. 12 N. Hamp. 481; Warner v. Mower, 11 Vt. 385; Dana ». Bank of U.S.5 W. & 8. 228; State 0. Bank of Md. 6 G. & J. 205; Hopkins v. Gallatin Turn. Co. 4 Humph. 403; e parte Con- way, 4 Ark. 804; Pope v. Brandon, 2 Stew. 401. This implied power to mortgage property does not extend to fran- chises. It is well settled that no corporation can, without express legis- lative authority, either sell or mortgage its franchises. York & Md. R. R. Co. v. Winans, 17 How. 39; Pullan o. Cincinnati & Chic. R, R. Co. 4 Biss. 85; Pierce », Emery, 32 N, Hamp. 484; Commonwealth ». Smith, 10 Allen, 448; Richardson », Sibley, 11 Allen, 65; Hendee o. Pinkerton, 14 Allen, 381; Troy & Rut. R. R. Co. v. Kerr, 17 Barb. 601; Black 0. Del. & Rar. Canal Co. 7 C. E. Green, 99; Susquehanna Canal Co. v. Bonham, 9 W. & S. 27; Steiner’s Appeal, 27 Penn. St. 818; Lanman 2. Lebanon Val- ley R. R. Co. 30 Penn. St. 42; Winchester & Lexington Turnpike Co. 2. Vimont, 5 B. Mon. 1; Arthur o. Commercial Bank, 9 8. & M. 394; Coe ». Columbus & Piqua R. R. Co. 10 Ohio St. 872; but see Shepley o. A. & St. L. R. R. Co. 55 Me. 395; Kennebec & P. R. R. Co. 2, Portland & K. R. R. Co. 59 Me. 9; Miller o. Rutland & W. R. R. Co. 36 Vt. 452; Hall o. Sullivan R, R. Co. 2 Redf, Amer. R. R. Cases, 621. The legislature, having the power to waive the objection that an act is CAPITAL AND PROFITS. 125 issue of debentures? charged upon the same. In the construction of these mortgages and debentures, careful ? Re Tans of Court Hotel Co, L. R. 6 Eq. 82. invalid for want of legislative assent, may ratify such act by subsequent statute, and thus confirm the mortgage so far as it was defective for want of authority from the legislature. Shepley v. A. & St. L. R. R. Co. 55 Me. 395; Portland & K. R. R. Co. v. Kennebec & P. R. R. Co. 59 Me. 9; Richards », Merrimack & Conn. R. R. R. Co. 44 N. Hamp. 127; Shaw 0. Norfolk R. R. Co. 5 Gray, 162; Black R. & Utica R. R. Co. v, Barnard, $1 Barb. 258; Oroville R. R. Co. v. Plumas Co. 37 Cal. 354. It would seem that an express authority is not necessary if the legisla- ture impliedly recognize the mortgage as a valid security. Hall v. Sulli- van R. R. Co. 2 Redf. Amer. Railw. Cases, 621. A mortgage may be void as to the franchises and yet good as to the rest of the property (Pullan v. Cin. & Ch. R. R. Co, 4 Biss. 35); but, as to the effect of statute in Massachusetts, see Richardson ». Sibley, 11 Allen, 65. In some States general statutes have been passed providing that upon foreclosure of mortgages of specified corporations, the purchasers may form a new corporation, with the powers of the old corporation, but relieved of its debts and liabilities. 9 N.Y. R.S. Edmonds’ ed.) pp. 616, 912: Nixon’s N, J. Digest, 4th ed. p. 791; Purdon’s Penn. Digest, 9th ed. p. 200; R. 8. Wisconsin, ch. 79,§ 83; Code of Virginia, ch. 61, § 27; General Statutes of Nebraska, 1878, p. 204; Swan & Sayler, Ohio Statutes, pp. 125, 127; Wilcox’s Ohio R. R. Laws, pp. 209, 220. A railroad company may mortgage as security not only the then ac- quired property, but also such property requisite for the exercise of its franchises as may be acquired in future. Pennock v. Coe, 23 How. 117; Dunham », Cincinnati &c. R. R. Co. 1 Wall. 254; Galveston R. R. Co. ¢. Cowdrey, 11 Wall. 483; U. 8. 0. New Orleans R. R. Co, 12 Wall. 362; R. R. Co. v. Soutter, 13 Wall. 517; Williamson 7 New Albany & Salem R. R. Co. 1 Biss. 198 ; Dunham »v. Earle, 2 Redf. on Railways, 506; Mor- rill v. Noyes, 56 Me. 458; Haven o. Emery, 33 N. Hamp. 66; Seymour 2. .Can. & N. Falls R. R. Co, 25 Barb. 284; Stevens o. Buffalo & N. ¥. R. R. Co. 31 Barb. 590; Buffalo, N. Y. & Erie R. R. Co. », Sampson, 47 Barb. 533; Benjamin ». Elmira R. R. Co. 49 Barb. 441; Fish v. Potter, 2 Abb. Ct. App. Dec. 188; Stevens ». Watson, 4 Abb. Ct. App. Dec. 302; Willink ». Morris Canal Co. 3 Green’s Ch. 877; Phil. Wil. & Balt. R. R. Co. 2. Weelpper, 64 Penn. St. 860; State v. N. Central R. R. Co. 18 Md. 193; Ludlow ». Hunt, 1 Disney (Ohio), 552; Coe o. McBrown, 22 Ind. 252; Pierce v. Milwaukee & St. P. R. R. Co. 24 Wis. 551; but see Howe v. Freeman, 14 Allen, 566; Moody ». Wright, 18 Met. 17; Coe o. Col. &e. R. 126 THE FINANCIAL AFFAIRS OF CORPORATIONS. attention must be paid, both to the language of the charging instrument itself and to the powers belonging expressly or impliedly to the company itself and to the governing portion thereof." The expression, “the un- dertaking,” whether alone or in connection with other words, has been repeatedly the subject of judicial de- cision. In one case the terms employed were “all the lands, tenements, and estates of the company, and all their undertaking ;”® in another, “ our undertaking and property and receipts and revenues ;”® in a third, “ the 1See the cases referred to in the 3 Re Marine Mansions Co, L. R. 4 next four notes. Eq. 601. ? King v. Marshal, 33 Beav. 565; 34 L, J. Ch. 163. R. Co. 10 Ohio St. 372; State v. Mexican Gulf R. R. Co .3 Rob. (La.) 513; Brainerd v. Peck, 34 Vt. 496; Bath v. Miller, 53 Me. 318; Williamson », N. J. Southern R. R. Co. 10 C. E. Green, 18. A mortgage, made with authority, upon all the property and fran- chises, will cover subsequently acquired property, as incident to the right of acquiring and holding it. Pierce v. Emery, 32 N. H. 484; see on mort- gage of separate divisions, Farmers’ Loan & Trust Co. ». Commercial Bank, 11 Wis. 207. A railroad company may mortgage future net earnings to se- cure payment of interest onitsbonds. Jessup v. Bridge, 11 Iowa, 572; Dun- ham ». Isett, 15 Iowa, 284; State». Northern Central R. R. Co. 18 Md. 193. As to bonds pledging income. Garret ». May, 19 Md. 177. | Lands acquired by a railroad company, lying outside of the legal limits of the track and branches, not used for shops, depots and other legitimate purposes of the company, are not covered by a mortgage convey- ing in general terms the railway and its appurtenances, Seymour 2. Can. & N. Falls R. R. Co. 25 Barb. 285; Elbridge 0. Smith, 84 Vt. 484. Express authority to mortgage for a particular purpose will not take away or abridge the general power of a corporation to mortgage for security of creditors. Allen 0. Montgomery R. R. Co. 11 Ala. N. 8. 487; - Mobile &. R. R. Co. v. Talman, 15 Ala. N.S. 472; Phillips o. Winslow, 18 B. Mon, 481. Among the most important subjects growing out of railway mortgages is the character of rolling stock. It must now be considered as an open question whether rolling stock is to be regarded as personal or real estate, and hence, also, whether mortgages seeking to create a lien on such prop- erty shall be filed as chattel mortgages, or recorded as mortgages affecting real estate; as to which, see Appendix. CAPITAL AND PROFITS. 127 undertaking and all the real and personal estate;”* in a fourth, “the general undertaking as defined by the act, and all the tolls and sums arising from or out of the general undertaking ;”*? and in neither case did the security constitute a charge upon the capital of the company. We may perhaps conclude that the “ under- taking” means ordinarily nothing more than the profits . arising from the business of the company, and that a mortgage of the “ undertaking,” without more, creates a charge upon such profits only, and not upon the capital or plant of the company; and that, consequently, when the undertaking ceases to be a going concern, such mortgages and debentures cease to give their holders any priority over other creditors. In each of the cases just cited, it will be noticed that the charge extended to other assets than the “ undertaking,” and that the holders thereby acquired rights varying with the cir. cumstances over the company’s property. The “undertaking” will not, however, always have such a restricted interpretation. A steamship company, having power to issue mortgages, bonds, or debentures, issued mortgage debentures, charging “the undertak- ing, and all sums of money arising therefrom,” with the repayment at a specified time of the money borrowed, with interest in the mean time. Before the debentures became due, the company was wound up, and the ships and other property of the company were sold. It was here held that the debenture holders acquired a charge upon all the property of the company, past and future, by the term “ undertaking,” and that they were entitled to be paid out of the property of the company in } Re New Clydach Sheet & BarIron Vict. c. 16. Compare Furness v. Cater- Co, L. R. 6 Eq. 514, ham Railway Company, 27 Beay. 358, *Gardner v, London, Chatham, & and Fountaine », Carmarthen Railway Dover Railway Co. L. R, 2 Ch. 201. Company, L. R, 5 Eq, 316. This was a mortgage given under 8 & 9 128 THE FINANCIAL AFFAIRS OF CORPORATIONS. priority to the general creditors. Giffard, L. J., thus interpretated the effect of these debentures: “I have no hesitation in saying that, in this particular case, and having regard to the state of this particular company, the word ‘ undertaking’ had reference to all the prop- erty of the company, not only which existed at the date of the debenture, but which might afterwards become the property of the company.* And I take the object and meaning of the debenture to be this, that the word ‘undertaking’ necessarily infers that the company will go on, and that the debenture holder could not inter. fere until either the interest which was due was unpaid, or until the period had arrived for the payment of his principal, and that principal was unpaid. I think the meaning and object of the security was this, that the company might go on during that interval ; and, further- more, that during the interval the debenture holder would not be entitled to any account of mesne profits, or of any dealing with the property of the company in the ordinary course of carrying on their business.” * No matter how extensive the authority given to a company or vested in its officers to raise money and to create securities for the same, future calls cannot be ? Re Panama d&ec. Royal Mail Company, L. R. 5 Ch, 818, 822. * A railroad company, authorized to borrow and to execute such se- curities in amount and kind as it may deem expedient, may mortgage its entire road with its franchises, and all its property, including all future acquisitions for the use of its road. Sce note, p. 125; Pierce v. St. P. & Mil. R. R. Co, 24 Wis. 551; but see Steiner’s Appeal, 27 Penn. St. 313. A mortgage, given to the State by legislative authority, on ‘‘ roads, lands, and franchises” by foreclosure, passes all the franchises, including the right to be a corporation. St, Paul & Pacific R. R. Co. 0. Parcher, 14 Minn. 297; also, on construction of a mortgage, see Parish », Wheeler, 22 N. Y. 494; Landenschlager 2. Benton, 3 Grant’s Cases, 884; Farmers’ Loan & T. Co, v. Commercial Bank, 15 Wis. 424. CAPITAL AND PROFITS. 129 mortgaged * without an express power for such pur- pose, and probably not even then.” But calls already made, although the time for payment has not yet come, may be validly assigned as security for existing debts when the company possesses an express power to mort- gage calls;* and it would seem, even without such a power, provided only that it has a general authority to borrow,‘ or, if owing to emergencies, it becomes abso- lutely necessary for the continuance of the business to raise money upon almost any terms.’ So, also, where a bank refused to renew the notes of a company given for advances properly made, save upon the agreement that a call should at once be made, and the proceeds as- signed to the bank as security for these advances, it was held, upon the agreement being carried out, that the mortgage, being of the proceeds of a call already de- termined, was distinguishable from an attempt to pledge future calls, and was therefore valid.® What is the exact nature and effect of debentures, and what are their various incidents, has not yet been fully determined. They resemble ordinary mortgages in that they constitute charges more or less extensive upon the assets, or some particular portion thereof, of the company issuing them, and, in so far as this charge. extends, they entitle their owners to a priority over other creditors. But they differ from them in not amounting to an assignment—in being merely a charge, and, consequently, in not investing the chargee with 1 Re British Provident Life & Fire 16 W. R. 474, 667; Re Sankey Brook Assurance Company, ex parte Stanley, 33 L, J. Ch. 5385; King v, Marshall, 33 Beav. 565; 34 L. I.Ch. 168; Re Sankey oe Coal Company (No. ’2), L. R, 10 . 381 ie See per Knight Bruce, L. J., in ex parte Stanley, ubi supra. * Re Humber Ironworks Company, 9 Coal Company (No. 1), L. R. 9 Eq. 721. ‘Pickering v, Ilfracombe Balvey Company, L. R. 3 C, P. 235. ® Re International Life Assurance Company, Gibbs and West’s Case, L. R. 10 Eq. 812, * Re Sankey Brook Coal Company, L. BR. 9 Eq, 721. 130 THE FINANCIAL AFFAIRS OF CORPORATIONS. the legal title, or with any of the ordinary rights of ownership over the property charged. Whatever other rights debenture holders may be endowed with, they have no means—save so far as chancery may aid them —of preventing the owner of the property from using or removing the property charged, or otherwise dealing with it as he pleases, and this power of interfering with the owner is the true test as to whether the relation- ship of mortgagor and mortgagee does or does not exist.’ * Profits. VI. Profits can be declared only out of moneys act- ually earned, but it is not necessary that all out- standing liabilities should be first cleared off,t and they must be paid in money.{ ‘Holroyd v. Marshall, 10 H. L. C. 191. As to the negotiability of these instruments, see post, section 4. * See Garrett 0. May, 19 Md. 177. t Of course this portion of the rule must be limited to cases of solvent corporations. Where an incorporated company becomes insolvent before its surplus funds have been apportioned as dividends among the stock-. holders, such surplus funds, as well as the capital stock, must, if neces- sary, be applied to satisfy its debts, to the exclusion of any prior claim of the stockholders on such surplus. Scott v. Eagle Ins. Co. 7 Paige, 198;. see Karnes v, Rochester & Genesee Valley R. R. Co. 4 Abb. Pr. N. 8. 107. ¢ Under ordinary circumstances, where a company has earned a divi- dend, and desires at the same time to retain the moneys so earned, for the purposes of the company, in making improvements of its property, or for payment of its debts, it would be no violation of law to retain such moneys, and in lieu thereof to issue to stockholders a corresponding amount of stock. The election to do either rests with the directors, and if the company has the power to increase the capital stock for any pur- pose, either mode of making the increase is not a violation of law, and af- fords no ground for an injunction to restrain them. Howell v. Chicago & N. W. R. R. Co. 51 Barb. 378; see, to the same effect, Atkins v. Albree, 12 All. 859; Minot v. Paine, 99 Mass. 101; Boston & Lowell R. R. Co. 2. Commonwealth, 100 Mass, 399; Daland ». Williams, 101 Mass, 571; Le- CAPITAL AND PROFITS. 131 The term “ profits "is ambiguous. It may denote either the net earnings, deducting merely the interest on money borrowed, or what, if anything, remains after paying off loans as well as the interest thereof.* Where land », Hayden, 102 Mass. 542; Rand ». Hubbell, 115 Mass. 461; Gifford v, Thompson, 115 Mass. 478; in which cases it is also held, that cash divi- dends are to be regarded as income, and stock dividends, however made, as capital; see, also, Harp’s Appeal, 28 Penn. St. 868; Wiltbank’s Appeal, 64 Penn. St. 256, which support the main proposition above, but hold that stock dividends are income. In Ehle ». Chittenango Bank, 24 N. Y. 548, it is said that a dividend of the profits of a bank,, declared: by the directors ‘‘payable in N. Y. State currency,” is payable in cash; that the directors have no authority to declare it payable other- wise; and that a dividend declared becomes a debt payable only in legah tender; in Scott », Central R. R. & Banking Co. of Ga. 52 Barb. 45, attempt was made@to prove, by proof of surrounding circumstances, that a dividend declared in general terms in the State of Georgia was payable in Confederate money. * “Tt is undoubtedly true that ‘ profits’ and ‘income? are sometimes. used as synonymous terms; but, strictly speaking, ‘income’ means that, which comes in, or is fea from any business or investment of capital, without reference to the outgoing expenditures; while ‘ profits’ generally’ means the gain which is made upon any business or investment when both receipts and payments are taken into the account. ‘Income,’ when applied. to the affairs of individuals, expresses the same idea that revenue does. when applied to the affairs of a State or nation, and no one would think. of denying that our government has any revenue because the expenditures: for a given period may exceed the amount of receipts.” Bronson, J., in People v. Supervisors, 4 Hill, 20; s. c. on appeal, 7 Hill, 504. “ Net earnings are, properly, the gross receipts, less the expense of oper- ating the road (or other business of the corporation) to earn such receipts. Interest on debts is paid out of what thus remains—that is, out of the net: earnings. Many other liabilities are paid out of the net earnings. When all liabilities are paid, either out of the gross receipts or out of the net. earnings, the remainder is the profit of the shareholders, to go towards. dividends, which, in that way, are paid out of the net earnings.” St. John ». Erie R. R, Co. 10 Blatch. 271; affi’d, U. 8. Supreme Court. The unearned premiums, received by an insurance company in advance: upon policies of insurance, are not surplus profits, which the directors are: authorized to distribute as dividends, but are the ordinary means, or primary fund, out of which the losses upon the policies are to be paid. Scott v. Eagle Ins. Co. 7 Paige, 198. 132 THE FINANCIAL AFFAIRS OF CORPORATIONS. money has been raised in virtue of express powers in that behalf, Corry v. Londonderry and Enniskillen Railway Company’ has settled that profits will have the former and wider meaning. The master of the rolls in that case was of opinion “that all the debts of the company are first payable, other than those which, for want of a better expression, may be called funded debts; for instance, if the defendants have raised money by mortgage, under the powers contained in their act, for the purpose of completing their line, this does not constitute such a debt as can be paid off out of the profits, before the profits are divided. “But, on the other hand, any debts which have been incurred, and which are due from the directors or the company, either for steam engines, for rails, for completing stations, or the like, which ought to have been and would have been paid at the time, had the defendants possessed the necessary funds for that purpose—those are so many deductions from the profits, which, in my opinion, are not ascertained till the whole of them are paid.” His lordship accordingly decided that the holders of prefer- ence shares created in pursuance of the company’s stat- utory powers were not entitled to be paid off out of the ‘surplus profits remaining after the interest on such preference shares had been met. The case, however, would be different with respect to ordinary loans to a company while transacting its usual everyday business, €. g., advances by its bankers. These loans are simply debts which have to be defrayed before profits or divi- dends can be declared.* 129 Beav. 263. * Karnes . Rochester & Genesee Valley R. R. Co. 4 Abb. Pr. N. 8. 107, was a suit brought against a corporation by one of its stockholders, to compel it to declare and pay a dividend from funds on hand. It ap- CAPITAL AND PROFITS, 183° A company not unseldom inserts in its constating instruments a clause allowing interest to be paid, some- times to preference, sometimes even to ordinary share. holders, out of capital, before it has commenced busi- ness, or, it may be, afterwards, during times of adversity, when its losses counterbalance its gains. Whether such peared, that the corporation had on deposit and in securities thirty-six thousand dollars; that the floating debt was one thousand dollars, which would probably never be called for; that the funded debt was seventy thousand dollars, payable in seventeen years at six per cent. interest; the yearly current expenses, including interest on funded debt, was about ten thousand dollars; and that the corporation bad no need of any part of the money on hand cr of its earnings, except to pay current expenses. The court said: ‘‘ The property of every corporation, including all its earnings and profits, belongs primarily to such corporation exclusively, and not to its stockholders individually or collectively. They have a certain claim, it is true, but their claims are always subordinate to the claims of credit- ors, and the latter approach much nearer to the condition of ownership than the former. No stockholder can entitle himself to any dividend, or to any portion of the capital stock, until all the debts are paid. The funds on hand, which the plaintiff asks to have divided, and distributed among the several stockholders, are only about half sufficient to pay the indebt- edness of the defendant. It is of no sort of consequence, in a legal point of view, that the debt is not yet due, and has a number of years to run before it matures, The creditors still have the better right to the funds, which the defendant holds for them in trust. The court cannot under- take to say judicially, that the future business of the corporation will be prosperous; nor has it any right to postpone the rights and claims of creditors to future earnings and accumulations, even if it could be certain they would accrue. The board of directors, in their discretion, and in view of all the facts within their knowledge, might do this; but no court, I apprehend, would ever undertake to deal in such a manner with the funds of a corporation, which was indebted to an amount at least double the fund sought to be distributed. The corporation does not stand in any fiduciary relation to its stockholders. The stockholders are in no sense creditors of the corporation, nor are they in the situation of partners. They are constituent parts of the corporate body. In a general sense, a corporation may be regarded as the trustee of its creditors, but not of its stockholders. The action has, therefore, no foundation of a trust to sup- port it;” and the suit was dismissed. See remarks of Denio, C. J., in Utica v. Churchill, 33 N. Y. 238; People o. Commissioners, 35 N. Y. 423; 8. c. 4 Wall. 244. 1384 THE FINANCIAL AFFAIRS OF CORPORATIONS. a provision is legal and valid may, fairly be questioned, the manifest tendency of it is to waste, and in the re- sult to destroy, the capital of the company in carrying out objects aliwnde those for the prosecution of which it was created.* But, certainly, without it sharehold- ers can receive interest only out of the net earnings. The leading case is Macdougall v. Jersey Imperial Hotel Company Limited,’ where, in overruling a demur- rer to a bill, which stated that at an ordinary general meeting it had been determined that interest should be paid to the shareholders, although as yet no profits had been realized, and which prayed an injunction to restrain the same, Page- Wood, V.C., said: “On grounds of public policy, and on every principle, not only of honesty as regards the public generally, but of the in- 19H. & M, 528; followed in Salis- bury »v. Metropolitan Railway Company, 38 L. J. Ch. 249, where, however, the 196th section of the defendants’ act: ex- pressly provided that “it shall not be Jawful for the company, out of any money by this act, or by any other act relating to the company, authorized to be raised by calls in respect of shares, or by the exercise of any power of bor- rowing, to pay interest or dividend to any shareholder,” &c. * There is nothing against the law or public policy in the agreement of a railroad company to allow a city interest on the stock subscribed by her. Evansville R. R. Co. v. Evansville, 15 Ind. 895; see note, p. 147. A railroad company has authority to stipulate, that each stockholder shall be entitled to interest on sums paid on stock subscriptions, while its road is in process of construction, till it is completed and goes into oper- ation, payable whenever the surplus earnings shall enable it properly to do so; that is, whenever the company has such pecuniary ability as would, but for the obligation to pay this interest, justify the payment of a divi- dend to stockholders. Richardson ». Vt. & Mass. R. R. Co. 44 Vt. 618. See also Waterman ». Troy & Greenfield R. R. Co. 8 Gray, 488; Cunning- ham v. Vt. & Mass. R. R. Co. 12 Gray, 411; McLaughlin ». Detroit & Mich. R. R. Co. 8 Mich. 100; City of Ohio v. Cl. & Tol. R. R. Co. 6 Ohio St. 489. An agreement to pay interest to stockholders would not create an ab- solute liability, binding the corporation at all ‘events, and to be paid aud discharged in preference to or even on an equality with the debts of the corporation due to third persons, and founded on considerations of a val- uable nature. Barnard v. Vt. & Mass. R. R. Co. 7 Allen, 512. CAPITAL AND PROFITS. 135 terests of this company itself, I feel bound to prevent this proceeding.” In Bloxam v. Metropolitan Railway Company,! Page-Wood, V. C., decided, and, on appeal, the Lord Chancellor Chelmsford inclined to the same opinion, that it was ultra vires of the defendants to declare a dividend upon their ordinary stock, out of a sum of money received from the contractors, as penalty and in- terest in respect of unfinished lines. A still stronger decision in point is that of Hoole v. Great Western Railway Company.? The revenue of the Great Western Railway Company during a particu- Jar half-year had been sufficient to pay a dividend, after providing for all charges properly payable out of the revenue; but, owing to the refusal of creditors of the company to give time, the revenue was absorbed in pay- ment of sums properly chargeable to capital. In these circumstances the company in general meeting sanc- tioned a plan for offering to each shareholder, at par, preference shares to an amount equal to the dividend which would have been payable to him if the revenue ° had not been diverted for capital purposes. These shares were salable, but only at a considerable dis- count. A shareholder filed his bill on behalf of himself and the section of shareholders to which he belonged, to restrain the issue of shares for the above purpose, to have those already issued canceled, and to restrain the payments of dividends on them. On an application by a shareholder, an injunction was granted to restrain this issue, on the ground that the scheme was ultra vires. Assuming that the shares could lawfully be issued at a discount (an issue under this scheme being in reality an issue at a discount), and assuming that, owing to the 1L, R. 3 Ch. 337. 2 Thid. 262. 186 THE FINANCIAL AFFAIRS OF CORPORATIONS. diversion of the revenue to capital purposes, they could lawfully be treated as assets for payment of a dividend, Page- Wood, V. C., first, and the Lords Justices affirming his decision, held, that each shareholder who was not willing to accept an allotment of them in specie, had a right to insist that the proceeds of the whole should be applied ratably in payment of a dividend to all the shareholders. From this case we may deduce the following con- clusions—first, that it is ultra vires of a company to expend its profits in any manner whatever other than in paying dividends to those entitled thereto; and,. secondly, that any one shareholder may refuse to receive the profits coming to bim in any shape, preference shares, &c., other than that of hard cash. * Whether a dividend can or cannot be declared is a matter of internal arrangement for the determination of the general body of members. The Court of Chancery, in the absence of fraud, will generally refuse to inter- fere in such a matter, whether to direct or to restrain against the declaration of a dividend, even though ite * Examination of the American cases cited in the notes to pages 130, 132, will show that the conclusions arrived at in the text from the last case, do- not hold good in this country. Profits may be applied by the corpora- tion in the payment of its floating or funded debts, or in the development of its business (see Pratt v. Pratt, 88 Conn. 446); and, secondly, while it is true, that there are some dicta in the opinions which seem to sup- port the idea that nothing but hard cash can be divided among stock-- holders, the books are full of cases relating to stock or scrip dividends (see State v. Balt. & O. R. R. Co. 6 Gill, 368); and it is well known, that it has been for years the practice of American corporations to make, as it were, forced loans from their stockholders of some portion of their profits, issuing to them new stock, created in lieu of cash dividends to the same amount. As to the rights of old stockholders in this new stock, see Le-- land 2, Hayden, 102 Mass. 542; in re Wheeler, 2 Abb. Pr. N. 8, 361; Miller 2. Til. Cent. R. R. Co. 24 Barb. 812; Currie v, White, 45 N. Y. 822;. Wiltbank’s App. 64 Penn. St. 256, and note on page 112. CAPITAL AND PROFITS. 137 interference be sought on the ground that a contem- plated dividend has been calculated on a wrong princi- ple.' * Tt seems also that the whole of the profits must be periodically divided ; that is, that the company has not impliedly any option in the matter, and cannot create, for instance, even a contingency fund wherewith to meet future unforeseen losses.? + On the other hand, Mills v. Northern Railway of Buenos Ayres Company,’ shows that where a company have paid for things properly chargeable to capital out of revenue, they are justified in recouping the revenue * See Yool v. Great Western Railway 2 Per Giffard, L. J., L. R. 4 Ch, 494, Company, 20 L. T. N.S. 74. 495, 3L. R. 5 Ch. 621, 680. * While a court of equity will not interfere with the officers of a cor- poration, while acting within the scope of their powers and authority, yet, when it is apparent, that they have erred and wronged some of its stockholders, it should see that injustice is not done. Equity will thus interfere to prevent an unjust discrimination in the distribution of profits (Luling v. Atlantic Mut. Ins. Co. 45 Barb. 510); or to prevent the declara- tion of a dividend in the absence of surplus profits (Carpenter v. N. Y. & N. H. R. R. Co. 5 Abb. Pr. 277); or to restrain payment of dividends until a true list of the shareholders is obtained. Underwood v. N.Y. & N. H. R. R. Co. 17 How. Pr. 537. A court of equity will not compel the declaration of dividends, except in case of willful abuse of discretion on the part of the directors. Pratt . Pratt, 88 Conn. 446; Scott ». Eagle Fire Ins. Co. 7 Paige, 198; Howell v. Chicago & N. W. R. R. Co. 51 Barb. 378; Ely 2. Sprague, Clarke Ch. 351; Smith v. Prattsville Co. 29 Ala. 503. Nor will equity enjoin the declaration of dividends by a corporation having neither officers nor place of business in the State. Williston v. Mich. 8. &N.I. RB. R. Co, 13 Allen, 400. + The American cases do not support the rule, as stated in the text, that the whole of the profits must be periodically divided. On the other hand, unless there is some obligation created by the charter or by con- tract to the contrary, it is entirely a matter of discretion with the directors whether any, or what, dividend be declared. They are to manage the affairs of the corporation in this, as in every other respect as wise, prudent and honest men manage their own affairs. See note, p. 140. 1388 THE FINANCIAL AFFAIRS OF CORPORATIONS. account at a subsequent time out of capital; and may, if necessary, raise fresh capital under their borrowing powers for that purpose. In this case Lord Hatherley, L. C., said: “No doubt many great frauds have been practiced by companies, both upon themselves and- sometimes, unfortunately, upon the public, by carrying to capital account things that ought to go to revenue account, and thereby leaving an imaginary profit, which is no profit at all. But the bill avers nothing of this kind distinctly and definitely, and the affidavit does not go beyond it. The affidavit verifies a quantity of reports, out of which I am to pick the items as I best may, and to ascertain whether they should or should not have been charged to capital or revenue ac- count. IfI saw anything grossly extravagant or fraud- ulent in them, such as the working expenses of the year, or the wages of the men carried to capital account, in order to make things look pleasant, as it is called, I should have to pause, and consider how it might be proper for this court to deal with transactions of that kind. * * * * Therefore, the whole of the aver- ment, as I read it here, is really this, that the directors have said in their report that they are going to carry back to revenue what they have borrowed from it, for the purpose of capital; and when they have carried that back to revenue, then they are going to make a divi- dend. I do not see anything ultra vires in what is either there alleged or suggested.” Where dividends have been declared under a de- lusive and fraudulent balance sheet, those who have re- ceived and those who declared the same may be com- pelled, upon the winding up of the company, to refund the same. To accomplish this purpose proceedings may be had against the parties liable, either by bill or by CAPITAL AND PROFITS. 189 application to the summary jurisdiction vested in the court by sections 101 and 165 of the companies act of 1862.1 * * Re Mercantile Trading Company, Insurance Company, Rance’s Case, L. R. Stringer’s Case, L. R. 4 Ch. 475, and 6 Ch, 104. eases there cited. Re County Marine * Dividends improperly declared and paid may be recovered back. The assets of a corporation are a trust fund for the payment of its debts, and its creditors have a lien thereon and the right to priority of payment over its stockholders. Where property of a corporation has been divided among stockholders, before its debts have been paid, a judgment creditor, after return of execution unsatisfied, may maintain an action, in the na- ture of a creditor's bill, against a stockholder to reach what was so re- ceived by him. It is immaterial, whether he got it by fair agreement or by a wrongful act. Bartlett v. Drew, 57 N. Y. 587; see, also, Osgood ». Laytin, 3 Keyes, 521; Gratz v. Redd, 4 B. Mon. 178; Curran ». State of Ark. 15 How. 304; Sawyer v. Hoag, 17 Wall. 610. A shareholder in a corporation has no legal title to the property or profits of the corporation, until a division is made or a dividend actually declared. Goodwin ». Hardy, 57 Me. 143; Minot v. Paine, 99 Mass. 101; Phelps v. Farmers’ &c. Bank, 26 Conn. 269; Karnes ». Rochester & G. V. R. R. Co. 4 Abb. Pr. N. 8. 107; Hyatt. Allen, 56 N. Y. 553; Brundage ». Brundage, 1 N. Y. Supr. Ct. (T. & C.) 82; Curry 0. Woodward, 44 Ala. 305. But a dividend declared of the earnings of the company, becomes thereupon the individual property of the stockholder, to be received by him on demand. It is a severance from the common fund of the com- pany, of so much for the use and benefit of each corporator in his indi- vidual right, which may be demanded by him, and if refused become the subject of an action for money had and received to his use. A dividend declared, becoming the individuai right of the stockholder, is thereafter held as a trust fund that cannot be devoted to other objects. Accord- ingly, the action of assumpsit lies to recover the dividend as a debt due from the corporation to the individual stockholder, after demand of pay- ment. Granger v. Bassett, 98 Mass. 462; Stoddard »v. Shetucket F. Co. 34 Conn. 542; Kane -v. Bloodgood, 7 Johus. Ch. 90; Carpenter v. N. Y. & N. H. R. R. Co. § Abb. Pr. 277; Jones 2. Terrehaute & R. R. R. Co. 29 Barb. 358; 8. c. 57 N. Y. 196; Howell v. Chic. & N. W.R.R. Co, 51 Barb. 578 ; King v. Paterson & H. R. R. R. Co. 5 Dutch. 82; 8. c. Ibid. 504; Jackson ®, Plank-road Co. 2 Vroom, 277; Brown v. Lehigh Coal & Nav. Co. 9 Penn. St. 207; P. W. & B. R. R. Co. v. Cowell, 28 Penn. St. 329; Marine Bank o. Biays, 4 H. & J. 358; State o. Balt. & O. R. R. Co. 6 Gill, 363; City of Ohio »v. Cl. & Tol. R. R. Co. 6 Ohio St. 489; and in Le Roy v. Globe Ins. 140 THE FINANCIAL AFFAIRS OF CORPORATIONS. But though the court will, as abundantly appears from the foregoing authorities, restrain the wrongful declaration or payment of dividends, it will not inter- fere in matters of internal arrangement—it will not, for instance, lay down, as a rule, that there must be act- ually cash in hand or at the banker's to the full amount of the dividend declared, or be astute in searching out minute errors in calculation in an account honestly made out and openly declared. SECTION : II. SHARES.* The capital of a company is usually divided into portions styled shares. Such shares may be of one 1 Per Selwyn, L. J., L. R.4 Ch. 492, Company, 20 L. T. (N. 8.) i see post, 493; Yool v. Great Western Railway part IV, ch. I. Co. 2 Edw. Ch. 657, the Vice Chancellor was of opinion, that a bill in equity would lie, to recover possession of the money as a trust fund. The dividends must be general, on all the stock, so that each stock- holder will receive his proportionate share. The directors have no authority to declare a dividend on any other principle. Jones v. Terre- haute & R. R. R. Co. 29 Barb. 358; 8. c. 57 N. Y. 196; Luling o. Atlantic Mut. Ins. Co. 45 Barb. 510; Atlantic &c. Tel. Co. 0. Commonwealth, 3 Brews. 366; State v. Balt. & O. R. R. Co. 6 Gill, 8363; Ryder o. Alton & Sangamon R. R. Co. 13 Ill. 516. The declaration of dividends is discre- tionary with the directors of the corporation, and so long as they act in good faith the courts will not interfere, even though they may deem their judgment erroneous. State of La. v. Bank of La. 6 La. 745; Ely v. Sprague, Clarke Ch. 351; Karnes v. Roch. & Gen. V. R. R. 4 Abb. Pr. N. 8. 107; Luling v. Atl. Mut. Ins, Co. 45 Barb. 510. *Although in some of the earlier American cases shares of corpora- tions were treated as real estate (see Tippets v. Walker, 4 Mass. 595; Howe v, Starkweather, 17 Mass. 240; Weller v. Cowles, 2 Conn. 567; Meason’s Estate, 4 Watts, 341), and to obviate this rule express provisions were in- serted in railway and other charters, that the capital stock should be deemed and taken as personal estate (see, ¢. g.. N. Y.1 R. L. 247; Laws of N. J. 1830, p. 88, sect. 17), it is now well established that shares of SHARES. 141 description only, being of one and the same amount, and conferring on all holders thereof the same rights, all corporations are personal property. Bank of Waltham ». Waltham, 10 Metc, 334; Hutchins v. State Bank, 12 Metc. 421; Wheelock », Moulton, 15 Vt. 519; Isham », Ben. Iron Co. 19 Vt. 230; Arnold ». Ruggles, 1 R. I. 165; Denton v. Livingston, 9 Johns. 96; Gilpin ». Howell,5 Penn. St. 41; Sleighmaker v. Gettysburgh Bank, 10 Penn. St. 378; State v. Franklin Bank, 10 Ohio, 91; Johns v. Johns, 1 Ohio St. 350; Hart o. State Bank, 2 Dev. Eq. 111; Plan. & Mer. Bank ». Leavans, 4 Ala. 753; Union Bank 2. State, 9 Yerg. 490; Brightwell ». Mallory, 10 Yerg. 196. The capital stock of an incorporated company has not, neither has the certificate or other evidence of title or ownership, any of the qualities of commercial or negotiable paper. As arule, the purchaser or assignee of shares of the capital stock in a corporation acquires no other or better title than the seller or assignor has, and takes it subject to the legal and equitable rights of third persons. Weaver v. Barden, 3 Lans. 388; 5. c. 49 N. Y. 286; Mech. Bank v. N. Y.& N. H. R. R. Co. 18 N.Y. 599; Dunn ». Commercial Bank, 11 Barb. 580. The common practice of passing the title to stock by delivery of the certificate with blank assignment and power, has been repeatedly shown and sanctioned in cases which have come before our courts. Such was es- tablished to be the common practice in the city of New York, in the case of The N. Y. & N. H. R. R. Co. », Schuyler, 34 N. Y. 80, and the rights of parties claiming under such instruments were fully recognized in that case. The holder of the certificate, as between himself and the person from whom he received it, acquires a perfect title to the stock; against the corporation he has a right of action for damages, the measure of which is the market value at the time of demand and refusal to transfer; but a subsequent bona jide purchaser from him, in whose name the stock still stands upon the books, after a transfer permitted by the corporation, be- comes vested with a complete title to the stock, and cuts off all the rights and equities of the holder of the certificate to the stock itself. Holbrook 0. New Jersey Zinc Co. 57 N. Y. 616; McNeil o Tenth National Bank, 46 N. Y. 825; s.c. 55 Barb. 50; Weaver 2. Barden, 3 Lans. 338; 5. c. 49 N. Y. 286; Broadway Bank ». McElrath, 2 Beas. 24; Hunterdon Co. Bank ». Nassau Bank, 2 C. E. Green, 496; Mt. Holly &c. T. Co. ». Ferree, 2 C. E, Green, 117; Bridgeport Bank ». N. Y. & N. H. R. R. Co. 30 Conn. 270. In Bank ». Lanier, 11 Wall. 386, the court say: ‘Stock certificates of all kinds have been constructed in a way to invite the confidence of business men, so that they have become the basis of commercial transactions in all the large cities of the country, and are sold in open market the same as other securities. Although nei- ther in form nor character negotiable paper, they approximate to it as nearly 142 THE FINANCIAL AFFAIRS OF CORPORATIONS. privileges, and liabilities;* or they may be of various classes, and with various denominations, the possessors of shares of one class having rights and being under liabilities differing widely from those belonging to the shares of other classes. The number and respective amounts are usually fixed by the acts of parliament and the other instruments creating a company; and when this is so, the characteristics of such shares become essential facts of the corporation, and cannot be changed by the action of any or all of the members thereof. But if and in so far as such matters have not been de- termined upon, it is competent for the corporation, either in general meeting or by its directors, to deter- mine upon them, and from time to time to vary them.t Smith v. Goldsworthy’ is sometimes cited, as showing that once the value of the shares fixed, no change therein can ever afterwards be made. But this case seems rather to be an authority to the effect that the amount of capital cannot be reduced, not that the shares cannot be varied if the capital remain unaltered, since, in the subsequent case of Ambergate Railway Company v. Mitchell, it was decided that, under certain circum- stances, this might be done. The act incorporating the Ambergate Railway Company provided that, for the purpose of voting, £25 of the capital should represent a share, and that no one should vote in respect of any less 14Q, B. 430; 12L, J. QB. 192. *4 Ex. 540; 19 L. J. Ex. 89. as practicable. * * * No better form could be adopted, to assure the pur- chaser that he can buy with safety.” See Leitch o. Wells, 48 N. Y. 585; Salisbury Mills v. Townsend, 109 Mags. 115. * Stcckholders are entitled to equal rights without preference or dis- crimination, unless there has been created a preference either by the charter or by a contract to which they are parties. See Luling v. Atlantic Mut. Ins. Co. 45 Barb. 510, and other cases cited in note, page 140. . +See, as to varying the amount of capital stock, ante, p.112 and notes. SHARES, 143 proportion. After the formation of the company the shares were altered to £20 each, and the directors made a call on such; and it was held that the calls were not illegal by reason of the shares having been altered. The judgment is not very clearly reported ; but it evi- dently lays down that where the constating instruments fix the amount of the shares, not for all purposes, but only for some particular purpose, then it is competent for the company to fix the amount. The majority of companies, however—at least, of trading companies—are within the companies acts of 1862 and 1867; and it seems that such companies can in no respect vary the nature of their shares, save by subdividing them. Even this can be done only by virtue of the express enactment contained in the 21st section of 30 & 31 Vict. c. 131, which enables any com- pany, limited by shares, by a special resolution, so far to modify the conditions contained in its memorandum of association, if authorized so to do by its regulations a’ originally framed, or as altered by special resolution, as to subdivide its existing shares or any of them. Previously to this enactment such a subdivision was, as to these companies, illegal, even though done in pursuance of an express authority contained in the con- stating instruments. The memorandum of association of the Financial Corporation provided that the capital should consist of shares of £100 each, and the articles (clause 7) gave the board power, “by a resolution passed by a majority, consisting of not less than two- thirds of the whole number of directors, to reduce the nominal value of the shares, or any of them, by divid- ing the same into a larger number of shares of any nominal value authorized by law.” This power the directors exercised by converting each £100 share into 144 THE FINANCIAL AFFAIRS OF CORPORATIONS. five £20 shares; but it was decided that such conver- sion was unauthorized and void. Lord Cairns, Lord Justice, said: “I am clearly of opinion that, under | these sections (Z. ¢, 8, 12, 22, 25, and 28, of 25 & 26 Vict. c. 89), the amount of shares into which the capital is divided must be stated in the memorandum; that these shares must be identified by numbers; that no transfer of less than one share can be made; that no departure from the memorandum by way of lowering the value of or subdividing the shares can be admitted ; and that no person can become a member or corporator, except through the ownership of at least one share, which share is to be of at least the amount named in the memorandum. The provisions in the sections to which I have referred for the consolidation and increase in the nominal value of the shares, and for the notice to the registrar of such consolidation and increase, seem to me to make more emphatic the prohibition against any change lowering the nominal value of the shares.” But a person may, by his acquiescence in such a division, be estopped from afterwards denying the le- gality of the same;** and if the original shares which have been thus subdivided can be traced and identi- fied, the holders of them will still remain liable, and may be placed on the list of contributories.® ? Re Financial Corporation, Feiling’s ley, 30 L. J. Ex. 5; Re Financial Cor- and Rimington’s Case, L. R. 2 Ch. 714, poration, King’s Case, L. R. 2 Ch. 714. 482. See New Zealand Banking Corpo- *Feiling’s & Rimington’s Case, ubi ration, Sewell’s Case, L. R. 3 Ch, 131. supra; Sewells Case, ubi supra. ? Hull Flax d&c. Company v, Welles- * The acceptance by a stockholder of a dividend upon his stock is not a ratification of illegal conduct of directors. Hilles o. Parrish, 1 Mc- Carter, 380. , SHARES. 145 Preference Shares. Very frequently a company issues shares, having a dividend payable in priority to that upon the ordinary shares. To do this the power must have been given in the constating instruments.’ The holders of such shares are entitled to be paid arrears of dividend out of future profits, but without interest on the arrears,’ unless there should be express statutory provisions to the contrary.® ‘When such power exists it must be employed solely and expressly for its special purpose, viz., the obtaining capital. In Hoole v. Great Western Railway Company,' where the defendants had power to raise additional capital by the issue of shares, and to allot to them a preferential dividend, it being enacted that dividends should not be paid out of any moneys received for the shares, and that no share should be issued until one- fifth of the amount had been paid, they were restrained from paying dividends in preference shares. With regard to shares of various descriptions, the companies act, 1867, 30 & 31 Vict. c 131, provides, by section 24, that any company under the companies act, 1862, may, if authorized by its regulations as originally framed, or as altered by special resolution, make arrangements on the issue of shares for a differ- ence between the holders of such shares in the amount of calls to be paid, and in the time of payment of such calls. But whether this enactment will justify the is- 1 Re National Patent Steam Fuel Company, ex parte Worth, 4 Drew. 529; 28 L. J. Ch, 589; Hutton v, Scarborough Cliff Hotel Company, 2 Dr. & Sm. 521. * Henry v. Great Northern Railway Company, 4K. & J.1; 27 L. J. Ch. 1; Corry v. Londonderry & Enniskillen Railway Company, 29 Beav. 263; 30L. J. Ch. 290 ; Coates v, Nottingham Water- works Company, 30 Beav. 86. Asto the 10 rights of holders of different kinds of preference shares, see Matthews v, Great Northern Railway Company, 28 L. J. Ch. 375; Coey v. Belfast and Down Railway Company, Ir. Rep. 2 C. L. 112. 3 See 26 & 27 Vict. c, 118, 5. 14, . amended by 32 & 33 Vict.’c. 48. ‘L. BR. 3 Ch. 262; see ante, p, 135, where the facts are stated. 146 THE FINANCIAL AFFAIRS OF CORPORATIONS. sue of preference shares, unless powers in that behalf had been given to a company at its inception, must be considered doubtful. The same statute, by section 27, allows companies, under certain conditions, with respect to any share. which is fully paid up, or with respect to stock; to is- sue, under their common seal, a warrant, stating that the bearer of the warrant is entitled to the shares or stock therein specified. This power is apparently not possessed by companies not coming within the provis- ion of the companies acts, 1862 and 1867." It is almost needless to add that the rights of the preference shareholders, whether individually or in a body, cannot be modified save by the acquiescence of the individuals affected; and that the Court of Chan- cery will, where necessary, interfere to restrain acts of” the company in derogation of their rights.2 But these shareholders are not creditors, not even as to dividends in arrear, and therefore in a winding up they can rank only pari passu with the other members.* ‘The companies clauses act of 1845, ss. 6 & 9, and the companies act of 1862, s. 22, require the shares of companies, which fall under their regulations, to be numbered. This provision was held‘ to be satisfied where, though the register did not show the numbers of the defendant’s shares, it could be proved, aliunde, that the shares had been in ? See Re General Company for Pro- motion of Land Credit, L, R. 5 Ch. 363, * See especially Henry »v. Great Northern Railway Company, 4 K. & J. 1, and 1D, G. & J. 606. * Re London India Rubber Company, L, R. 5 Eq, 619, * East Gloucester Railway Company », Bartholomew, L, R. 8 Ex, 15; com- fact distinguished by num- ys Trish Peat ged v. Philips, 1 . & §. 629; 380 L. J. Q. B. 368; Wolverhampton Waterworks Company 2, Hawkesford, 29 L. J. 0. P.121. As to the effect of the existence of two sets of shares with the same numbers, see Londop & County Insurance Company, Jones’ Case, 27 L, J. Ch. 666. SHARES. 147 bers which had been inserted in a book kept by the plaintiffs.* * Preferred shares can only be issued where a power to do so is expressly given in the charter or in some general statute, or where the language of the charter or statute does not limit the corporation to one class of stock. The power to issue preferred stock has sometimes been claimed to exist from the power to borrow money and to secure such borrowed money by a pledge of income, it being contended that the issuing of preferred stock is in theory, as it certainly is in practice, a mode of borrowing money, as distinguished from an investment at the hazard of the enterprise, as in the case of the original subscriptions to the capita! stock. Unless the con- tract by which preference shares are issued, having a sum stipulated as interest, expressly provides that the interest shall be cumulative, the hold- ers of such stock will be entitled to payment only out of the income earned in any one year; and in estimating such earnings, the entire year should be considered, and not any fraction of a year. There is this dis- tinction between dividends or income upon preferred stock and those upon common stock, that, whereas in regard to the latter, the question of their declaration is a matter of discretion with the directors with which courts will not generally interfere (see note to p. 140), in regard to the former, the question of ability to pay is to be decided by the court whose inter- position is invoked, and the decision of the directors is not conclusive. See Bailey v. R. R. Co. 17 Wall. 96; 8. c. 1 Dill. 174; St. John ». Erie R. R. Co. 10 Blatch. 271; affi’d, 11 Alb. L. J. 83; Bates o. Andr. & Ken. R. R. Co, 49 Me. 491; Rutland R. R. Co. v. Thrall, 35 Vt. 586; Barnard ». Vt. & Mass. R. R. Co. 7 Allen, 512; Williston ». M. 8. & S. I. R.R. Co. 13 Allen, 400; Taft ». Hart. Prov. & F. R. R. Co. 8 R. I. 310; Thompson o. Erie R. R. Co. 45 N. Y.468; Prouty o. M. 8. & N. I. R. R. Co. 1 Hun, 655; Chase v. Vanderbilt, 83 N. Y. Supr. Ct (5 J. &S.) 384; Westchester & Phila. R. R. Co. ». Jackson (Penn. Supreme Ct.), 7 Leg. Gaz. 58; McLaughlin ».’D. & M. R. RB. Co. 8 Mich. 100; Hazelhurst 0. Savannah R. R. Co. 43 Ga, 13. Payments of interest on preferred stock can only be made out of profits bona fide earned; for a corporation has no power to contract for the pay~ ment of interest or dividends on its capital stock in excess of the earnings: of the company. Pittsburgh &c. R. R. Co. », Allegheny Co. 68 Penn. St.. 126. An agreement by a corporation to pay annual premiums to preferred: stockholders, without reference to ability to pay them from earnings, is: void as opposed to public policy. Lockhart 1. Van Alstyne (Sup..Ct.. Mich.), 14 Am. Law Reg. N. 8. 180; see Curran o. Arkansas, 15 How.. 304,, and compare Evansville R. R. Co. ». Evansville, 15 Ind. 595, and other cases cited in note to page 134. 148 THE FINANCIAL AFFAIRS OF CORPORATIONS. Scrip. “Scrip” is often issued by the projectors of com- panies, generally of those coming under the operation of special acts. This consists of certificates or other documents, entitling the holder to become a proprietor in the future company. The liability imposed upon the scrip receiver will principally depend upon the engage- ment he has entered into with the projectors; he may negotiate the scrip, but he will nevertheless remain liable if the company be formed, until the name of the purchaser be entered upon the register.’ * . ‘Midland Great Western Railway Cocker, 4 Beav. 59; and the cases cited Company v. Gordon, 16 M. & W. 804; in next note. 16 L. J. Ex. 166. But see Jackson ». * Preliminary subscriptions to stock become vested in the corporation when formed; the right of membership is a sufficient consideration for such subscription, and there results a promise to pay, implied, if not ex- press, which will support an action to recover on calls on such subscrip- tions by the company, after its complete incorporation. In the general laws providing for the incorporation of companies, which may now be ‘considered the accepted mode in this country for the creation of corpora- tions, preliminary subscriptions and payments to certain amounts are required from some of the corporators of the inchoate body, as a condition precedent, and these subscriptions become part of the assets of the cor- poration when fully organized. See Penobscot R. R. Co. ». Dummer, 40 Me, 172; Watkins ». Eames, 9 Cush. 587; People’s Ferry Oo. ».. Balch, 8 ‘Gray, 308; Danbury & Norwalk R. R. Co. ». Wilson, 22 Conn. 485; Buf- falo & N. Y. R. R. Co. v. Dudley, 14 N. Y, 336; Eastern Pl. R. ‘6. v% Vaughan, 14 N. Y. 546; Lake Ontario R. R. Co. 0. Mason, 16 N. Y. 451; ‘Ren. & Wash. Pl. R. Co. 0. Barton, 16 N.Y. 457; Stanton o. Wilson, 2 Hill, 153; Ham. & Deansville Co. v. Rice, 7 Barb. 157; Ref’d Prot. Dutch Ch. » Brown, 29 Barb. 335; s. c. 4 Abb. Ct. App. Dec. 31; Tag- ‘gart 0. West Md. R. R. Co. 24 Md. 563; Selma & Tenn. R. R. Co. 2. ‘Tipton, 5 Ala. N. 8. 787; Anderson 2, New. & Rich. R. R. Co. 12 Ind. 376; Johnson ». Wabash R. R. Co. 16 Ind. 389; Heaston o. Cin. & Ft. W. R. R. Co. 16 Ind. 275; Griswold ». Peoria Univ. 26 Ill. 41; Johnston v. Ewing Fem. Univ, 35 Ill. 518; Tonica R. R. Co. 0. McNeeley, 21 Ml. 71; Oregon Central R. R. Co, o. Scoggin, 8 Or. 161; but see Strasburg SHARES, 149 Sometimes, after the formation of a company, scrip is issued to applicants, instead of an allotment of shares. What is the exact effect of such an arrangement. is not settled. It must, however, it is presumed, be determined by the terms under which such scrip is issued, as read in connection with the constating instruments of the corporation. A decision in point is that of Re Little- hampton d&c. Steamship Company, Ormerod’s Case." The articles of association of the company provided that the directors, instead of entering allottees of shares on the register of members, might issue to them scrip certificates entitling the holders to the shares therein named, subject to the payment of the instalments at the times therein mentioned; that the word “shareholder” should include scripholder; that the shares for which scrip was issued should be transferable by delivery of the scrip, and the holder of the scrip should be the only person recognized as entitled to the shares, and that the scripholder, on surrendering his scrip, should be entitled to be entered on the register of members in respect of the shares mentioned in the scrip certificate. In No- vember, 1863, Ormerod applied in writing for 100 shares. These were allotted him, and he paid a deposit of £1 per share; but his name was put on the register for ten shares only, and for the remaining ninety he received provisional scrip certificates, declaring the holder en- 21, R. & Eq. 110. Compare Eustace v. Dublin Trunk Connecting Railway Company, L. R. 6 Eq. 182. R. R. Co. ». Echternacht, 21 Penn. St. 220; Gleaves v. Brick Ch. T. Co. 1 Sneed, 491. As to when the preliminary subscriptions become obligatory, see Troy & Boston R. R. Co. v. Tibbits, 18 Barb. 297; Burt . Farrar, 24 Barb. 518; Poughkeepsie & 8. P. Pl. R. Co. v. Griffin, 21 Barb. 454; 8, c. 24.N. Y. 150; Thrasher v. Pike R. R. Co, 265 Ill. 398. 150 THE FINANCIAL AFFAIRS OF CORPORATIONS. titled to the shares therein numbered. One Gregg similarly applied for shares, and received a notice from the company that he might have scrip certificates for the shares allotted to him; but he did not obtain the certificates, and the directors subsequently entered his name on the register of members. The master of the rolls held Ormerod not to be, and Gregg to be, a con- tributory.! Lord Romilly, M.R., followed the principle laid down in Ellis’s Case,? that the articles of associa- tion made a clear distinction between members of the company and mere scripholders, these latter not becom- ing members or liable as such till shares were issued to them, and their names put on the register. Calls. * Companies having their capital divided into shares have, as incident thereto, the power to make calls. It is purely a question of internal arrangement in whom this power is vested. It will generally be in the direct- ors; and where it is so, a call made by those who are actually directors, and not yet removed, will be good, t But if made by persons not having the power,’ or not 1 Compare Ellis’s Case, arising from the winding up of the same company before the M. R., 34 Beav. 256; affirmed on appeal, 2D. G. J. & Sm, 621; 34 L. J. Ch, 287. See other cases of scrip cer- tificates, Newry and Enniskillen Rail- way Company v. Edmunds, 17 L. J. Ex. 102; Hyam’s Case, Re Mexican &e. Company, 1 D.G.F. & J. 75; 29 L. J. Ch, 243; De Pass’s Case, 4D. G. & J. 544. As to certificates of shares, see 8 & 9 Vict. c. 16, ss. 11-13, and 25 & 26 Vict. v. 86, s. 31; and Broadbent ». Varley, 12 C. B. N.S. 214. 2 Ubi supra, 5 Swansea Dock Company v. Levien, 20 L. J. Ex. 447. Compare Southampton Dock Company v. Richards, 1 Man. & Gr, 448, ‘ Howbeach Coal Company v. League, 5H. & N. 161. * On the general subject of calls or assessments upon shares and the defenses thereto, see Ang. & Ames on Corps. c. xv; 1 Redf. on Rail- ways, §§ 47-60; see also ante, note to-p. 105. + York & Cumberland R. R. Co. ». Ritchie, 40 Me. 525; Hays 2. Pittsburgh R. R. Co. 38 Penn. St. 81; Ross . Lafayette & Ind. R. R. Co. 6 Porter (Ind.), 297; Roberts ». Ohio & Mobile R. R. Co. 32 Miss. 378. SHARES, 151 acting at a board meeting when this is required, ‘the “all will be simply nugatory.! * Calls must in all respects, both as to times and amounts, be made, whether by the company in general meeting, or the directors, in such a way as to press equally upon all;? and for the furtherance of the cor- porate purposes, + @. ¢, for the bona fide purpose of obtaining capital, and to enable any particular mem- bers® to escape or lessen their liability. t Of course calls can be made only for purposes not ultra vires of the corporation. Ifit isintended to devote the proceeds to other purposes, the call imposes no lia- bility either at law or in chancery upon a shareholder. | 1 Kirk v, Bell, 16 Q. B. 290. And see post, Part III, ch. V. 7 Preston v. Grand Coll. Dock Com- pany, 11 Sim. 327, See Richmond and Painter’s cases, private members ; and Gilbert’s case, L. R. 5 Ch. 559, as to directors, ‘South Eastern Railway Company v. Hebblewhite, 12 A. & E. 497; Shrop- shire Union Railway Company v. Ander- 4K. & J. 305, as to calls made favoring son, 3 Ex. 401; Welland Railway Com- . pany v. Blake, 6H. & N, 410. * The fact that the directors have been illegally elected cannot be set ‘up as a defense to a suit for the payment of stock. Eakright v. Logans- port R. R. Co. 13 Ind. 404. + Any fundamental change in the purposes of the company will relieve ‘the subscriber from calls. See ante, p.'79, note; Union Locks Co. ». Towne, 1N. H. 44; Stevens ». Rut. & Burl. R. R. Co. 29 Vt. 545; Dan. & Nor. R. R. Co. 2. Wilson, 22 Conn. 435; Hart. & N. H. R. R. Co. v. Croswell, 5 Hill, 383; Del. & Alt. R. R. Co. v. Irick, 3 Zab. 321; Kenosha R. & R. I. R. R. Co. ». Marsh, 17 Wis. 18; see Hays cv. R. R. Co. 61 Ill. 165. { Mann ». Pentz, 2 Sandf. Ch. 258; Sagory v. Dubois, 3 Sandf. Ch. 465 ; Hart. & N. H. R. R. Co. o. Boorman, 12 Conn. 530; Everhart v. Chester R. R. Co. 28 Penn. St. 339; Graff o. Pittsburgh R. R. Co. 31 Penn. St. 489; Hays v. Pittsburgh R. R. Co. 38 Penn. St. 81. But unless rights of creditors intervene, the company may release subscribers on proper con- sideration. Miller 7. Second Building Assn. 50 Penn. St. 32; Gelpcke ». Blake, 19 Iowa, 263; Hallo. Selma & Tenn. R. R. Co, 6 Ala. N.S. . 741; Haynes v. Palmer, 18 La, Ann. 240; compare Burke ». Smith, 16 Wall. 595; N. Albany v. Burke, 11 Wall. 106; Curran 2. State, 15 How. 304; Wood ». Dummer, 3 Mason, 308; Slee v. Bloom, 19 Johns. 456. | These purposes must be such as were originally authorized or natu- rally auxiliary thereof. See ante, notes pp. 79, 83. 152 THE FINANCIAL AFFAIRS OF CORPORATIONS. The Court of Chancery will interfere to restrain the making of calls for an illegal object ;* or the enforcing them against a shareholder, inveigled into taking shares by the fraud of the company or its officers;** but it will not interfere if the application of the proceeds be in reality a matter of internal economy, and within the scope of the company, or of a majority of its members. to determine.’ + 7 Hodgkinson v. National Live Stock 5 See Yettg v. Norfolk Railway Com- Insurance Company, 26 Beav. 478;4D. pany, 3D.G. & Sm. 293; and the other G. & J. 422. similar cases following Mozley v, Al- 2 Smith v. Reese River Company, L. ston; and post, Part VI, ch. I. R.4 HL L. 64, . * Subscriptions obtained by fraud cannot be enforced against the sub- scriber, and while any parol representations or agreements made at the time of subscribing for stock, inconsistent with the written terms of the subscription, are inoperative and void and inadmissible to vary it, still this rule does not exclude such parol evidence showing fraud sufficient to: vitiate any contract. See Kennebec R. R. Co. 0. Waters, 34 Me. 369; Piscataqua Ferry Co. v. Jones, 39 N. Hamp. 49; Blodgett ». Morrill, 20 Vt. 509; Conn. & Pass. River R. R. Co. v. Bailey, 24 Vt. 465; Conn. R. R. R. Co. ». Baxter, 32 Vt. 805; Burrows 0. Smith, 10 N. Y. 550; N. Y. Exch. Co. v. De Wolf, 31 N. Y. 273; s. c. 5 Bosw. 593; Coit . Pittsburg Female College, 40 Penn. St. 439; N. O. R. R. Co. », Leach, 4 Jones Law,, 340; Martin v. Pensa. Coal Co. 8 Fla. 370; Reeves v. P. R. Co. 30 Ala. 92; Smith v, P. R. Co, 30 Ala, 650; Hester c. Memphis R. R. Co. 82 Miss. 378; Walker v. Mobile R. R. Co. 34 Miss, 245; Ellison v. Mobile R, R. Co. 36 Miss. 572; Henderson v. R. R. Oo. 17 Tex. 560; Miss, R. R. Co. 0. Cross, 20 Ark. 443; Cunningham ». Edgefield R. R. Co. 2 Head, 23; E. Tenn. R.. R. Co, 7. Gammon, 5 Sneed, 567; Wight ». Shelby R. R. Co. 16 B, Mon.. 4; La Grange R. R. Co. 0. Mays, 20 Mo. 64; Johnson v. Crawfordsville R. R. Co, 11 Ind. 280; Keller 0. Johnson, 11 Ind. 337; Hawter 0. Ohio & Miss. R. R. Co. 14 Ind. 174; Hardy ». Merriweather, 14 Ind. 203; Thorn-. burgh v. Newcastle R. R. Co. 14 Ind. 499, + The power of forfeiture and sale of shares, upon failure of the sub- scribers to pay calls, is not an exclusive, but a cumulative remedy, unless. the charter or some general statute applicable to the subject otherwise enacts, The obligation of actual payment is created in all cases by a sub- scription to capital stock, except the terms of the subscription are such as: plainly to exclude it. Glass Co. x. Alexander, 2 N. Hamp. 380; White Mts. R. R. Co. v. Eastman, 834 N. Hamp. 147; Essex Bridge Co. v. Tuttle, 2 Vt. 393; City Hotel Co. ». Dickinson, 6 Gray, 586: Lexington & W.. SHARES. 153 Paid up shares are not unfrequently issued by com- panies, but such an issue is ultra vires, at least to this extent, that the parties taking such shares will, on a winding up, be contributories in respect thereof, unless they shall have given for them an equivalent in money’s worth. * To relieve from the payment in money, the ? Drummond’s Case, L. R. 4 Ch. 772; Case, L. R, 11 Eq. 181; Dent's and Pell’s Case, L. R. 5 Ch. 11; Schroder’s Forbes’ Case, L. R. 8 Ch. 768, Cambridge R. R. Co. 0. Chandler, 18 Met. 811; Hart. & N. H.R. B. Co. v, Kennedy, 12 Conn. 499; Ward v. Griswoldville Mfg. Co. 16 Conn. 593; Mann ». Cooke, 20 Conn. 178; Goshen Turnpike Co. o. Hurten, 9 Johns. 217; Dutchess Cotton Mfg. Co. 2. Davis, 14 Johns. 238; Harlem Canal Co. o. Seixas, 2 Hall, 504; Mann ». Pentz, 2 Sandf. Ch. 257; Sagory 2. Dubois, 3 Sandf, Ch. 466; Palmer v. Lawrence, 3 Sandf. Sup. Ct. 161; Spear v. Crawford, 14 Wend. 20; Troy T. Co. 2. McChesney, 21 Wend. 296; Mann ». Currie, 2 Barb. 294; Northern R. R. Co. 0. Miller, 10 Barb, 260; Troy -& R. R. R. Co. v. Kerr, 17 Barb. 581; Troy & Boston R. R. Oo. v. Tibbits, 18 Barb. 297; Ogdensburg &c. R. R. Co. v. Frost, 21 Barb. 641; Delaware Canal Co. v. Sansom, 1 Binn. 70; Tar River Nav. Co. 2. Neal, 8 Hawks, 520; Greenville & Col. R. R. Co. v. Smith, 6 Rich. 91; Charlotte & 8. C. R. R. Co. » Blakely, 8 Strob. 245; Hightower ». Thornton, 8 Ga. .486; Beene ». Cahawba & M. R. R. Co. 8 Ala. 660; Selma R. R. Co. vr. Tipton, 5 Ala. 787; Gayle ». Cahawba R. R. Co. 8 Ala. 586; Freeman 2. Winchester, 10 Sm. & M. 577; Elysville v. O’Kisco, 5 Miller, 152; Gratz ». Redd, 4 B. Mon. 178; Banet ». Alton & Sangamon R. R. Co. 18 Il. 504; Klein 0. Same, 13 Ill, 514; Ryder v. Same, 18 Ill. 516; Peoria R. R. Co. 2. Elting, 17 Ill. 429; see, however, Ken. & Port. R. R. Co. 0, Kendall, 31 Me. 470; Seymour ». Sturges, 26 N. Y. 184. But the corporation must elect which remedy to pursue—at least it cannot forfeit the stock and then sue; so where an action had been com- menced to recover certain instalments, and then a further call was made and the stock forfeited for non-paymont of the last call, a plea of the de- fendant of such forfeiture, in bar of further maintenance of the action, was sustained. Small o. Herkimer Mfg. Co. 2 Coms. 330; overruling Herkimer Mfg. Co. v. Small, 21 Wend. 273; 2 Hill, 177; Athol & Enfield R. R. Co. ». Inhab. of Prescott, 110 Mass. 213; New Albany R. R. Co. v, Pickens, 5 Ind. 247. In Brockenborough v. James River Co. 1 P. & H. 94, and Danbury & N. R. R. Co. v. Wilson, 22 Conn. 435, power to sue after sale was given by statute. * The sale of stock in a corporation by the directors at a less rate than 154 THE FINANCIAL AFFAIRS OF CORPORATIONS. consideration must be something given to the company after it is formed; what is given to it before its forma. tion will not do.1* The 25th section of the companies act, 1867, imposes an additional requisite, viz, that every share shall be deemed issued, and “ held subject to the payment of the whole amount thereof én cash, unless the same shall have been otherwise determined by a contract duly made in writing, and filed with the registrar of joint stock companies at or before the issue of such shares.” This enactment has hitherto been con- strued stringently, and persons have been in several in- stances made contributories who have given a full equivalent for their shares, but which equivalent has not been in the form of a payment in cash.’ '1 Re Baglan Hall Colliery Company, see Fothergill’s Case, L. R. 8 Ch. 270; ‘L, R. 5 Ch, 346. Maynard’s Case, L. R. 9 Ch. 60 ; Coates’ ? Cleland’s Case, L. R. 14 Eq. 887; Case, L. R. 17 Eq. 169, Pritchard’s Case, L. R. 8 Ch. 956; but the price fixed in the charteris a fraud upon the law and the stockholders, Sturges 0. Stetson, 1 Biss. 246; Fosdick v. Sturges, 1 Biss. 255; Fisk ». Chic. R, I. & Pac. R. R. Co. 58 Barb, 513; O’Brien o. Same, 53 Barb. 568; Neuse River Nav. Co. v. Com’rs, 7 Jones Liw, 275; see, however, Otter 2. Brevoort Petroleum Co. 50 Barb. 247; Knowlton », Congress (&c. Spring Co. 57 N. Y. 518, Stock cannot be issued as security for the debt of a corporation. Brewster ». Hartley, 37 Cal. 1. * See as to distinction between subscriptions before and after organiza- tion, Pittsburg & Conn. R. R. Co. v. Stewart, 41 Penn. St. 54. NEGOTIABLE INSTRUMENTS. 155 SECTION III. ORDINARY NEGOTIABLE INSTRUMENTS. A corporation has not, as one. of the incidents of its existence, the power to accept bills, or make notes, or be one of the immediate parties to negotiable instru- ments of other descriptions. Such a power must be given to it either expressly or impliedly.* A corpora- tion may possess it expressly either by the provisions of its own constating instruments, or by the direct enact- ments of the legislature.’ Impliedly the power may belong to it in various ways—e. g., by necessary deduction from the purview or the language of an act of parliament. Thus the joint stock companies act of 1844,7 & 8 Vict. c. 110, having in section 45 laid down certain regulations as to the mode in which bills should be accepted, &c., on be- half of companies coming within this statute, it was as- sumed as a matter of course that such companies thereby acquired the power to issue bills and notes.’ The companies act of 1862 contains a section, 47, very similarly worded, and Malins, V. C., thought that it, by implication, invested companies with such a power; but, upon appeal, Cairns, L. J., overruled this opinion.’ *Slark v. Highgate Archway Com- Q. B. 160; Aggs v. Nicholson, 1 H. & pany, 5 Taunt. 792; Murray v. East N. 165; 25 L. J. Ex. 348. India Company, 5 B. & Ald. 204, ® Peruvian Railway Co. v, Thames 7 See Halford v. Cameron’s &c, Rail- and Mersey Marine Insurance Company, way Company, 16 Q. B. 442; 20 L. J. L, R. 2 Ch. 617, * “No question is better settled upon authority, than that a corpora, tion, not prohibited by law from doing so, and without any express power in its charter for that purpose, may make a negotiable promissory note, payable either at a future day or upon demand, when such note is given for any of the legitimate purposes for which the company was incorporated.” Police Jury v. Britton, 15 Wall. 566; Moss ». Averill, 10 N. Y. 449, and cases cited; Richmond F. &c. R. R. Co, v Snead, 19 Gratt. 354; see ante, note to p. 121. 156 THE FINANCIAL AFFAIRS OF CORPORATIONS. Or, again, from a consideration of the business of the company, and of the requirements of the same. But the mere fact that a corporation trades or otherwise en- gages in business is not sufficient to enable it to issue negotiable instruments, and consequently such a power has been denied to waterworks companies in Broughton v. Manchester Waterworks Company,’ to mining com- panies in Dickinson v. Walpy,’* to railway companies in Bateman v. Mid-Wales Railway Company,’ to a cemetery company in Steele 7. Harmer,* to gas com- panies in Bramah v. Roberts,’ to a salt and alkali com- pany in Bult v. Morell,’toa salvage company in Thomp- son v. Universal Salvage Company,’ to a washing com- pany in Neale v. Turton.2 But “corporate bodies may issue promissory notes and bills of exchange where the nature and character of their business warrants it. Here the nature and character of the business is such that the issuing negotiable instruments would be an ordinary and almost necessary incident to it.”® This was said by Page-Wood, L. J., of a company whose ob- jects, as stated in the memorandum of association, were 18 B. & Ald. 1; followed in East London Waterworks Company »v. Bailey, 4 Bing. 283. 710 B, & OC. 128;-compare Bur- mester v, Norris, 6 Ex. 796; 21 L. J. ° 3 Bing. N. C. 963. °12 Ad. & E, 745, 71 Ex, 694; 18 L. J, Ex, 242, *4 Bing. 149, ° Re General Estate Company ex Ex, 48, °L. R.1C. P. 499; Peruvian Rail- way Co, v, Thames and Mersey Marine Insurance Company, L, R. 2 Ch, 617. parte City Bank, L. R. 8 Ch. 758, 761; compare re Land Credit Company of Ireland, ex parte Overend, Gurney and Company, L, R, 4 Ch. 460. 414M. & W. 881. * The right to make promissory notes belongs to mining companies. Moss ». Averill, 10 N. Y. 457; railway companies, Olcott v. Tioga R. R. Co. 27 N. Y. 546; Lucas ». Pitney, 3 Dutch. 221; Hamilton ». Newcastle R. R. 9 Ind. 359; insurance companies, Barker v, Mech. Fire Ins. Co. 8 Wend. 94; manufacturing companies, Mott 0. Hicks, 1 Cow. 518; Clarke». Farmer's Woolen Mfg. Co. 15 Wend. 256; Smith », Eureka Flour Mills, 6 Cal. 1. As to power of municipal corporations to make negotiable instruments, see 1 Dillon on Mun. Corp. §§ 81-83, 404-406, NEGOTIABLE INSTRUMENTS. 157 “to acquire by purchase, lease, or otherwise, freebold, copyhold, leasehold, and other real property, for build- ing thereon, improving, letting, or selling, and the doing of all such other things as are incidental or conducive to the attainment of the above objects.” Or, lastly, from the very wide language used in the charter, deed of settlement, or other documents to de- fine the purposes for which the corporation has been created. This is established by the decision on appeal in the Peruvian Railways Company v. Thames and Mersey Insurance Company.’ This was the case of a company formed under the companies act, 1862, for the purpose of purchasing a concession from a foreign government for the construction of a railway, and form- ing a société anonyme to make arailway. The memo- randum stated that in order to attain their main object the company might do, in England or Peru, or else- where, whatever they thought incidental or conducive thereto. The articles gave the directors a general power to do all things, and make all'contracts, which in their judgment were necessary and proper for the purpose of carrying into effect the object mentioned in © the memorandum. It was decided in the court below, that bills of exchange, accepted in manner prescribed by section 47 of the act, were binding on the company, on the ground that every company constituted under the act of 1862 has power to issue bills of exchange. Cairns and Turner, L. JJ., however, decided, first, that the companies act, 1862, does not confer on all com- panies registered under it, a power of issuing negotiable instruments; but that such a power exists only where, upon a fair construction of the memorandum and arti- cles of association, it appears that it was intended to be iL, R. 2 Ch, 617. 158 THE FINANCIAL AFFAIRS OF CORPORATIONS, conferred ; and, secondly, that such a power existed in the present case, for that although it could not be in- ferred from the nature of the business of the company, it was conferred by the above general words in the memorandum and articles. It is not necessary that bills and notes issued by corporations should be under seal.* Provision has, therefore, usually been made for the issue of such in- struments by the directors or other officials on behalf of the corporation, and various formalities, are also attached to prevent fraudulent or improvident issues. These formalities must be strictly observed or, whatever the nature of the documents in other respects, those actually making them will usually be liable thereon ;* and, as a rule, the corporation will also be liable to such persons as received or negotiated the instruments un- aware of the informalities.’ The authority to issue negotiable instruments is, in an especial degree, liable to be turned to wrong pur- poses. Its exercise is, therefore, scrutinized rather care- fully by the courts, and bills or notes accepted, made, or otherwise negotiated, not merely with a defect in form, but either without power, express or implied, in that behalf, or with such power but for purposes un- connected with the objects of the company will be void, in the hands at least of those cognizant of the nature of the consideration. This is aptly shown by the well- known and leading case of Balfour v. Ernest? which ? Penrose v. Martyn, E. B. & E499; L, J. Ex. 202. The distinction is be- 28 L. J. Q. B.28; Scott» Ebury, L.R. tween a defect in form where the power 2. P. 255; Dutton », Marsh, L. R. 6 to issue exists, and the absence of such Q. B, 361. Compare Lindus v, Melrose, power, See Part III, ch. 6, secs, 1&2. 8H. & N.197; 27 L, J. Ex. 826, 55 C0. B.N.S. 601; 28 L. J.C. PL ? Gordon v, Sea, Fire, and Life As- 170, The facts are stated ante, p. 82. surance Company, 1 H. & N. 599; 26 * See mast Part TIT eh 8 can 9+ Maca m Awarill 1M WT W AAO NEGOTIABLE INSTRUMENTS. 159 has already been mentioned. Here the directors of a joint stock insurance company were authorized by the deed of settlement to draw bills on account of the com- pany only when they were so drawn for the purposes of the company ; and the company were held not liable upon a bill drawn by them for purposes aliunde the ordinary and proper business of the company. Lord Campbell, C. J., in delivering judgment for the defend- ants, said: “It is contended that the plaintiffs, not having had any knowledge of the want of such au- thority, are entitled to treat this bill as a bill taken from a partner having a general power of drawing bills, and which might be considered as drawn for partnership purposes, though; in fact, it was drawn by one partner in fraud of the others. There is, however, this differ. ence between that case and the present one, that there, there would be no reason for supposing that the bill was not given for partnership purposes, whereas here, the bill was taken by the plaintiffs in payment of a debt, for the discharge of which they knew it was not within the general scope of the authority of the direct- ors of this society to draw bills, for the plaintiffs must have known that the company were constituted under a deed of settlement, to which being registered pursu- ant to the statute, the plaintiffs could have had access, and the case which has been referred to by my brother Willes shows that a man must be taken to have knowl- edge of the contents of a deed of this kind.” Here the rationale of the decision was, that the plaintiff was affected with notice of the nature of the transaction, and that the bill was given for the accom- - plishment of an object dehors the purposes for which the society existed.* Would the decision have been * Persons dealing with a corporation must be assumed to know the ex- 160 THE FINANCIAL AFFAIRS OF CORPORATIONS. different if the plaintiff had been an innocent holder, 6. Ju, aD indorsee for value? It is submitted that it would not have been different. The insurance society, and a fortiori its directors, had authority to issue bills only for certain purposes. Bills drawn or accepted for any other purposes must be held to be simply void as such, to be analogous to those of infants or married women. A corporation or its directors may be guilty of fraud, actual or constructive, and may, perhaps, be compelled by a Court of Equity to account for the money paid as consideration for such bills; but if it, 4. @., the corporation, has not the powers to enter into certain contracts, it seems necessarily to follow that neither can it be rendered liable upon negotiable instru- ments made for the carrying out of such contracts.’ The innocent purchaser of such bills is in precisely the same position as is a similar purchaser of the bills of an infant. The commonest way in which this power is likely to be abused is in obtaining funds by means of bills or 1Compare Atheneum Life Assur- ance Society v, Pooley, 3D. G. & J. 294; 28 L. J. Ch. 119. tent of its corporate powers, and take notice of any restrictions in its charter. So, too, where the duties and powers of the officers of a corpo- ration are prescribed by statute or by charter, all persons dealing with such officers must take notice of any limitation imposed upon their au- thority by such statute or charter. Dillon on Munic. Corp. § 381; Pearce v. Mad. & Ind. R. R. Co. 21 How. 441; Merritt v. Lambert, Hoff.’ 166; Farmers’ Loan & Trust Co. o. Perry, 3 Sandf. Ch. 339; Brady‘v. Mayof, 2 Bosw. 173; aff'd 20 N. Y. 312; Hayes v. State Bank, Mart. & Y. 179; see also Root ». Goddard, 3 McLean, 102; Root v. Wallace, 4 McLean, 8. There is a distinction between the defenses arising from the want of power to issue negotiable instruments and those arising from irregularities in the exercise of the power. In the former case the defense is good against all persons; in the latter, it is unavailing against a bona fide holder without notice of the irregularity. See review of authorities in 1 Dillon on Munic. Corp. §§ 415-426; see cases cited ante, page 122, note; Police Jury ». Britton, 15 Wall. 566; see Mayor v. Ray, 19 Wall. 468. NEGOTIABLE INSTRUMENTS. 161 notes when a company either has no borrowing powers or has exhausted them. Whether money be raised directly by borrowing or indirectly by the issue of ne- gotiable instruments for any purpose other than in payment of goods, the practical result is the same to the company. Nevertheless there are differences be- tween the two operations. Therefore, if a company endued with the power to do so issues or negotiates bills or notes really and dona fide as an ordinary busi- ness transaction, such bills or notes will be valid, how- ever nearly the transaction may resemble a pure loan. “ Borrowing and lending are things perfectly well un- derstood, and although the procuring of money by means of a bill of exchange confers the same benefit on the person who procures it as if he were to borrow the amount, yet it is impossible to consider transactions upon bills of exchange given in this manner as borrow- ing and lending within the meaning of the 56th article of the company’s articles of association. It has been, well decided that the balance due to a bank by a com- pany which keeps an account with it, and has had the benefit of the money, is a debt, but not a loan in the proper sense.” ‘These are the words of Sir John Stuart, in Re Cefn Cilicen Mining Company,’ where the vice chancellor held that, notwithstanding a clause in the company’s articles of association prohibiting the direct- ors from borrowing beyond £500 without the consent of the shareholders, the company was liable, upon bills of exchange, drawn and accepted by the directors, in- dorsed by the company, and discounted by a bank,%the proceeds of which had been in part applied in satisfy- ing an overdrawn account at the bank, and the balance for the benefit of the company. 1L, R. 7 Eq, 88; Waterlow v. Sharp, L. R. 8 Eq. 501 11 162 THE FINANCIAL AFFAIRS OF CORPORATIONS. So, where a company or its directors have authority to issue negotiable instruments, this is an absolute and general authority, and it cannot be restricted in degree or amount, subsequent clauses limiting the liability of the company or its members to certain sums being re- pugnant and void; and consequently bills drawn or notes made under such authority, even in the hands of a holder with notice of the limitation, bind at law and in equity both the company and the individual share- holders to the full extent.’ Such a restriction differs in toto from the imposition of a formality. A company may well require for its protection that the powers which it confers upon its agents shall be exercisable in certain ways only, and parties dealing with the com- pany will frequently have to see that such formalities are duly observed;* but to say that its agents may engage in transactions up to a certain amount only, would be to lay down that every person entering into any contract with the company shall investigate the state of the company’s business. Bills and Notes under Seal. The corporate seal is not unseldom affixed to notes and bills issued by corporations;* but it would seem that the seal in such case is simply inoperative, not in- terfering with the negotiability of the instrument if otherwise valid, and not converting into a deed a docu- ment purporting to be negotiable, but which the cor- poration had no power to make.t The bill or note, if 1Gordon v, Sea, Fire, and Life As- ? See post, Part III, ch. V, sections 1 surance Society, 1 H. &N. 599; 26L. & 2, : J. Ex. 202; ve State Fire Insurance 5 See Bateman v. Mid-Wales Railway Company, ex parte Meredith, 82 L. J. Company, L. R. 1 ©. P. 499, Ch. 300. On seire facias against a “See Aggs v, Nicholson, 1 H, & N. shareholder, see Pedell v. Gwynn, 1H. 165; 25 L, J, Ex, 348, & N. 690; 26 L, J. Ex. 199. ' INSTRUMENTS UNDER SEAL. 163 good at all, is good as a bill or note, and not as a money bond or as an acknowledgment under seal of indebted- ness. But besides these, which whether sealed or not are intended and admitted to be ordinary bills and notes, corporations frequently issue other documents duly sealed and occasionally bearing a deed stamp, and yet though not purporting to be bills or notes designed for circulation by indorsement or mere delivery. These form the subject of the next section. SECTION IV. INSTRUMENTS UNDER SEAL WHICH PURPORT TO BE NEGOTIABLE. Some consideration has already been given to the documents known as debentures or mortgage deben- tures.’ It has been séen that they are documents which, when anything more than ordinary money bonds, con- fer upon the grantee or holder thereof charges or liens on the property and assets, or certain specified portions thereof, belonging to the corporation issuing them. To that extent they make an approach to mortgages pure and simple; but they differ from these latter in want- ing certain of the important attributes which characterize them. Viewed in another light, debentures are choses in action, and, as such, they are prima facie non-negotia- ble, and therefore assignable in chancery only and taken subject to equities? But of late years many companies have issued bonds of this kind, payable to “order” or “bearer” and the like, and the decisions are very con- flicting as to how far such expressions render these 1 Ante, pp. 123, 129, ciety v. Pooley, 3 D. G. & Jo, 294; 28 2 See Atheneum Life Assurance So- L. J. Ch. 119, 164 THE FINANCIAL AFFAIRS OF CORPORATIONS. bonds negotiable and estop the companies issuing from setting up the equities existing between them and the original assignor. The weight of authority must, how- ever, now be considered to be in favor of the proposi- tion that such instruments are, in equity, at least, nego- tiable free from the equities primarily attaching to them. First.—The Eiffect of these Instruments in Chancery. The claim of the New Zealand Banking Company, Fe Blakely Ordnance Company,’ arose thus: Blakely and Dent agreed, in writing, with the promoter of a proposed company, viz., the Blakely Ordnance Company, to sell their business to the company when formed, part of the purchase money to be paid in debentures of the company, payable to bearer. The articles of association adopted this agreement, and directed it to be carried into effect. The directors accordingly gave to Blakely and Dent debentures under the seal of the company, by each of which the company covenanted to pay the sum therein mentioned to “Blakely and Dent, their exec- utors, administrators, and assigns, or to the bearer hereof.” Some of these debentures were passed by de- livery to the New Zealand Banking Corporation, who were bona fide holders for value. In the winding up of the Blakely Ordnance Company, the Lords Justices de- cided that as these debentures were conformable to the: agreement between Blakely and Dent and the promoter, which had been made binding on the company, effect must be given to them in equity, according to their *L. R. 3 Ch. 154. Compare Wood- ration, L. R. 2 Ch. 391, where a letter of ham v. Anglo-Australian Assurance As- credit was held assignable free from the sociation, 3 Giff, 238, where a deposit equities, See also re Blakely Ordnance note, and re Agra and Masterman’s Company, ex parte Metropolitan and Bank, ex parte Asiatic Banking Corpo. Provincial Bank, W. N. 1869, p. 148, INSTRUMENTS UNDER SEAL. 165 tenor, and that consequently the New Zealand Bank- ing Corporation could prove on them in their own name, without being subject to any equities existing between the company and Blakely and Dent, the orig- inal grantees thereof. The ground of the decision was that the Blakely Company had contracted themselves out of their right to set up the equities. “The right to this money was assignable in equity; and though, in the absence of anything more than a mere assign- ment, the assignee would take subject to the equities existing between the original ‘parties to the contract, I am of opinion that there is nothing inequitable in al- lowing the debtor in an obligation ‘to contract with his creditor, that he will not avail himself of any such equities, that he will pay the amount due on the obli- gation to the assignee of the creditor (whether he be such assignee by instrument in writing or by mere delivery of the obligation), without regard to any such equities; and I have already said that, in my opinion, in this case the Blakely Company have so contracted. ‘The debt to be proved is the money due on this con- tract, and not the amount due on an instrument pur- porting to be apromissory note. The laws which regu- late the stamps to be affixed to promissory notes are not, in my opinion, applicable to the case, and it would, I think, be inequitable to deny the assignee of the cred- itor the full benefit of the contract entered into between the original contracting parties. “In He Agra and Masterman’s Bank, ex parte Asiatic Banking Corporation,‘ it was held that the rule which makes assignments of choses in action subject to the equities existing between the original parties to the contract, must yield when a contrary intention appears 1L, R. 2 Ch, 391, 166 THE FINANCIAL AFFAIRS OF CORPORATIONS. from the nature or terms of the contract. I adopt that decision. I think it applicable, as above explained, to the facts of this case.” * The accuracy of this decision was recognized and followed by Page-Wood and Selwyn, L. JJ., in Re General Estates Company, ev parte City Bank,’ where the directors of the General Estates Company had given to H. for value an instrument under the seal of the company headed “ debenture,” and stamped as. a deed, by which the company “undertake to pay to the order of J. H., on 1st July, 1867,” £1,000, with interest half-yearly on presentation of the annexed interest warrants. The Lords Justices, reversing the decision of the master of the rolls, allowed the in- dorsee and transferee for value of this instrument to- prove on it against the company, free from equities between H. and the company. The latest case in chancery on the subject is that of Re Imperial Land Company of Marseilles, ex parte Colborne and Strawbridge.? Here the directors of a company, having power by its memorandum of asso- ciation to borrow money and to issue transferable or other bonds, mortgages, or debentures, had, under its articles of association, large powers for issuing “ de- bentures, bonds, obligations, or other securities, either specifically charged on any property of the company, or not so charged, in any form or manner, or for any amount,” not exceeding the nominal capital of the company, and a specific power to issue and indorse negotiable instruments. The company issued, in pay-* ment to vendors of land to them, instruments de- scribed on their face as “debenture bonds,” and 1 Per Lord Justice Rolt, L, R. 3 Ch. 21, R. 8 Ch. 758. 159, 160. °T, R. 11 Eq. 478. INSTRUMENTS UNDER SEAL, 167 stamped as bonds, and which expressed that the company, “bind themselves and their successors to pay the bearer the principal sum of £20.” The words with respect to interest were in a similar form, and there was no charge on any of the property of the company. The instruments were sold in open market. The company came to be wound up, and it was decided, it being ad- mitted that the company had equities against the parties to whom the instruments were originally issued: 1. That the instruments were promissory notes, or, if not promissory notes, negotiable instruments, and amounted to contracts to pay any one who might happen to bethe bearer; 2. That, consequently, holders for value, with- out notice of the equities, were entitled to prove for the amount due, free from equities; 3. That the right to prove was not affected by the fact that holders had pur- chased, after the passing of resolutions to wind up the company, though without notice of their having been passed. All the prior authorities were referred to and commented upon, and Malins, V. C., in the course of a very careful judgment, said: “I am clearly of opinion that, whether they (¢.¢, the instruments in question) were promissory notes, or bonds, or debentures, it was within the powers conferred upon the directors, by the clauses I have read from the memorandum and articles of association, to issue them. Are they, then, promis- sory notes or debentures? or does it make any differ- ence which they are in the result? My opinion is that, whichever they are, the result is the same, because they in any case make a contract by which the company have bound themselves to pay, not to any particular person, but to any person who may be the bearer, the sum appearing to be due upon their face.” On the other hand, there is the well-known decision 168 THE FINANCIAL AFFAIRS OF CORPORATIONS, of Lord Cairns, when Lord Chancellor, in Ae The Natal Investment Company, Claim of the Financial Corpora. tion,! to the effect that debentures payable to “ C., or to his executors, administrators, or -transferees, or i the holder, for the time being,” were taken subject to equi- ties. Lord Cairns, after commenting upon the form of the document, and the circumstances under which it was issued, said: “There is nothing, therefore, here in any engagement antecedent to the debenture, nothing in the surrounding circumstances of the case, and noth- ing in the construction of the debenture itself, to show that the Natal Company intended to forego or to re: nounce the ordinary rule, that the assignee of a chose in action must take subject to the equities noes the original parties.” This construction is, however, in flat opposition to that placed by the Lords Justices Rolt, Page-Wood, and Selwyn, by the Court of Exchequer, and by Malins, V.C., upon exactly similar instruments, they laying down, as we have already seen, that even if such instru- ments are not promissory notes, the companies making them have debarred themselves, either by the contract entered into by them with the first holder, or by their holding out to the world, from subsequently setting up the equities which have existed between them and the first holders of these instruments. Secondly.—The Effect of these Instruments at Law. In the Blakely Company’s case, Lord Justice Rolt expressed some doubts whether the debentures there sued upon would have been valid at law. This point has since been settled, to some extent at least, by the ‘L. R. 3 Ch, 355, 866, followed in re mingham Bank, 17 W. R. 8438; W. N. Rhos Hall Iron Company, ex parte Bir- 1868, 228. INSTRUMENTS UNDER SEAL. : 169 Court of Exchequer, in Higgs v. Northern Assam Tea Company, Limited;* there the plaintiff had sold an estate to the defendants, receiving in part payment de- bentures payable with interest to him, “his executors, administrators, and assigns.” Some of these the plaint- iff transferred to C. and S., and the defendants in vari- ous ways recognized C. and 8. as proprietors of the same. The plaintiff became indebted to the defendants for un- paid calls upon shares held by him in the company, and by the articles of association the defendants had a primary lien on the debentures of any member of the company who mightbe absolutely or contingently liable to the company in any amount or any account whatever. Some of the debentures assigned to C. and S. having become due, upon action brought by C. and 8. in the name of the plaintiff to recover the amounts so due, it was held that “the defendants and Higgs contemplated . and intended that Higgs should assign these debentures, that he could not practically do so if subject to such equities as these now set up; that, consequently, Higgs and the defendants contemplated and intended that Higgs should assign free from those equities, and that the defendants have dealt with Messrs. C. and S. on that footing. Holding this, and guiding ourselves as best we can by the cases cited, we think the plaintiff entitled to our judgment.” _ This, however, must not be considered a decision to the effect that such documents are negotiable at law, but only that the parties thereto, having entered into the contracts thereby expressed, will, under certain cir- cumstances, be bound by such contracts, into whose- soever hands the documents may come. As has been laid down in a subsequent case,? “If Mackin (7. @, the 1L. BR. 4 Ex, 387, 396. 71, R. 8 Q. B. 385. 170 THE FINANCIAL AFFAIRS OF CORPORATIONS. original payee) were suing in his own name for the benefit of an assignee, as in Higgs v. Assam Tea Com- pany or if the assignee were proceeding in equity in his own name, as in He Blakely Ordnance Company; and the defendants set up some equitable defense, good against the original contractee, and therefore generally good against the assignee also, it would be a good an- swer to say that the defendants had, with a view to in- duce persons to become assignees of such instruments, represented that there were no such equities, and that the now holder was induced to take this instrument on the faith of that representation. _- The case, Crouch v. Credit Foncier of England,! from the judgment in which the above extract is taken, is the latest decision at law, and it seems to be conclusive against the negotiability at common law of these instru- ments. ‘The circumstances were as follows: In May, 1869, the defendants, a limited company, registered un- der the act of 1862, sold to M. a document under the seal of the company, and signed by two directors and the secretary. It was numbered and headed with the name of the company, and called “ Debenture,” and pro- ceeded: “The company hereby promise, subject to the conditions indorsed on this debenture, to pay to the bearer £100 on the 1st of May, 1872, or upon any ear- lier day upon which this bond shall be entitled to be paid off according to the conditions, and interest at 8 per cent., on the 1st of November and the 1st of May in each year; and also a further sum of £10 by way of interest or bonus at the same time as the principal sum is paid off. In witness whereof the common seal of the company has been affixed this 9th day of May, 1869.” By the conditions indorsed, a certain number of the ‘LR. 8 QB, 874, INSTRUMENTS UNDER SEAL. 171 bonds were to be drawn for twenty-one days before the days for the payment of the half-yearly interest, and any bond drawn was to be advertised and paid off with the interest and bonus due, the bond being given up and no further interest being payable. In July, 1869, the bond was stolen from M. In October; 1871, the number of the bond was drawn. At the end of 1871 the plaintiff purchased the debenture from S., who after- wards absconded. The defendants having notice of the robbery, refused to pay the debenture to the plaintiff, and he brought an action in his own name, alleging that he was lawful bearer of the debenture. At the trial it was admitted that similar documents had been treated as negotiable; it was also admitted that the plaintiff derived title from the thief, but the jury found that the plaintiff had given value for the debenture without no- tice. The Court of Queen’s Bench were unanimous, first, that the contract contained in the conditions pre- vented the debenture from being a promissory note, even if it had been under hand only; secondly, that it was not competent to the defendants to attach the inci- dent of negotiability to such instruments, contrary to the general law; and that the custom to treat them as negotiable, being of recent origin, and not the law mer- chant, made no difference, as such a custom, though general, could not attach an incident to a contract con- trary to the general law. And the plaintiff, therefore, could not recover. It has not yet been distinctly decided, but it follows as a natural consequence, that the power to issue neyo- tiable debentures belongs, not to all corporations, nor even to those authorized to borrow by means of de- bentures, but only to such as may issue ordinary bills. and notes.’ 1 See per Lord Justice Rolt, in re Blakely Ordnance Co.’s Case, L. R. 3 Ch. 154. 172 THE FINANCIAL AFFAIRS OF CORPORATIONS. Thirdly.—The exact Import of Instruments of this Description. It follows that the great preponderance of authority in chancery generally, and at common law with certain qualifications, is in favor of the opinion that when these documents are payable to the “holder,” “bearer,” or “transferee,” the company is compellable to pay them free from the equities primarily attaching to them. But this is not sufficient to determine the exact nature of them. Corporations and private individuals may be liable to discharge to any possessor of a document the debt of which such document is good and perhaps con- clusive evidence; but if the liability be based simply and solely upon the contract entered into by the maker of such document, or upon the ground that the said maker is estopped by his deed or his admission in pais, the complete negotiability of such document is by no means established—in fact, it is by implication denied. Now, in considering this point, we have to bear in mind that by the strict rules of law, a corporation could bind itself by no engagement to which the corporate seal had not been duly affixed, and, consequently, the real question to be determined is, not why in each particular instance has the seal been affixed, but what is the effect of language prima facie importing negotiability, ap- pearing in instruments under the seal of corporations. To this question one of three answers must be returned. Either, firstly, the document is a deed—nothing more, and the words “to order,” or “bearer,” or the like, must either be struck out as inconsistent with its general tenor, or be read as Lord Cairns read them in the Natal Investment Company’s Case:! “ We (1. ¢., the 1L, R. 8 Ch. 855, 361. INSTRUMENTS UNDER SEAL. 178 corporation) undertake that we will fulfil this contract, either to yourself personally, or to your executors, or to your administrators, or to your assigns by deed, or to any person whom you may make the holder of this de- benture, even without a deed; but what we undertake to fulfil, whether to you or to any other of these parties, is the contract, and nothing but the contract, which we. have made with you; and if, in our dealings with you, there is anything that might affect that contract, the person who takes the contract by assignment must take. subject to the equity between us.” This, however, it is submitted, is a very strained con- struction of language otherwise clear and unambiguous, and it is impossible to reconcile it with the interpreta- tion put in later cases upon expressions almost identical. Or, secondly, the document is negotiable as regards. the corporation, but not as regards any other party. It is the acknowledgment of adebt owing—the evidence of a contract entered into—hy the corporation, having the seal affixed as a necessary formality, and binding the cor- poration to fulfil such contract, modo ac forma—that is, to pay the sum of money thereby stated to be due, to any person who may lawfully be entitled to the said document. It will therefore bear a twofold character. As between the corporation and all other parties it will be negotiable; but, like every other negotiable instru- ment, free from those equities only which do not appear on the face of it. This latter qualification is most im- portant, but it has to a great extent been overlooked. Whatever equities or, trusts are attached to an ordinary bill or note in its inception, or become attached to it in the course of its circulation—e. g., bya restrictive in- dorsement—qualify and limit the negotiability of the in- strument, which henceforth passes, subject to such 174 THE FINANCIAL AFFAIRS OF CORPORATIONS. equities or trusts. Apply this principle to the case in question. First, a corporation has certain powers only ; secondly, those powers are those which are expressly given it by its constating instruments, or which, by im. plication therefrom, it must possess for the due and ad- vantageous carrying on of its business; thirdly, it in- curs no liability by engaging in transactions aliunde those for the prosecution of which it has been created; fourthly, persons dealing with it directly or through its agents, are bound to inform themselves by an examina- tion of its constating documents of the purposes for which it exists, of the powers with which it is endowed, and of the limitations, if any, placed upon the exercise, in manner or degree, of such powers. These facts are admitted, and they determine the liability ex contractu of every corporation. Take the Natal Investment Company’s Case. The company agreed to purchase of: one A. Coqui certain land in Natal, paying him partly in cash, partly in debentures ; and, in pursuance of this agreement, they gave him debentures payable to him- self, “ or to his executors, administrators, or transferees, or to the holder for the time being,” and commencing thus: “Whereas the Natal Investment Company, Limited, hereinafter designated the company, is indebted to A. Coqui in the sum of £500, now these presents witness, that in consideration of the premises the com- pany hereby declares that the funds, assets, and prop- erty of the company shall be subject, &c.” These bonds were issued, not in an absolute and unqualified manner, or as binding the company to pay at all events, but “in consideration of the premises”—that is, in considera- tion of the due performance of the contract so entered into, the completion of which, therefore, became an equity attaching to the debentures and, being apparent INSTRUMENTS UNDER SEAL. 175 on the face of them, affecting every one into whose hands they came with notice thereof. Coqui, however, wholly failed to carry out his contract, having no title to the land he had agreed to sell. Consequently, the company was not indebted to him, and the bonds given to him in consideration of such indebtedness became null and void, whether as bonds or as negotiable in- struments, and whether in his hands or in those of any other party. The Natal Company had power to issue negotiable bonds in payment or otherwise in fulfilment of contracts entered into in the ordinary course of their business, but not for any other purpose; and pérsons taking such bonds were simply placed in the usual po- sition of persons dealing with the company—that is, were bound to inform themselves of the extent of the powers possessed by the company, and of the restric- tions placed upon these powers. Whether, however, the word “premises ” in the above bond can be read as meaning the contract made between the company and Coqui, is at least doubtful ; and, perhaps, the only con- clusion to be come to is that the Natal Company’s Case is irreconcilable with other authorities. Or, thirdly, the document is fully negotiable. This seems to be the only logical conclusion at which in the majority of cases we can arrive. The fact that the seal is affixed is of slight importance. It denotes that the corporation has duly executed the instrument—nothing more, not converting it into a deed, nor rendering neces- sary that a transfer should be under seal. It is, ina word, a negotiable instrument, pure and simple, belong- ing to the class of simple contracts, and attested by the corporate seal as a formality solely; and in the two latest and niost considered decisions on the subject, He 176 THE FINANCIAL AFFAIRS OF CORPORATIONS. General Estates Company, ex parte City Bank,’ and Re Imperial Land Company of Marseilles, ex parte Col- borne and Strawbridge,? instruments—in the former case styled “debenture,” and made payable “to the order of” J. C. H., and in the latter “debenture bond,” and payable “to the bearer,” both expressed to be given under the common seal, and bearing each a deed stamp —have been so held, and persons taking them by the customary parol transfer were allowed to prove in the winding up for the full amount of their claims. Lastly, there is the very wide provision contained in the 11th clause of the 25th section of the Supreme Court of Judicature act, that “ generally in all matters not hereinbefore particularly mentioned, in which there is any conflict or variance between the rules of equity and the rules of common law with reference to the same matter, the rules of equity shall prevail.” ‘This enact- ment, read in connection with the rules relating to equitable rights contained in the section immediately preceding, must, it is conceived, render most mortgage debentures, purporting to be transferable, whether by indorsement or simple delivery, to be really and fully negotiable. The decisions, and therefore the rules, in chancery—with the solitary exception of the Natal Company’s case—are uniform, that such documents are assignable, either absolutely so, like ordinary bills and notes, or, if restricted at all, subject only to the equities, that is to say, the conditions appearing in the same. These decisions and rules in future are to prevail at law; consequently, mortgage debentures must, under ’ ordinary circumstances, and if in the ordinary language, in future be negotiable at law as in equity. In connection with this point, the mortgage deben- 1L, R. 8 Ch. 758, *L. R. 11 Eq. 478. INSTRUMENTS UNDER SEAL. 177 ture acts of 1865 and 1870, 28 & 29 Vict. c 78, and 33 & 34 Vict. c. 20, should be noticed. They au- thorize corporations, whether governed by the com- panies acts or incorporated by special statutes, whose objects are the advancing of money upon real securities and other analogous purposes, to issue transferable mort- gage debentures, provided their capital be not less than £100,000, in shares of not less than £50 nominal value. * * The interesting discussion contained in the text in the preceding section is without practical importance in this country, in view of the rule, now well established, that obligations providing for the payment of money, made by States, muricipal and private corporations, and intended to pass by delivery, although under seal, have the properties of negotiable instruments, and when transferred before maturity to bona jide purchasers have the usual characteristics of commercial paper. The reason for the tule, does not seem to be based upon their being made payable to bearer or being issued in blank, except so far as such language or such mode of uttering them may be taken as evidence of the intention of the maker to impress upon them the qualities of negotiable commercial instruments, The decisions of the courts are based as well upon the intentions of the parties as upon the necessities of trade. See Myers v. York & Cumber- land R. R. Co. 43 Me. 232. Mr. Justice Grier, in Mercer Co. v. Hacket, 1 Wall. 95, holds the following language: ‘‘This species of bonds is a modern invention, intended to pass by manual delivery, and to have the qualities of negotiable paper, and their value depends mainly upon this character. Being issued by States and corporations, they are necessarily under seal. But there is nothing immoral or contrary to good policy in making them negotiable, if the necessities of commerce require that they should be so. A mere technical dogma of the courts or the common law cannot prohibit the commercial world from inventing or using any species of security not known in the last century. Usages of trade and commerce are acknowledged by the courts as part of the common law, although they may have been unknown to Bracton or Blackstone. And this malleability to suit the necessities and usages of the mercantile and commercial world is one of the most valuable characteristics of the common law. When a corporation covenants to pay to bearer, and gives a bond with negotiable , qualities, and by this means obtains funds for the accomplishment of the ‘useful enterprises of the day, it cannot be allowed to evade the payment by parading some obsolete judicial decision that a bond, for some technical: reason, cannot be made payable to bearer. That these securities are treated as negotiable by the commercial usages of the whole civilized 12 178 THE FINANCIAL AFFAIRS OF CORPORATIONS. world, and have received the sanctions of judicial recognition, not only in this court, but of nearly every State in the Union, is well known and ad- mitted.” In the case of Morris Canal & Banking Co. 2. Fisher, 1 Stockt, 667, decided in 1855, the Court of Appeals say: ‘‘ That under ordinary circumstances, the property of bank notes and of bills and promissory notes payable on their face, or by a blank indorsement, to a bearer, follows the possession, has long been settled. By analogy to this class of cases, the exigencies of business have from time to time introduced other secu- rities into the same category. The Court of King’s Bench seems to have hesitated to recognize India bonds as belonging to it. Glyn v. Baker, 13 East, 509. But parliament immediately interfered and declared them negotiable instruments. Exchequer bills were so regarded in Wookey o. Pole, 4 B. & Ad. 1. In the case of Gorgier v. Mieville, 3 B. & C, 45, bonds of the King of Prussia, which were shown to be ordinarily passed from hand to hand by delivery, and so designed, were held to be like money or bills, so as to give a bona fide possessor the legal title. And in the case of Lang v. Smith, 7 Bing. 284, the same principle was applied to the case of instruments issued by the government of Naples, although in that case they were held not to be negotiable, because it was found that they did not usually circulate without a certificate, which did not accom- pany them. The manner in which these bonds are engraved, with cou- pons making the interest payable half-yearly to the bearer of them, and all the evidence before us, conspire to show that the company which is- sued them, and which now disputes the title of the holder on the gronnd that they put them into the hands of the seller for a special purpose, which did not authorize him to dispose of them as he did, really intended them to circulate, as in fact they do. This design is indeed quite as ap- parent as if it was engraved on their face inexpress words. The objection now made, that the legal character of the instrument adopted is such as to frustrate this design, certainly comes with a bad grace from the party which put them in circulation, Even as between third parties, we sup- pose the common usage to transfer them by delivery, without inquiry as to the title of the transferrer, would justify us in holding these securities to differ from common obligations, in being so far negotiable that the bona fide possessor shall be held to have a good title. But the case is still stronger against the party which made and issued them, with full knowl- edge of the prevailing usage and with the manifest design that they should be so circulated. To permit such parties to dispute this result of the usage, would be to permit them to take advantage of their own wrong. And besides, the obvious interest of the companies is that these bonds should be salable free from all questions of equity. They are generally issued for the express purpose of raising money by their sale. To declare them subject to the equities existing in the case of ordinary bonds upon | every transfer of them, would be to strike « blow at the credit of the great INSTRUMENTS UNDER SEAL. 179 mass of these securities now in the market, the consequences of which it would be impossible to predict.” To the same effect are White v. Vermont R. R. Co. 21 How. 575; Moran v. Com’rs, 2 Black, 722; Gelpcke v. City of Dubuque, 1 Wall. 206; Meyer ». City of Muscatine, 1 Wall. 384; Murray v. Lardner, 2 Wall. 110; Thompson v. Lee Co. 8 Wall. 827; Aurora City 2. West, 7 Wall. 82; City ®. Lamson, 9 Wall. 481; Smith v. Sac Co. 11 Wall. 150; Pendleton Co. », Amy, 13 Wall. 297; City of Lexington », Butler, 14 Wall. 282; Police Jury v Britton, 15 Wall. 566; Kennicott v. Supervisors, 16 Wall. 452; Rogers », St. Joseph, 16 Wall. 644; Nugent ». Supervisors, 19 Wall. 241; Clark v. Lee Co. 20 Wall. 583; Duvant o. Iowa Co. 1 Woolw. 72; McCoy ». Washington Co. 3 Wall. Jr. 382; Miller v. R. & W. R. BR. Co. 40 Vt. 399; Chapin o. Vt. & Mass. R. R. Co. 8 Gray, 577; Haven ». Grand Junction R. R. Co. 109 Mass. 88; Nat. Exch. Bank ». H. P. & F. R. R. Co. 8 R. I. 375; Soc. for Savings v. City of N. London, 29 Conn. 174; State of Ill. v. Delafield, 8 Paige, 527; 8. c. 2 Hill, 159; Bank of Rome ». Village of Rome, 19 N. Y. 20; Brainerd o. N. Y. & Har. R. R. Co. 25 N. Y. 496; 8. c. 10 Bosw. 332; Conn. Mut. Life Ins. Co.» Cleveland &c. R. R. Co. 41 Barb. 9; Blake v. Livingston Co. 61 Barb. 149; Morris Canal Co. v. Lewis, 1 Beas]. 323; Winfield ». City of Hudson, 4 Dutch. 255; De Voss o. Rich- mond, 18 Gratt. 338; Langston ». 8. C. R. R. Co. 28. C. 248; Porter o. McCollum, 15 Ga. 528; Craig 0. City of Vicksburg, 31 Miss. 217; Maddox o. Graham, 2 Met. (Ky.) 56; N. Albany Pl. R. Co. 0. Smith, 23 Ind. 358; Johnson v. County, 24 Ill. 92; Clapp ». County of Cedar, § Clarke (Iowa) 15; Clarke v. City of Janesville, 10 Wis. 1386; Barrett 1. Schuyler Co, 44 Mo. 197; Smith 0. Clarke Co. 54 Mo. 58, The case of Clark 7. Woolen Mfg. Co. 15 Wend. 256, has been attempted to be distinguished from the later cases on this point; but if it is in conflict with them, it must be considered as overruled, Mr. Justice Nelson, who delivered the opinion, having since united with his associates. in the Supreme Court of the United States in rendering judgment in the cases heretofore cited, which hold the contrary doctrine. In Diamond ». Lawrence County, 37 Penn. St. 358, which was a case: relating to municipal bonds, as to which gross frauds were alleged, the Supreme Court of Pennsylvania, while admitting that the uniform current of authority is as stated in this note, refuse to follow the rule thus estab- lished. An explanation of this case will be found in note to Miller v. Race, 1 Smith’s Leading Cases (7th Am. ed.) 819; see also Phil. v. Sunbury R. R. Co, 33 Penn, St. 38; Com. v. Pittsburg, 34 Penn. St. 496; Carpenter ». Rommell, 5 Phil. 34. For a review of the decisions upon the Iowa municipal railway aid bonds, see King ». Wilson, 1 Dillon C. C. Rep. 555. The following propositions in reference to coupons or interest warrants may be considered as established: 1. That coupons may be dissevered from the bonds and be sued upon 180 THE FINANCIAL AFFAIRS OF CORPORATIONS. as separate instruments by the holder, although he be not the holder of the bonds. Murray >. Lardner, 2 Wall. 110; Thompson v. Lee Co. 3 Wall. 327; City of Kenosha». Lamson, 9 Wall. 477; Spooner v. Holmes, 102 Mass. 503; National Exch. Bank °. Hart. Prov. & Fish. R. R. Co. 8 R. I. 3%; Arents v. Com. 18 Gratt. 750; San Antonio ». Lane, 32 Tex. 405; Johnson o. County, 24 Ill. 75; but see Myers ». York & Cumb. R. R. 43 Me. 232. 2. That coupons thus dissevered have the like qualities of commercial paper as the bonds to which they were attached; see cases ante. 3. That coupons bear interest from the date of demand of payment and refusal. Gelpcke ». Dubuque, 1 Wall. 105; Aurora City o. West, 7 Wall. 105; Whittaker ». Hart. Prov. & Fish. R. R. Co. 8 R. I. 47; Conn. Mut. Life Ins. Co. 7. C. C. & C. RB. R. Co. 41 Barb. 9; N. Penn. R. R. Co. 2. Adams, 54 Penn. St. 94; Burroughs v. Richmond, 65 N. OC. 234; San Antonio ». Lane, 32 Tex. 405; Mills o. Jefferson, 20 Wis. 50. 4, As to the statute of limitations applicable to coupons, the cases of City v. Lamson, 9 Wall. 478, and Lexington ». Butler, 14 Wall. 282, were understood to hold ‘‘that a suit upon a coupon is not barred by the stat- ute of limitations, unless the lapse of time is sufficient to bar also a suit upon the bond,” but these cases are explained in the later case of Clark ». Iowa City, 20 Wall. 585, and the court there says: ‘‘ Most of the bonds of municipal bodies and private corporations in this country are issued in -order to raise funds for works of large extent and cost, and their payment, ‘is, therefore, made at distant periods, not unfrequently beyond a quarter ‘of a century. Coupons for the different instalments of interest are usually attached to these bonds, in the expectation that they will be paid as they mature, however distant the period fixed for the payment of the principal. These coupons, when severed from the bonds, are negotiable and pass by delivery. They then cease to be incidents of the bonds, and become in fact independent claims; they do not lose their validity, if for any cause the bonds are canceled or paid before maturity; nor their negotiable character; nor their ability to support separate actions; and the amount ‘for which they are issued draws interest from its maturity. They, then, “possess the essential attributes of commercial paper, as has been held by ‘this court in repeated instances. Every consideration, therefore, which gives efficacy to the statute of limitations, when applied to actions on the bonds after their maturity, equally requires that similar limitations should be applied to actions upon the coupons after their maturity. Coupons, when severed from the bonds to which they were originally attached, are ‘in legal effect equivalent to separate bonds for the different instalments of ‘interest. The like action may be brought upon each of them, when they respectively become due, as upon the bond itself, when the principal matures; and to each action—to that upon the bond and to each of those upon the coupons—the same limitation must upon principle apply. All statutes of limitation begin to run when the right of action is complete, and it would be exceptional and illogical to hold that the statute sleeps v INSTRUMENTS UNDER SEAL, 18h with respect to claims upon detached coupons, while a complete right of action upon such claims exists in the holder.” The court, therefore, holds that the statute of limitations commences to run against actions upon de- tached coupons from the maturity of the coupons respectively. 5. Coupons, when detached from the bond, are still liens under the mortgage given to secure the bond. Whether the holders are entitled to a pro rata distribution or are entitled to payment in the order in which the coupons fall due, see Sewall o. Brainerd, 38 Vt. 364, and Miller o. Rutland & Washington R. R. Co. 40 Vt. 399. CHAPTER V. LEGAL PROCEEDINGS. Corporations may undertake, whether by institut- ing or defending, all such legal proceedings as may be necessary for the protection of their own rights and their own legitimate business. Such a power is simply necessary for the existence of every corporation, and is, therefore, an essential legal fact in its constitution.* ‘The corporation sues and is sued in its corporate name.’ t Beirg a legal entity existing apart from its members, it may maintain any proceedings in any court of compe- tent jurisdiction as well against its own members as against strangers; { and all the ordinary rules of pro- cedure and of pleading—e. g., cross claims, set-off, no- tice, &c.—will be as applicable in the one case as the other. Thus they can validly execute bonds as security for costs, although they might not ordinarily have power to make money bonds? 1 Woolf v. City Steamboat Com- 704; 27 L. J. C. P, 823; and Towne v- pany, 7 C. B.103; 18 L. J.C. P. 125; London &e. ship Company, 5 C. B. N. see Pilbrow v. Pilbrow’s Atmospheric 8. 730. Railway Company, 3 C, B. 730; Fell v, 2 Young v. Brompton d&c, Water- Burchett, 7E. & B, 637; Ingate v, Aus- works Company, 1 B. & §. 675; 31 L. trian Lloyd’s Company, 4 C. B. N. 8. J. Q. B, 14, 3 * Tt is one of the incidental powers of a corporation. Kyd on Corp. 69; 2 Kent, 278; Angell and Ames, § 110; The Comanche, 8 Wall. 448; McKim 0, Odoun, 8 Bland Ch. 417; Gordon ». Baltimore, 5 Gill, 281. + Bradley v. Richardson, 2 Blatch. 843; 8. c. 23 Vt. 720; Minot ». Curtis, 7 Mass. 444; Bartlett o. Brickett, 14 Allen, 62; Norton v. Hodges, 100 Mass. 241; Lucas v. Johnson, 8 Barb. 244; Bundy ». Birdsall, 29 Barb. 31; Leonardsville Bank 2. Willard. 25 N. Y. 574; Porter 0. Neker- vis, 4 Rand. 359; Legrand ». Hampden Sidney Coll. 5 Munf. 324; Manney », Mots, 4 Ired. Eq. 195; Dart », Houston, 22 Ga. 506; Trustees of Lexing- ton v. McConnell, 3 A. K, Marsh. 224; Hay 0. McCoy, 6 Blackf. 69; Tl. Insane Hospital 0, Higgins, 15 Ill. 185; Curtis ». Murry, 26 Cal. 638. } See ante, p. 3, notes, as to suits by and against stockholders. BY OR AGAINST THE CORPORATION DIRECTLY. 183 SECTION I. LEGAL PROCEEDINGS INSTITUTED BY OR AGAINST THE CORPORATION DIRECTLY. Not only can a corporation sue, but it is the proper party—and, indeed, the only party—to bring actions in all cases where the ground of action is a matter affect- ing the corporation as a whole, and not some par- ticular members or classes of members. The commonest instances where questions arise as to who are the proper and necessary parties to a suit, and to be plaintiffs and defendants respectively, are when the officials of the corporation have gone beyond their authority, or have done or omitted to do some act whereby the corporation has been prejudicially affected. The acts or omissions in question will be either ultra vires of the corporation, or about or with reference to matters which are themselves ultra vires; if so, it will generally be incompetent for the corporation to attempt to take cognizance of them; or within the authority of the corporation to approbate or reprobate, to affirm or ’ repudiate. If of the latter description, then it is for the corporation to take proceedings or not—individual shareholders cannot interfere. It cannot be too clearly or plainly laid down, that the corporation as such alone is competent to deal with what concerns it as a corpora- tion. No matter how grievously members, whether few or many, are damnified by the transactions in ques- tion, provided such transactions concern the whole body collectively in their corporate character and are not ultra vires, the members in their private capacity will be without remedy. They—the members complaining —cannot bring a suit either individually, or as.a class, 184 LEGAL PROCEEDINGS. or in the name of some one or more, “on behalf of themselves, &c.;” unless indeed the corporation—that is to say, the majority—are acting fraudulently towards the members complaining, by refusing to institute the necessary proceedings. This part of the subject more properly falls under Part IV, Chapter I, “On the Interference of the Courts in the Internal Affairs of Corporations;” but one or two of the leading cases may be quoted in illustration.* Mozley v. Alston? ig a decision often cited. The bill was filed by two shareholders against the corpora- tion and twelve other members, who were alleged to have usurped the office of directors, and to be exercis- ing the functions thereof, as a majority of the governing | body, injuriously to the interests of the company, pray- ing that those twelve defendants might be restricted from acting as directors, and be ordered to deliver the common seal, and the property and books of the com- pany in their possession, to six other persons who were alleged to be the only duly constituted directors. The defendants demurred, and the Lord Chancellor, upon appeal, allowed the demurrers. In Exeter and Crediton Railway Company v. Buller, the defendants, the late directors of the com- ? Atwool v. Merryweather, L. R. 5 21 Phill. 790; Foss v. Harbottle, 2 Eq. 464, n. Hare, 461; 16 L. J. Ch. 217. °5 Ra. Ca. 211. * The primary party to bring suit in regard to corporate rights or cor- porate property is the corporation itself; but where the corporation refuses ‘to bring the action, or the parties to be proceeded against are in control of the corporation, one stockholder may bring action in equity in his own name in behalf of all, to which suit the corporation must be a party de- fendant. Dodge o. Woolsey, 18 How. 331; Samuel ».-Holliday, 1 Wool- worth, 400; Heath ». Erie R. R. Co. 8 Blatch. 847; Brewer ». Proprietors of Boston Theatre, 104 Mass. 378; Bunn 2. Vandyke, 4 Hals, Ch. 795; Butts. 9. Woods, 88 Barb. 181; 8. c. 37 N. Y. 817; and see Appendix. BY OR AGAINST THE CORPORATION DIRECTLY. 185. pany, retained possession of the corporate seal. There- upon some of the shareholders, alleging themselves to. be a majority, filed a bill in the corporate name, but not under seal; and it was held that the suit was rightly brought. Gray v. Lewis' is the most recent authority. The facts, stated very concisely, were these: The directors of Charles Lafitte and Company, Limited, were con- cerned in certain transactions which, if bearing the con- struction put upon them by some of the shareholders, and among them the plaintiff, were ultra vires, and which in the result entailed great loss upon the com- pany. Gray, a shareholder, filed a billin his individual capacity against these directors, and other parties mixed up with them, to make them recoup the company for this loss. On appeal, the bill was dismissed. Lord Justice James said: “ Now in this case I am of opinion, that the only person—if you may call it a person—hav- ing a right to complain was the incorporated society called Charles Lafitte & Co. In its corporate character it was liable to be sued, and was entitled to sue; and if the company sued in its corporate character, the de- fendant might allege a release or a compromise by the company in its corporate character—a defense which would not be open in a suit where a plaintiff is suing on behalf of himself and uther shareholders. I think it is of the utmost importance to maintain the rule laid down in Mozley 2. Alston, and Foss v. Harbottle, to which, as I understand, the only exception is where the the corporate body has got into the hands of directors and of the majority, which directors and majority are are using their power for the purpose of doing some- thing fraudulent against the minority, who are over- *L, BR. 8 Ch, 1085, 1051, 186 LEGAL PROCEEDINGS. whelmed by them, as in Atwool v. Merryweather,. where Page-Wood, V. C., under those circumstances, sustained a bill by a shareholder on behalf of himself and others, and there it was after an attempt* had been made to obtain a proper authority from the corporate body itself in public meeting assembled.” I. A corporation cannot interfere in, whether by in- stituting or assisting, legal proceedings which. do not either directly or indirectly affect itself or its privileges. When any measures, legal or otherwise, are taken against a corporation directly, the question is quite clear; a corporation, like every other person when attacked, may adopt in defense every and any course allowed by law, whether such course may or may not necessitate an appeal to the legal tribunals. But whether a corporation may take part in pro- ceedings instituted against its members, which in the result and indirectly impeach its own status, is some- what doubtful, although the balance of authority is decidedly in the affirmative. In the Att. Gen. v. Mayor &e. of Norwich,’ Lord Cottenham was of opinion, though he did not actually decide, that it is no im- proper application of the funds of a municipal corpora- tion to defend proceedings on guo warranio informa- tions, which have for their object to destroy the corpo- ration of which the individuals attacked are members. Tn the following cases the costs were deemed prop- erly incurred by the corporations concerned, and therefore payable out of their funds. 12 My. & Cr. 406, 428. * The refusal of the directors is essential. Memphis 2, Dean, 8 Wall, 64. BY OR AGAINST THE CORPORATION DIRECTLY. 187 (1) Reg. v. Town Council of Lichfield* Here the town council had, by resolution, removed the town clerk from his office for misconduct. His claim for compensation being refused, he sued out a mandamus to assess the same, and the jury ultimately found the issues raised in his favor. An attorney was employed to oppose the mandamus, and it was determined that his costs were chargeable upon the borough fund, it not being shown that the town council had acted with mala Jides in the removal. (2) Holdsworth v. Mayor d&e. of Dartmouth. + Quo warrantos were filed against the plaintiff and several of his friends, to try their right to be members of a corporation, and they were in the result ousted. These informations the plaintiff, without the direction or authority of the defendants, caused to be defended, and subsequently thereto the defendants sealed and de- livered to the plaintiff bonds to reimburse him for the costs of such defenses, and for no other consideration. These bonds were adjudged to be good. This, it will be seen, is a strong case. The plaintiff defended without the authority first obtained of the defendants; the issues were found against him; it was not shown that thereby the existence or rights of the corporation were compromised; afterwards, when the proceedings were at an end, the bonds were given, and yet they were binding on the corporation. 110 Q. B. 534; 16 L. J. Q. B. 333. 711A. & E. 490; 4 Jur. 605. * See Hadsell v. Inhab. of Hancock, 3 Gray, 526. + See Mayor ». Cummins, 47 Ga. 321, in which the life of the corpora- tion was attacked in an action against its agents, and the corporation was allowed to come in and defend and move for removal to United States court. 188 LEGAL PROCEEDINGS. (3) In Reg. v. Town Council of Lichfield,’ the Court of Queen’s Bench thought that the council of a borough may prosecute at the expense of the corpora- tion for an assault upon the mayor in the execution of his duty.* (4) Reg. v. Prest.” Here a municipal corporation had imposed a rate which they intended to enforce, but concerning which they were threatened with litigation if they persevered in their intention. They employed a solicitor, who took counsel’s opinion as to the legality of the rate, and it was held that his costs were properly chargeable upon the borough funds. (5) Lewis v. Mayor &e. of Rochester.2+ This case arose thus: The defendants, at a court duly held, ex- punged the names of several burgesses from the borough list, who thereupon obtained rules nds¢, calling upon the mayor to show cause why he should not hold another court to revise the list. The corporation, under their common seal, retained the plaintiff, an attorney, to show cause and otherwise defend the rules. He accordingly did so, but the rutes were made absolute. The plaintiff then sued the corporation for his costs, and the court held that the costs were legally incurred, and that he was consequently entitled to recaver the same against the corporation. { 14 Q. B. 893; 12 L. J. Q. B. 308, 59 CBN. S. 401; 30L.J5.C.P. See Reg. v. Town Council of Stamford, 169. See Reg. v, Mayor &c. of Mon- 4Q. B. 900, 2; 181.3 QB. 177. mouth, L. R. 6 Q. B. 251 °16 Q. B, 33; 20 LJ. Q. B. 17. * Contra, Butler o. City of Milwaukee, 15 Wis. 493. t Nelson o. Milford, 7 Pick. 18; Babbitt ». Savoy, 3 Cush. 530. { A municipal corporation which has employed an attorney to file a bill seeking to destroy, by suit, the existence of the corporation itself, cannot apply the corporate funds in payment for such services, Daniel 2. Mayor, 11 Humph. (Tenn.) 582. NOT BY OR AGAINST THE CORPORATION DIRECTLY. 189 SECTION II. LEGAL PROCEEDINGS NOT BY OR AGAINST THE CORPORATION DIRECTLY. First.— Where the corporate interests are not directly endangered. In the authorities just cited, the rights and franchises of the corporation either were directly affected, or in the result might have been compromised by the proceedings that had been instituted. But if this be not so, if in- dividuals only are attacked as such, and in their private capacity, even though it be for exercising corporate offices, then the corporation cannot interfere. The courts consider such proceedings to concern these individuals only, who must consequently themselves bear any ex- penses which may be incurred by them in respect thereof. The chief decisions on this point are the following : (1) Reg. ». Mayor &e. of Leeds.* On the election of councillors for a borough, a question arose, which of two candidates had been duly declared to be elected. The mayor took counsel’s opinion, on which he acted by rejecting the vote of one of the candidates. The council had given the mayor a general authority to take such opinion in case of need. The excluded candidate obtained a rule nisi for a mandamus to the mayor, aldermen, and burgesses, to receive his vote, and permit him to act as councillor; and the council resolved, by a majority, that cause should be shown against the rule. It was determined that the costs of such opposition, and of the case submitted to counsel, could not be charged on the borough fund, under stat. 5 & 6 Will. IV, ¢. 76, s. 92, though it was sworn that the proceed- ings were taken bona fide, and not for the purpose of 14Q. B. 796, 190 LEGAL PROCEEDINGS. supporting one candidate against the other at the public expense. (2) In Reg. v. Bridgwater, and Reg. v. Paramore,’ expenses incurred by a corporation under similar cir- cumstances were disallowed. The town council of Bridgwater had ordered payments from the borough fund for defraying the expenses of opposing two rules, one fora guo warranto against a party who had been declared duly elected a councillor, and had accepted the office, for exercising that office ; the other for a criminal information against an alderman of the borough, for alleged misconduct at an election of councillors. On motion for a certiorari, made at the instance of a burgess, the Court of Queen’s Bench quashed the orders which directed the payments in question, holding that the purposes for which the expenses had been incurred were clearly not public purposes. (8) In Reg. v. Town Council of Stamford,” a rule was made absolute to remove by certiorari into the Queen’s Bench, an order of a town council to defray out of the borough funds the expenses entailed upon two police officers of the borough, in the prosecution of a party for an assault committed upon them in the execution of their duty ; and. also the expenses of their defense to an indictment preferred against them by him for an assault upon the same occasion. The court determined that the payment of such expenses was not justified by sect. 92 of 5 & 6 Will. IV,c. 76; and that a resolution of the watch committee which had been passed, approving of such payment was not an award of expenses within sect. 82 of that statute, (4) Reg. v Mayor &c. of Tamworth? is to the 10 A. & E. 281. Reg. v. Thompson, 5 Q. B. 477; D. & M. °4Q. 8B, 900,15; 18L.J.Q.B,177; 497. See Reg. v, Dunn, 5 Q. B. 959. °17 W.R. 231; 19. L. T. N.S, 483. NOT BY OR AGAINST THE CORPORATION DIRECTLY. 191 same effect. The court laid down the general rule, that the costs of litigation undertaken by a corporation, if mala fide and from improper motives, or in respect of a matter in which the corporation is only collaterally interested, cannot be charged upon the borough fund ; but, if in the bona fide assertion of the rights of the corporation, they may be charged upon the fund, al- though the litigation has not resulted in favor of the corporation. (5) Reg. v. Mayor &ec. of Sheffield? A water- works company in the borough of Sheffield were by their act bound, on the requisition of the town council, to give a constant supply of water, and they were em- powered to make regulations to be observed By the consumers subject to the approval of two justices, any person aggrieved having the right to oppose the regula- tions before the justices. The town council having required the company to give a constant supply, the company proposed certain regulations, which were op- posed before the justices by the corporation, on the ground that they imposed too onerous conditions on the consumers, and the justices modified the conditions ac- cordingly. The town council made an order for the payment of the expenses so incurred, but the Queen’s Bench quashed the order, as not being justified by sect. 92 of 5 & 6 Will. IV, c. 76, and there being no surplus rates from which the payment could be made. The result of the above cases would seem to be this: Jirst, that it is only the invasion, actual or contemplated, of either the franchises, the rights, or the property of a corporation, which will justify an expenditure of the corporate funds, not an action, a guo warranto informa- tion, or the like brought against individual members of 1L, R. 6 Q B, 652, 192 LEGAL PROCEEDINGS. even the governing ‘body; secondly, that save under very exceptional circumstances, a corporation may not indemnify a member for expenses incurred: by him in maintaining his rights as a member; but, thirdly, that the courts construe the corporate “rights” somewhat liberally,* and, therefore, if legal proceedings be neces. * It is competent for a town to take upon itself the expense of defend- ing a suit to restrain its school committee from making expenditures for educational purposes according to their discretion. Babbitt v. Selectmen of Savoy, 3 Cush. 530. A town may appropriate money to indemnify its school committee for expenses incurred in defending an action for an alleged libel, contained in a report made by them in good faith. Fuller». Inhab. of Groton, 11 Gray, 840. And, again, a municipal corporation may indemnify an executive officer for expenses caused by a judgment against him for acts ‘committed in good faith in the discharge of his official duty. Sherman v. Carr, 8 R. I. 431; Nelson o. Milford, 7 Pick. 18; Bancroft 0. Lynnfield, 18 Pick. 566; Hadsell v. Inhab. of Hancock, 3 Gray, 526. The agreement of a town to pay the expenses of a suit by an individual, which involves the determination of the town line, is valid and binding. Baker 2. Inhab. of Windham, 13 Me. 74; see also Briggs ». Whipple, 6 Vt. 95. On the other hand, a Massachusetts town is not bound by its corpo- rate vote to pay the expenses of a field driver, incurred in a suit brought against him for wrongfully impounding cattle. The town is not respon- sible for his acts, and therefore has-no interest in the suit. . Vincent 2. Nantucket, 13 Cush. 108. So, too, a city cannot employ counsel to aid in criminal prosecutions on behalf of the State against persons lately offi- cers of the city for misconduct in office. Butler 0. City of Milwaukee, 15 Wis. 493. Nor can a town properly vote to pay money to its selectmen, or those who have acted in that capacity, for costs or damages sustained by them in resisting criminal prosecutions brought against them for their official conduct. Merrill o. Plainfield, 45 N. H. 126, in which case the judge makes the following statement of the law on this general subject: “Tt has been held, that a town may indemnify a surveyor of highways for liabilities incurred in the bona jide discharge of his duties, because the town is bound to repair highways, and is responsible for defects in them, and therefore has so direct an interest in the subject that it can adopt the acts of the surveyor, acting as the agent of, and for the benefit of, the town, in a matter of town affairs. His duties are the duties of the town. Bancroft ». Lynnfield, 18 Pick. 566. So towns may bind themselves by vote to indemnify a collector of taxes from the costs and expenses of de- fending actions brought against him for acts done in the performance of. his duties, because he acts by authority of the town and as their agent, NOT BY OR AGAINST A CORPORATION DIRECTLY. 193 sary to protect the mayor or other member of the governing body in the discharge of his functions, or to secure the corporation against the doing of acts which may, though remotely, prejudicially affect its interests, the costs of such proceedings may be defrayed out of the corporate assets ; provided, however, fourthly, that’ there be no prohibition, express or implied, against un- dertaking the proceedings in question, for if so, no measures, no damage, no benefit, present or prospective, will justify the same. Secondly.— Where the Corporate Interests are in no way concerned. II. A corporation cannot in any way interfere in legal proceedings, which do not involve or ques- tion the corporate rights or privileges. Tt has just been seen that a corporation may expend its funds in maintaining its own corporate privileges, but not those of private persons. -A fortiori, it may 1 See Reg. v. Mayor ce. of Sheffield, L, R. 6 Q. B. 652, and similar caacs. at least in collecting the taxes raised by the town; and the town may ratify and affirm his act as the act of the town. Pike v. Middleton, 12 N. H. 278. . But it has been equally well settled that in case of officers of the town who act not as the agents or servants of the town, but in a judicial capacity, where the town has no direction or control of them, is not re- sponsible for their fidelity, gains nothing by their diligence, and loses nothing by their carelessness, where the duties are imposed specifically by statute on the officer, and the town has no duty to perform, no right to defend, and no direct interest to protect, the town cannot properly in- demnify the officer in the discharge of his duties, and any attempt to do 80, any vote or contract to that effect, will be void. Anthony ». Adams, 1 Met. 284; Stetson 0 Kempton, 13 Mass. 272; Parsons v, Goshen, 11 Pick, 396; Vincent 2. Nantucket, 12 Cush. 103; Martin ». Mayor of Brooklyn, 1 Hill, 545, 551; Wadsworth v. Henniker, 35 N. H. 189; Gove v. Epping, 41 N. H. 539.” See also Dillon on Munic. Corp. §§ 98, 99. 13 : 194 LEGAL PROCEEDINGS. not institute or aid proceedings against parties who may have injured or made attacks upon its members, and thereby damaged the pecuniary position of the cor. poration. This was so decided in Pickering v. Stephenson! The directors of a foreign railway company. had prose- cuted a person for a libel published by him, as secretary of a committee, with respect to the council of adminis- tration of the company. It was admitted that the libel had prejudicially affected the prospects of the company, and that upon the commencement of the prosecution, the prospects were improved. But Wickens, V. C., laid down “ that where a guasi partnership of this sort is divided into a majority and minority, who differ on a question of internal administration, and litigation re- sults from the difference, it is contrary to the spirit of the partnership to pay the expense of the litigation out of the general fund; and that this is independent of the question whether the majority is overwhelming or a bare majority.” He therefore decided that the prose- cution of the proceedings in question at the company’s expense was ultra vires, and he consequently restrained the directors from paying any further costs out of the company’s funds, although he did not, under the cir- cumstances, order them to refund the costs which they had thus already discharged. Ill. A corporation may not adopt legal proceedings, which were not originated by or on behalf of itself. Generally speaking, a corporation may ratify, and thereby become liable for, acts not initiated by itself, ‘L, R. 14 Eq. 822, NOT BY OR AGAINST A CORPORATION DIRECTLY. 195 provided that they are not ultra vires. This power of ratification is, in respect of legal measures, subject to the qualification that these measures must have been commenced by persons purporting to represent the cor- poration, and to act on its behalf. Proceedings not so originated cannot subsequently be adopted or aided by the corporation, however beneficial to it may be the continued prosecution of such proceedings. This is well shown by the decision in Kernaghan v. Williams,! which arose out of the following circumstances: Three ' directors in the Dublin Trunk Connecting Railway Com- pany, instituted a suit (Williams v. O'Meara) on ‘be- half, &c., “ against the company, the directors, and other persons, for the purpose of’ recovering for the company moneys alleged to have been misapplied.” Shortly afterwards the board of directors #48 reconstructed, and Williams, and two of his coplaintiffs became di. rectors. ‘Somewhat later, at an extraordinary general meeting, the directors were authorized to prosecute the suit of Williams v. O’Meara, for the benefit and at the expense and risk of the company. But, upon a bill filed by a shareholder to prevent the directors so acting, the master of the rolls decided that this resolution was ultra vires, and he restrained the directors from acting upon it.* This principle of course does not in any degree 11. RB. 6 Eq, 228; compare Elborough v, Ayres, L. R. 10 Eq. 367. * Where the general agent of a corporation, in charge of its lands and buildings, made a lease (by virtue of his general authority, but without special authority to lease) for the purpose of trying title to land, into which he had entered for condition broken, a suit prosecuted by the cor- poration in the name of the lessee does not operate as a ratification of the act of the agent, so as to make the lease effectual. Gillis v. Bailey, 17 N. H. 18. 196 LEGAL PROCEEDINGS. qualify the liability of corporations with respect to pro- ceedings actually, though perhaps not nominally, in- stituted or defended on their behalf by persons duly authorized by statute or otherwise to represent them, such as public officers,‘ clerks to public boards,’ and the like. Nor does it modify or otherwise affect their lia- bility to indemnify directors,> persons holding shares as trustees for a company,‘ and others who from their po- sition in relation to the company have incurred expense on its account.* 14 Geo. IV, c. 46, 8. 14; see Croxton’s * Re National Financial Company, Case, 5 D. G. & Sm. 482. L, R. 3 Ch. 791; James v. May, L. R. 6 2See Hall v, Taylor, E.B.& E.107; H. Lds. 328; see also Re Oriental Com- 27 L. J. Q. B. 811. mercial Bank, L, R. 12 Eq. 501, and 5 See General Exchange Bank v. ante, p. 98. Horner, L. R. 9 Eq. 480. * In determining whether a corporation should conduct or defend at its own expense legal proceedings not directly by or against itself, di- rectors, charged with the administration of its affairs, should be governed by the rules adopted by prudent men in the conduct of their own busi- ness. Many questions arising in the progress of actions are determined upon principles which may involve the property or very existence of the corporation nota party, and it is believed that, in such an event, it would not be wltra vires for the corporation to contribute to the employ- ment of counsel and other legitimate expenses of the litigation. It cer- tainly is competent for a corporation to defend its title to property, though the action of ejectment may be brought against its tenant as defendant. These considerations would doubtless determine the question, if pre- sented to a court of equity on an application to prevent an agreement to conduct or defend being made. The liability of a corporation for expenses already incurred by its of- ficers or directors in prosecution or defense of such actions, as the officers and directors are mere agents, should depend upon the law of agency. The law of agency is thus stated by Mr. Justice Story (Story on Agency, §§ 335, 336): “Another right of agents is, to be reimbursed all their advances, ex- penses and disbursements made in the course of their agency, on account of, or for the benefit of, their principal. This is naturally, nay necessarily, implied, from the very character of every agency to which such advances, expenses, and disbursements are incident, whenever they fall within the appropriate duty of the agent. Hence, all the incidental charges and ex- NOT BY OR AGAINST A CORPORATION DIRECTLY. 197 penses incurred for warehouse room, duties, freight, lighterage, general average, salvage, repairs, journeys, and other acts done to preserve the property of the principal, are to be fully paid by the latter. So, if an agent has, at the express or the implied request of his principal, necessarily incurred expenses in carrying on or defending suits for the benefit of his principal, those expenses must be borne by the latter, and the agent will be entitled to recover them from him. But this liability of the principal proceeds upon the ground that the advances, expenses, and disburse- ments have been properly incurred, and reasonably and in good faith ‘paid, without any default on the part the agent. Under such circum- stances, it will constitute no objection to the claim, that the advances, ex- penses, or disbursements have not been attended with all the benefits to the principals which were expected or intended by the agent; for, his acts being in good faith, in the exercise of a sound judgment, and ac- ‘cording to the ordinary course of business, the agent ought not, in justice, to be made responsible for any ultimate failure of success in the agency. Cases may indeed occur of such peculiar exigency as will justify an agent in making advances or incurring expenses beyond what ordinarily apper- tains to the regular course of business, for which, nevertheless, the princi- pal will be bound to make hima full reimbursement. And, a fortiori, this rule will apply where the agent is clothed with a discretionary au- thority. However, if the agent has voluntarily, and officiously and with- out any authority, made advances or payments, or has incurred unreason- able, useless, or superfluous expenses, the principal will not be bound to any reimbursement thereof, for it will be imputed to the fault, or negli- gence, or unskillfulness of the agent.” CHAPTER VI. APPLICATIONS TO’ PARLIAMENT. Tr has been seen that a corporation may extend its legitimate business by every legitimate means. Will applications to parliament, and agreements with ref: erence to the same, made at the expense of the company by its duly appointed agents, either in virtue of their own inherent authority, or in pursuance of resolutions - promulgated at an extraordinary meeting, be a “ legiti- mate means?” ‘The answer is not clear; but, as far as can be gathered from the many couficting decisions, it appears that such applications and agreements will. be legal and binding, if'made bona fide for the purpose of developing the existing business, and of rendering the working of the same more easy, expeditious, and eco- nomical; but that they will be ultra vires, if the in- tention be to add to the business, and per consequentiam, to increase the liabilities of the corporation as a whole, _ and of individual shareholders, or if the: manifest tendency of the same be in this direction. Many of the cases under this head have arisen from proceedings by shareholders, to restrain directors from making such application. It was at first doubted whether the Court of Chancery could thus interfere between the legislature and parties proposing to address it; but the jurisdiction of the court was amply vindi- cated by Lord Cottenham in Heathcote v. North Staf- fordshire Railway Company; and it has since been fre- quently admitted, theoretically, at least.? 12 Mac. & G. 100; 20 L. J. Ch. 82. 2See Lancashire and Carlisle Rail- NOT AT CORPORATE EXPENSE, 199 SECTION I. APPLICATIONS TO PARLIAMENT NOT PURPORTING OR INTENDED TO BE AT THE'CORPORATE EXPENSE. I. Both private individuals and corporations may, without hindrance from the courts, make any applications whatever to Parliament.* way Company v. North-Western Rail- court, there can be no doubt whatever of way Company, 2 K. & J. 293; 25 L. J. its power to interfere after the decisions Ch, 223, where, per Page-Wood, V. C., that have been arrived at.” “With regard to the jurisdiction of the * The right of petition is one which could not be “ practically denied, until the spirit of liberty had wholly disappeared, and the people had be- come so servile and debased as to be unfit to exercise any of the privi- leges of freemen.” Story on the Constitution, § 1894; see Cooley on Const. Lim. 349. Federal and State constitutions have established three departments of government, executive, legislative, and judicial, each of which, within its prescribed limits, is supreme. The due order and regu- lar administration of public affairs require, that each department should be entirely independent of the others. ‘‘The law-making power of the State recognizes no restraints, and is bound by none, except such as are imposed by the constitution. That instrument has been aptly termed a legislative act by the people themselves in their sovereign capacity, and is therefore the paramount law. Its object is not to grant legislative power, but to confine and restrain it. Without the constitutional limitations the power to make laws would be absolute. These limitations are created and im- posed by express words, or arise by necessary implication. The leading feature of the constitution is the separation and distribution of the powers of the government, It takes care to separate the executive, legis- lative, and judicial powers, and to define their limits. The executive can do no legislative act, nor the legislature any executive act, and neither can exercise judicial authority.” Sill». Corning, 15 N. Y. 297. The leg- islative and executive departments must be free to act, within constitu- tional restrictions, each according to its best judgment, and must be responsible for its conduct only to the sovereign power residing in the people. For this reason the courts will not interfere by mandamus with the exercise of executive or legislative action not purely ministerial. Marbury v. Madison, 1 Cranch, 1387; State » The Governor, 1 Dutch. 331; Hawkins v. The Governor, 1 Ark. 570; Mauran 2. Smith, 8 R. I. 192; en parte Pickett, 24 Ala. 91; ex parte Echols, 39 Ala. 698. It is also well established, that the courts, though having the power to declare a 200 APPLICATIONS TO PARLIAMENT. In considering this question we must carefully dis. criminate two proceedings closely allied and very simi- legislative act unconstitutional, will be indisposed to do so, except in clear cases, for the reason that @ co-ordinate branch of the government has passed judgment on the matter. Cooley on Const. Lim. 160. With much greater reason should the courts hesitate to oppose legislation be- forehand, by preventing a citizen from seeking from the legislature the exercise of such judgment. It is therefore held, in People 2. Canal Board, 55 N. Y. 399, that ‘‘courts will not and cannot restrain the legislature either directly or indirectly; * * * nor restrain or prohibit a citizen from petitioning the legislature, or any public body, or asking action by either in his behalf, whether with or without the authority of law, unless to do so would be a violation of some covenant or agreement with others.” In New York, the courts would, moreover, be without power to com- pel obedience to an injunction against an individual to prevent his petitioning the legislature, or to punish disobedience of such injunction, for it is provided by statute, 1 R. S. Edmonds ed. p. 85, sec. 19, that ‘‘it is the right of the citizens of this State to petition the governor or either house of the legislature, and all commitments and prosecutions for such petitioning are illegal.” Story v. Jersey City and Bergen Poiut Plank Road Co. 1 OC. E. Green, 18, was a case in which a bill was filed by a stockholder of the company, praying, among other things, that the plank-road company, defendant, be enjoined from making any application to the legislature for authority to abandon any part of its road, or to change fundamentally the objects of the company, or to alter fundamentally the structure of its road. The chancellor says: ‘“‘ This, it is believed, is the first instance in this country of an application to a court of equity to restrain, by writ of injunction, an application to the legislature for any purpose, either of public or pri- vate concern. It is admitted that there is no American precedent for the exercise of such power. This fact in itself, though not decisive, is a per- suasive argument against the propriety of its exercise. In England, though applications to parliament have been restrained by injunction, the practice is of very recent origin, and there are but few reported cases of its exercise. It was adopted by Vice Chancellor Shadwell, in 1881, in Cunliff ». The Man. & Bolt. C. Co. and in Ware o, The Grand Junction W. W. Co. 2 Russ. & M. 470, and note. The former case was compromised without appeal; the latter was reversed on appeal by the Lord Chancel- lor. In 2 Phillips, 666 (1848), an injunction was granted by Vice Chancel- lor Shadwell to restrain a railroad company from opposing a bill brought before parliament by another railroad company for the amalgamation of the two companies. On appeal, the injunction was dissolved upon the merits, though the jurisdiction of the court was maintained by Lord Cot- NOT AT CORPORATE EXPENSE. 201 lar, but widely different in their legal. import and bearings, viz., first, applications to parliament without tenham. In 2 Macn. and Gor. 100 (1850), an injunction was granted by the vice chancellor, restraining the defendants from making application to parliament for any act to authorize them to abandon certain branch rail- ways, or to authorize anything to be done or omitted by the company inconsistent with, or repugnant to, a covenant entered into by them with the complainant. This injunction was also dissolved by Lord Cottenham upon the merits. In no one of these cases was the injunction restraining a party from making application to parliament, either in support of or in opposition to a bill, finally sustained. There are a number of cases in which the courts have enjoined a corporation having funds for distinct objects, from using them to promote an application to parliament for a fundamental change in its charter. But this, it is obvious, is an exer- cise of power resting on very different principles. J¢ is simply a restraint upon the corporation of a diversion of its funds from the purposes for which they are held in trust, to other and different purposes. 16 Simons, 225; 13 Beav. 1; Ib. 48; 5 De G. & Sm. 290; 10 Hare, 51; 16 Jur.828. Therule seems to be well settled in England, that a court of equity will not, either at the instance of a.stockholder or of a third party, restrain a corporation from applying to parliament for an alteration of its charter. As has been already intimated, the jurisdiction of the Court of Chancery to restrain a party from petitioning parliament for or against a measure, has been re- peatedly affirmed by the English chancellors. Thus, in 2 Phillips, 666, Lord Cottenham said: ‘There is no question whatever about the jurisdic- tion; a party who comes to oppose a railway bill in parliament, does so solely in respect of his private interest, not as representing any interest of the public, or for the purpose of communicating any information to par- liament. This court, therefore, if it sees a proper case connected with private property or interest, has just the same jurisdiction to restrain a party from petitioning against a bill in parliament, as if he were bringing an action at law, or asserting any other right connected with the enjoy- ment of the property or interest which he claims.’ And in the earlier case of Ware v. The Grand Junction Waterworks Company, Lord Chan- cellor Brougham said: ‘It is quite idle to represent this as an attempt to restrain by injunction the proceedings of parliament.’ It will be freely admitted, that the injunction operates directly, not upon the legislature, but upon the party enjoined, and in no wise interferes with the exercise by the legislature of its rightful powers. But I cannot resist the conviction that such exercise of power, under our form of government, is au infringement of the rights of the people and of their representatives. If not a direct infraction of the bill of rights and of the letter of the constitution, it is in conflict with the spirit of republican 202 APPLICATIONS TO PARLIAMENT. more, by the corporation itself, acting of course by its duly accredited agents, or by the members thereof, government and the structure of its institutions. very citizen has an un- questioned right to petition either branch of the legislature upon any subject of legislation in which he is interested. Every legislator has a right to be in- formed of the views and wishes of all parties interested in the enactment of a law. This right to perfect freedom of intercourse between the representa- tive and his constituents is not founded upon any constitutional provision or bill of rights, but springs from the very structure of the government. By what authority shall this court step between the: representative and his constituents, and deny to the one or the other the exercise of his political rights in their fullest freedom ? It is conceded that the legisla- tive powers cannot be trammeled by injunction. The legislature can neither be restrained from legislating upon any subject, nor from exercis- ing their authority to obtain information upon any matter of legislation. And if the legislature cannot be restrained from asking the information, can the citizen be restrained from giving it? Are the rights of. the rep- resentative more sacred than those of his constituents? “It appears to me that the granting of such an injunction is an unauthorized abridgement of the political rights of the party enjoined. The proper office of courts of justice is to maintain and enforce the legal and equitable rights of par- ties litigant, as established by existing law. It ts no part of their office to’ determine in advance what laws ought or ought not to be enacted, or to inter- fere, directly or indirectly, with the course of legislation. The complain- ant’s bill is framed upon the theory that the charter of an incorporated company cannot be altered in any essential particular, even with the con- sent of the corporation, without the consent, express or implied, of every stockholder; and that such alteration would be unconstitutional, as im- pairing the obligation of the contract entered into between the State and such stockholder. If this doctrine should be admitted in its fullest extent, it is not perceived that it can affect the result of the present application. * * %* Whatever limitation may exist to the reserved right of the legis- lature to alter or repeal the contract, I am clear that the reservation is in itself valid, and that this court ought not, upon a motion for a prelimin- ary injunction, to pronounce any alteration, suspension, or repeal of the charter to be unconstitutional-or illegal. Much less should this court make such declaration in advance of any actual legislation. The plank- road company werd incorporated with power to construct a plank- road upon an ancient public highway and with the franchise of tak- ing tolls thereon. No limit is fixed for the duration of the charter. The legislature have since incorporated a company to construct a horse railroad between the same termini. They have authorized the railroad company to purchase the plank-road. They have also authorized the NOT AT CORPORATE EXPENSE, 203 whether the governing body or private persons, but always in their individual character; and, secondly, plank-road company to lay rails upon their track. They have, however. provided that if the plank-road is purchased by the railroad company, the plank-road shall be continued; and if the rails are laid thereon by the plank-road company, they shall be so laid as not to hinder or obstruct: public travel. It must be presumed that the public convenience de- manded the increased facility to be afforded by the construction of the railroad. Of that the legislature were the peculiar exclusive judges. The complainant, a stockholder in the plank-road company, now asks. that the company shall be restrained from making any application to the legislature to abandon or change any part of their route, for this, it is insisted, would be fundamentally changing the objects of the company without his ‘consent; and that the railroad company, its officers, stock- holders, and promoters shall be enjoined from aiding and abetting such application. If this claim have any foundation in law or in equity, which is by no means admitted, and if it be recognized, it would place it in the power of a single stockholder, for his own pecuniary interest, against the wish of every other stockholder and the convenience of the whole com- munity interested in the line of travel, to prevent even a petition for a. change.” That the English authorities are not applicable to this country, will be,. moreover, apparent, when we consider the difference between the power of parliament and that of our legislatures. In the United States, ‘‘the will of the people, as declared in the constitution, is the final law, and the will of the legislature is only law when it is in harmony with, or at least not opposed to, that controlling instrument which governs the legis- lative body equally with the private citizen.” Cooley on Cons, Limit. 3.. But the power and jurisdiction of the British parliament ‘‘is so trans- cendent and absolute that it cannot be confined either for persons or causes within any bounds. * * * It can, in short, do everything that is not naturally impossible; and, therefore, some have not scrupled to call its. power, by a figure rather too bold, the omnipotence of parliament.” 4 Coke’s Inst. 36. So that while in America, the constitutionality of laws. can be reviewed in the courts, and the rights of citizens protected from unconstitutional attacks by the legislature, in Great Britain, the will of parliament is the final law, and no appeal can be taken from its decision to the courts. When, therefore, the action of the parliament takes place, there is no redress for the individual, no matter how unjust the action. towards him or the injury he may suffer. The English Courts of Chan- cery may therefore, with some show of reason and justice, intervene 204 APPLICATIONS TO PARLIAMENT. similar applications, coupled with a proposition to sup- port and defray the same by pledging or charging the corporate funds and assets. Now, as has just been seen, it has often been asserted “by judges of great eminence that the court has power to interfere, by injunction, to prevent an ap- plication to parliament; but they all decline to define the occasion which would justify such an interference, and even to express an opinion as to the difficulty of conceiving a case in which any one could be s0 re- strained, Although, in common with my predecessors, I assert the right to grant an injunction in a proper case, like them, I will not attempt to define my power, ‘to prevent private persons or corporations from applying for or setting in motion such parliamentary action. , In Stevens v. Rut. & Bur. R. R. Co. 29 Vt. App. 545, Chancellor Ben- nett observes, “It is evident that Lord Brougham, in the case of Ware ». The Grand Junction Water Works, grounds himself upon the sovereign and uncontrollable powers of the parliament. The change in the charter asked for in that case, would, under most if not all the decisions in this country, be regarded as a fundamental one. The argument of Lord Brougham, at least in one particular, does not seem very sound. He says the company ought to have the power of obtaining an alteration in their constitution, or that the plaintiff ought to have come in as a member of it, under certain conditions and limitations. But would the conditions and limitations be more sacred than the constitution itself? And if parlia- ment might change the constitution, might they not dispense with the ‘conditions and limitations? See Amer. Law Mag. vol. 6, p. 93. But with us no legislature can transcend the bounds of the constitution. It is not a constitutional tribunal to hear and settle the rights of the parties, as Lord Brougham seems to consider the British parliament. I appre- hend that, in this State, no Court of Chancery would restrain a corpora- tion from applying to the legislature for a fundamental change in their ‘charter; and a sufficient reason would be, that if the additional power and authority changed the character of the original contract, and defeated the vested rights of the stockholders, the act would bind such of the stockholders only as consented to the alteration.” NOT AT CORPORATE EXPENSE, 205. but will simply say that this is not a case in which I think I ought to interfere.”? These are the expressions of Lord Chelmsford, and it is difficult to avoid the conclusion at which, ap- parently, he arrived, viz., the jurisdiction of chancery in reference to the matters in question is more of myth than reality. It is the undoubted privilege of every person, legal as well as natural, to petition and other- wise to apply to the crown, that is to say, the supreme legislature, in a formal and respectful manner, whenso- ever and for whatsoever he pleases. This is a constitu- tional right, in the exercise of which no subject may be hindered even by the sovereign. How then can the Court of Chancery interfere? Moreover, another body has to be considered, parliament. Any injunction by chancery against an application to it would be an in- fringement of its privileges, and it need scarcely be observed that the issue of such an injunction would be a contempt of either the House of Lords or the House of Commons, or both, and that every person concerned in any attempt to enforce the same would also be guilty of a similar contempt, and would be lable to a com- mittal to prison as punishment therefor. Accordingly, in the case from the judgment in which the above ex- tract is taken, Steele v. North Metropolitan Railway Company,’ the chancellor did not venture to put in motion the asserted powers of hiscourt. The defendant company had agreed to purchase the land of a land- owner, and had a clause to that effect inserted in their bill, whereupon he withdrew his opposition to the bill. They afterwards promoted a bill to enable them to abandon the branch which affected the land in question, 2 Per Lord Chelmsford, L, C. in L. R. 7L. R. 2 Ch, 237, 2 Ch, 248. 206 APPLICATIONS TO PARLIAMENT. and to repeal that clause. Both Page- Wood, V.C., and the Lord Chancellor, on appeal, declined to restrain the company from making the application. Indeed, there is but one, and that a peculiar case, where the Court of Chancery has interfered to prevent such an application. In the case in question, Ward v. Society of Attorneys,’ Knight-Bruce, V. C., granted, until the hearing, an injunction, restraining the majority of the members of a corporation from surrendering their charter, with a view to obtaining a new charter for an object different from that for which the original charter was granted. The injunction was only temporary, and the Vice Chancellor apparently considered that the pro- ceedings of the majority were detrimental to the corpo- ration, and that on that ground the minority had an equity enabling them to call for the interference of chancery. But whether the decision can be upheld or not, it has not since been followed. Chancellors and courts have reiterated their inherent jurisdiction to re- strain applications to the crown; but they have never done so. Cases have arisen imperatively demanding chancery to intervene if it could do so—applications made or about to be made, not merely with mala fides, but in direct breach of solemn engagements—but the courts have been content to lament the want of good faith, and to comment in strong terms upon the fraud; but they have not gone further. In Att. General v. Manchester and Leeds Railway Company,’ a cause had been commenced with respect to the building of a bridge by the defendants in a manner detrimental to the public, and, pending a motion, an agreement was come to that no change in the existing state of things should be done until the hearing of the 11 Coll. 370. 71 Ra, Ca, 436, pea NOT AT CORPORATE EXPENSE, 207 cause. Notwithstanding this the defendants inserted, in a bill which they had before parliament, a clause liberating them from the agreement, and enabling them to do what they had undertaken not to do; and the Lord Chancellor Cottenham, while commenting very strongly on the conduct of the defendants, declared himself unable to interfere, In Lancaster and Carlisle Railway Company v. North-Western Railway Company,' the defendants had expressly agreed, in consideration of the plaintiffs with- drawing their opposition to a bill which the defendants were promoting, to erect their terminus at a certain spot, and not to carry their line in certain directions without the consent of the plaintiffs. Afterwards they brought forward another bill in parliament, authorizing them to make their line, terminus, &e, without paying any regard to this agreement; and Page-Wood, V. C., refused a motion on behalf of the plaintiffs for an in- junction to restrain them. Perhaps the strongest instance reported is that of Re London, Chatham and Dover Railway Arrangement Act, ex parte Hartridge v. Allender.” The “arrange- ment” act (30 & 31 Vict. ¢. ccix) provided: that no suits or other proceedings against the company, with certain exceptions, should be prosecuted during a period of ten years, without the consent of the Court of Chan- cery. Hartridge and Allender had been appointed by the court the representatives of the stock and share- holders of the company, to prosecute certain inquiries. A bill was introduced into parliament for conferring additional powers on the company, and was promoted 19K. & J. 308; 25 L. J. Ch. 223. .2 R. & M. 470; Astley v. Manchester, See also Stevens v. South Devon Rail- Sheffield and Lancashire Railway Com- way Company, 13 Beav. 49; Ware 2. pany, 2D.G. & J. 463. Grand Junction Waterworks Company, L, RB. 5 Ch. 671. 208 APPLICATIONS TO PARLIAMENT. by the directors on behalf of the company. Its pro- visions were approved of by the mortgagors and share- holders in general meeting; but while in the House of Commons it was very materially modified. Thereupon Hartridge and Allender, as the representatives of the stock and shareholders, applied to the court to restrain the directors from further promoting in the name of the company the said bill, or any other bill in parliament affecting the rights and interests of the stock and share- holders, without obtaining the previous sanction of the court. Stuart, V. C., having commented very strongly upon the conduct and general proceedings of the direct- ors and eertain other persons officially connected with the company, granted the injunction. On appeal, how. ever, the Lords Justices, while agreeing with the Vice Chancellor that the court “has a power to act im per- sonam, and, if a proper case should be proved, to re- strain any person from making an improper application to parliament,” held that this was not a fit occasion for the court’s interference, and accordingly discharged the injunction. 1 What would be the result of a con- flict between the legislature and the courts arising from the latter putting in force—if this were ever done—their as- serted jurisdiction in respect of applica- tions to the former, it is impossible to predict. Apparently no instance has yet occurred of such a conflict. It is, however, not impos-ible that the heed- lessness or the temerity of some court or judge, anxious to prevent some more than usually gross breach of faith ma. bring about such a collision, The fol- lowing extract from the Times of May 10th, 1873, shows that such a circum- stance, though unexpected and unlikely, is not outside the bounds of possibility : “Private Birt Leeis.ation.— A novel, if not an unprecedented, case has arisen this week before » private bill committee in the House of Com- mons, presided over by Sir John Rams- den, Sir John Duckworth sitting’ as referee. An improvement bill relating to the township of Kingstown in Ireland was promoted by the township commis- sioners under their corporate seal, and also by individual commissioners. Cer- tain dissentient commissioners and rate- payers moved in the Irish Court of Chancery for an injunction to restrain both sets of promoters from proceeding with the bill, and from applying the rates in furtherance of that object. The Vice Chancellor granted the injunction, but against the corporate body alone, the ground taken being that they had not complied with the provisions of the towns improvement (Ireland) act, 1854, and incorporated acts, which provide that, in carrying out works of improve- ment, local authorities shall first submit them to the ratepayers for approval. Armed with this injunction, the peti- NOT AT CORPORATE EXPENSE. 209 It has sometimes been attempted to draw a dis- tinction between applications to the legislature which are based on public, and those on private grounds, and to assert that though the former cannot be restrained, yet the latter may be. Bacon, V. C., thus alludes to this distinction:' “The main stress of the argument, which Mr. Eddis has urged so ably and so fully is, that no such relief as the plaintiff asks in this case can be given to him, because it would, in fact, be restraining an application to parliament by a public body in the discharge of a public duty, and in which public interests are concerned. I thought that the law on this subject was at least as well settled as any other law of this court: You cannot restrain a man from going to parliament on public grounds; you cannot usurp that authority which rests only with the legislature; you tioners against the bill applied to the committee, before the promoters’ case was opened, to stop the further progress of the bill; but the committee held that, as the bill had been referred to them by the authority of the House, they were bound to consider it, and that the cor- porate body must proceed at their own risk ofthe pains and penalties awaiting them if they disobeyed the Vice Chan- cellor’s order. Meanwhile the case was opened, and in support of the preamble evidence was heard at some length, in- cluding that of the Earl of Longford, Col, Taylor, M. P., Mr. Pim, M. P., and the chairman of the board. While this evidence was being heard, the pro- moters appealed in Ireland against the injunction; but the appellate court, comprising the Lord Chancellor and Lord Justice Christian, unanimously affirmed the Vice Chancellor’s order, with costs, Inthe committee two days afterwards counsel elicited from one of the witnesses in cross-examination that the commissioners, in their corporate capacity, had retired from the promo- tion of the bill, though the individual commissioners were still ready to pro- ceed with it, a guaranty fund having 14 been formed for the payment of ex- penses should the bill fail, On hearing this admission the committee at once ordered the room to be cleared, and after lengthened deliberation decided that, under the circumstances, while willing to hear the case out if the re- maining promoters desired them to do so, they must, in the absence before them of the responsible local authority, pro- nounce the preamble not proved. The petitioners, six in number, thereupon, with one assent, asked that the pro- moters should be made to pay their costs, because the local authority had been legally adjudged to be wrong-doers from the beginning, and the petitioners, therefore, in the words of the costs act, had been ‘ unreasonably or vexatiously ’ subjected to expense in defending their interests, The committee, however, de- ° clined to order costs.” 11, R. 18 Eq. 594. Compare Page- Wood, V. C., in Lancashire and Carlisle Railway Company v. North Western Railway Company, 2 K. & J. 298, 304, 25 L. J. Ch. 228, 227, See also Att. Gen, v. Ely &c, Railway Company, L. R, 4 Ch. 194, 210 APPLICATIONS TO PARLIAMENT. can shut no man’s mouth; butif he is going on in violation of a plain contract, which is personal to him- self, with which the public interests have nothing what- ever to do, you cannot, under the pretense that he is going to parliament, refuse the relief which, if there were no question about parliament, this court would be bound to give.” The distinction may perhaps exist; but, if so, the only effect of it must be this, viz., the Court of Chancery would decline to interfere, with applications to parlia- ment, when based upon public grounds, for the simple reason that—apart from any question of its juris- diction—it would not allow its powers to be turned to the detriment of the public. Il. The courts will prevent both corporations and ordinary citizens from breaking agreements not to oppose applications to parliament—semble.* The right to petition against, and that of promoting a bill in parliament would seem to depend upon exactly similar considerations. But it has been asserted in the most unqualified manner, that the court has jurisdiction to restrain parties, if not generally from opposing bills, at least from breaking agreements not to oppose. “This court, therefore, if it sees a proper case connected with private property or interest, has just the same jurisdiction to restrain a party from petitioning against _a, bill in parliament, as if he were bringing an action at law or asserting any other right connected with the en- joyment of the property or interest which he claims.” This was the opinion of the Lord Chancellor Cotten- * See People v. Canal Board, 55 N. Y. 899; and post, note to page 212, NOT AT CORPORATE EXPENSE. 211 ham, in Stockton and Hartlepool Railway Company v. Leeds and Thirsk Railway Company, where, however, his lordship refused the injunction prayed, holding that the alleged contract had not finally been agreed on. But the jurisdiction in the two cases of opposition to, and of promoting a bill—claimed on the same grounds, and supported by the same arguments—must in each case alike stand or fall. The constitutional principles affected in the one case are equally affected in the other, and the reasoning that is bad or good when applied to the one must be pronounced equally bad or good when applied to the other. As a matter of fact, the court has not yet restrained against the breach of a covenant not to oppose, much less the simply opposing a bill. III. Corporations will not be restrained from merely applying to the supreme government of another nation, for the purpose of amending their powers or otherwise modifying their constitution. Nor will the court prevent an application to a foreign legislature. There can be no doubt of the jurisdiction of the courts in this respect. The legal tribunals of this country are under no duties to foreign states, and may exercise their functions without regard to their wishes or intervention. Nevertheless, they do not in- terfere in such cases unless it can be shown that the proposed applications amount to a fraud on the mem- bers complaining, or are to be carried on at the corporate expense. In Bill v. Sierra Nevada Lake, &c., Company,’ a company had been formed in California, for purposes 1 9 Phill. 666. , 21D.G. F. & J. 177; see as to the ? Parker », River Dunn Navigation jurisdiction of the court in analogous Company, 1 D. G. & Sm, 192; Maunsell cases, Bulkeley v. Schutz, L. R. 3 P. C. v. Midland Great Western Railway 764; Smith v, Weguelin, L. R. 8 Eg. Company of Ireland, 1 H. & M. 162. 198. 212 APPLICATIONS TO PARLIAMENT. connected with land in that country; but nearly all the shareholders were resident in England. A resolution was passed, at a meeting of English shareholders, au- thorizing the trustees to take steps for increasing the preference shares to an extent not allowed by the exist- ing constitution of the company. One of the share- holders, objecting to the creation of these preference shares, filed a bill to restrain the company and its di- rectors from issuing the same. It appeared that there was no intention to create the preference shares, except with the sanction of the California legislature; and the Lords Justices discharged the order of the vice chan- cellor, and decided that an injunction ought not to be granted to restrain the company from acting on the resolution, holding that the court will notin general re- strain parties from applying to the legislature, whether of this or of a foreign country. . IV. Though persons will not be restrained from ap- plying to parliament, even in breach of agree- ments to the contrary, they will be compelled to observe contracts which they may have entered into collateral to such application.* * Quere. While it is true, that it is against public policy to prevent the | exercise of the right of petition, in regard to subjects of political interest, what considerations prevent the waiver of this right as regards matters. purely personal? Why may not a contract be enforced, founded on proper consideration, to forego application to or opposition against legislative action in matters affecting only the contracting parties, neither of whom is a legislator? The only doubt is to be found in the anxiety which courts manifest to avoid even the appearance of evil. See Marshall ». Balt. & Ohio R. R. Co. 16 How. 314, and cases cited, post, note to page 238. In Low 2. Railroad, 46 N. H. 284, the court say: ‘‘If the Vermont Central Railroad was making opposition to this bill, upon grounds not of a public character, but to protect or advance its private interests, the plaintiff might lawfully induce that corporation to withdraw such oppo- sition by considerations bearing upon its private interests. In repeated NOT AT CORPORATE EXPENSE. 213 It must, however, be conceded that the Court of Chancery has jurisdiction, on a proper case made out, to restrain parties entering into contracts and making arrangements derogatory to their own agreements, or to the rights of third persons, preliminary and inci- dental to applying to parliament. Telford v. Metro- politan Board of Works? is a recent decision in point. It arose out of the following circumstances: After the passing of the Metropolitan Commons act, 1866, the 7L. R. 18 Eq. 574; compare Att. Company, 1 Rail. Cas, 436; see Frewin Gen. v, Manchester and Leeds Railway v. Lewis, 4 My. é& Cr, 249, ‘instances this has been sanctioned by the English courts, in cases where individuals and turnpike and bridge companies have been induced to cease opposition to the incorporation or extension of railways, by indemnities for the injuries likely to be caused by such railways. There might be cases where the withdrawal of opposition to such bills, caused by com- ‘pensation secured to the persons making it, would be against public policy and illegal, although such opposition was merely of a private nature, as when the fact of compensation was by design concealed from the legisla- ture by the parties, knowing that the nature of the case was such that the legislature would be misled by the withdrawal of opposition, and might be induced to do what, with a knowledge of all the circumstances, they would not do. If, however, the opposition was of a private charac- ter, and merely to protect private interests, and it was afterwards with- drawn in consideration of a satisfactory indemnity for the injury antici- pated, and there was no purpose to conceal the arrangement from the legislature, we do not perceive that it would be open to objection; and the cases are numerous in England where such arrangements are held to be valid.” But in Pingry v. Washbum, 1 Aik. 264, Skinner, C. J., says: ‘‘The record shows that the defendant below offered to give evidence of a con- tract or agreement between himself and the corporation” (for whose use the plaintiff sued) “that if he would not oppose the passing of the act of 1822, the defendant, and all the inhabitants of Mount Holly should pass the gate toll free. Whether the testimony was rejected on the ground that defendant did not desist, or that he procured the conditions to be annexed to the act without the consent of the corporation, or that the contract was against sound policy, does not appear; but that such a contract is against sound policy, prejudicial to correct and just legislation, and of course void, is not to be questioned.” 214 APPLICATIONS TO PARLIAMENT. plaintiff, a part owner, and the other co-owners, of 3 manor, the waste of which became, under the above statute, a metropolitan common with the board of works as its local authority, sold and conveyed the manor, with the knowledge of the board, for a sum of £10,200, to two trustees, who afterwards sold and conveyed the same to the board of works. By the former convey- ance, the plaintiff (being the owner of house property near the common) stipulated that if, within five years. from the date of the deed the common should not be inclosed and dedicated to the public, having no part of it sold or let on building leases, he (the plaintiff) should repurchase his share of the manor, on giving the same price for it as he was then receiving. The board of works, with notice of this stipulation, memorialized the the inclosure commissioners to prepare and certify a scheme of local management, and the commissioners, on the suggestion of the board, published a scheme,, whereby it was proposed to give the board power: to sell or let, on building leases, a small outlying por- tion of the common, for the purpose of recouping to the board their expenses of and attending the inclosure.. Thereupon the plaintiff filed his bill to restrain the board from promoting the scheme, or any scheme incon- sistent with the stipulation originally made with him; and Bacon, V. C., decided that the board of works were bound by the stipulation in the conveyance by the plaintiff, and also that his right under the stipulation to sue in equity was not affected by the circumstance that the scheme in order to become operative must be submitted to parliament; and he granted the injunction as prayed. AT THE CORPORATE EXPENSE, 215 SECTION II. APPLICATIONS AT THE CORPORATE EXPENSE. In respect of applications of the other kind, viz., those which it is proposed to support at the corporate expense, considerations of a very different kind come into play. The persons favoring and urging on such applications, are not simply exercising their constitu- tional right of applying to the crown, but they are do- ing much more—they are expending, or proposing to expend, the funds belonging to another, the corporation, in the maintenance of their objects, and if the govern- ing body of the corporation, they are committing, or are about to commit, a breach of the trust which is im- . posed upon them for the general body of members. To restrain them from doing this, from what is in fact a misappropriation of the corporate property, is nothing more than what.the Court of Chancery always does when it interferes to compel a trustee to fulfill his duty. Consequently, though the court has never yet’ pre- vented a private person or a corporation from asking the intervention of the crown or parliament, yet it never hesitates to restrain such parties from devoting to such application funds intrusted to them for other purposes, when the persons—e. g., shareholders, ratepayers, and others interested in the said funds—call upon chancery to restrain the illegal dealing with such funds. First.—Applications to Parliament by Trading Corporations. It will be convenient to deal first and separately with railway and other similar commercial corporations 1 With but one exception, see Ward v, Societies of Attorneys, 1 Coll. 370. 216 APPLICATIONS TO PARLIAMENT. Here the parties immediately affected by the appropria- tion of the funds are the shareholders. If they consent no other parties can interfere, but if any of them, few or many, object to the contemplated proceedings, they may obtain an injunction against the same. It makes no difference what may be the object of the proposed application—to modify the constitution of the corpora- tion, to add to or supplement its powers, to enlarge the scope of its business—in every case a shareholder is entitled to say, “I became, and am,a member of a corporation, having such and such powers, and engaged in carrying on such and such a business; I sub- scribed my money to it, because it had those powers and was engaged in that business; but I do not think it can advantageously undertake any other business, and I decline to permit its funds to be wasted in any attempt to obtain additional powers, or to vary its constitution.” It might have been deemed consistent with the purposes, and intra vires of ‘every corporation endowed. with certain privileges and carrying on certain operations, to enter into any engagements enabling it the better to use its privileges and to conduct its opera- tions. But the contrary has been repeatedly decided. It must remain content with its present powers and machinery however defective they may be, or applica- tion for the increase and improvement thereof must be made in the first instance at the expense and risk of private members. Such persons may secure, by the insertion of proper clauses in the act for which they apply, that they shall be recouped by the corporation, but such provisions will evidently be of no avail if their application is unsuccessful. AT THE CORPORATE EXPENSE, 217 V. Commercial corporations may not make applica- tions to parliament for any purpose whatever at the corporate expense, if any members object to the same. * Such applications are ultra vires in the narrower and restricted meaning of the term. A corporation may with the assent of all its members defray the expense of these applications out of its general funds. Such proceedings are not ultra vires in the sense that a cor- poration may not concur in them, but only in the sense that any single member may refuse to allow them to be supported at the corporate cost. One of the strongest cases on this point is that of Munt v. Shrewsbury and Chester Railway Company.! The defendants here had been by various acts em- powered to make several railways and also to build wharves and warehouses for the purposes of the traffic of the company on the banks of the river Dee, the con- servancy of which was vested in other persons. They brought a bill into parliament to preserve and improve the navigation of the river; but they had no express power to apply any of the capital of the company for that puxpose. Upon a bill filed by one shareholder, it was held, that the directors of the railway company could not legally devote any of the railway capital to payment of the expenses of preparing, prosecuting, or 13 Beav. 1; Simpson v. Denison, 10 Hare, 51. * The principle upon which the rules V-VIII are founded is the same as that which forbids the use of corporate funds for purposes not authorized by the charter. If any individual stockholder chooses to employ his own money, in legitimate expenditure, to obtain any amendment to the char- ter, he is at liberty to do so, but he cannot employ for this end the money of the corporation, which has been contributed for other objects. 218 APPLICATIONS TO PARLIAMENT. promoting the bill in parliament; and the injunction prayed for to restrain the same was granted. In the Great Western Railway Company v. Rush- out,' the Oxford, Worcester and Wolverhampton Rail- way Company, of which Rushout and others were direct- ors, and in which the plaintiffs held shares, were pro- moting a bill in parliament, and the plaintiffs filed a bill to restrain the defendants from pledging their com- pany’s funds in support of the same. Parke, V. C., thus expressed himself: “The design of the application to parliament, which is the subject of this suit, is to vary the scheme of this railway company. Now, in my opinion, having regard to the cases that have been re- ferred to, the design of the application to parliament is a lawful design if lawfully pursued. 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. It is clearly not in dispute that the company mean to make use of the funds, and to pledge the credit, and to enter into contracts on be- half of the Oxford, Worcester and Wolverhampton Railway Company, for the purpose of promoting this undertaking. Now, upon all the authorities referred to, that is an unlawful application of the funds, and an ap- plication which this court will not permit.” He, therefore, granted an injunction to restrain the entering into such contracts, or the use of the company’s funds or the pledging their credit for the purpose of promoting the bill; but he would not go farther and prevent the defendants from soliciting the bill or ?5 D.G. & Sm. 290, 307, AT THE CORPORATE EXPENSE, 219 another like it in parliament, or from using the com- pany’s name and seal for such purpose.* It should be noticed that the vice chancellor in his judgment in the above case very carefully distinguishes between a simple application to parliament, “which is a lawful design if lawfully pursued,” and such an appli- cation defrayed out of the corporate property, which is unlawful if any one shareholder objects. On this point Page-Wood, V. C., commented in Vance v. East Lanca- shire Railway Company :! “ Mr. Bird contended that if it was once admitted that the directors had power to come to parliament for the act, all powers incidental to that must be inferred. It is quite clear that this is too large an inference ; for instance, one of the most neces- sary consequences of applying for an act, viz., the incur- ring expense, is just what this court will not permit. If they apply to parliament for an act, the court will not prevent them from so doing, on the ground of dis- senting shareholders objecting to it; but they are not permitted to apply any portion of the funds towards. any part of the expenses necessary for this new purpose. They cannot divert the funds to any purpose other than those sanctioned by the existing act of the corporation.” Stevens v. South Devon Railway Company,’ is another well-known authority. Here there were two classes of shareholders. A general meeting authorized 13K. & J. 50. 213 Beav. 49. * The general powers given by the charter of a manufacturing com- pany to the directors, to manage the stock property and affairs of the corporation, do not enable them to apply to the legislature for an enlarge- ment of the company’s powers; such application could be made by the authority of the company only. The resolve of the assembly giving power to the company to assess the stockholders, was void, because the application was made by the directors only, without any authority from the company. Marlborough Manuf. Co. ». Smith, 2 Conn. 580. 220 APPLICATIONS TO PARLIAMENT. the directors to apply to parliament for an act which would materially alter the existing rights and interests of the two classes, ¢nter se. A shareholder of one of the two classes moved for an injunction to restrain the ap- plication to parliament, and the use of the corporate geal, and the expenditure of the corporate funds for such purposes; and the court, though it would not restrain the application to parliament or the use of the corporate seal, restrained the expenditure of the funds of the com- pany in the payment of the costs of such application. VI. It is, if not actually ultra vires, at least improper on the part of a corporation, which is applying to parliament, to make contracts and to enter into other transactions on the assumption that its application will be successful. The contracts and transactions now referred to may easily enough be made contingent on the granting the application, and consequently to involve the corporation in no liability till the same is decided. Nevertheless the tendency of such contingent arrangements is bad, for despite all precautions the corporation may become involved in liabilities, actual, and not contingent on ob- taining the contemplated increase of powers. Conse- quently the Court of Chancery sets itself against such proceedings, and on proper cause shown, restrains them.* *In New Haven & Northampton Co. v. Hayden, 107 Mass. 525, an agreement had been made by the defendants with the plaintiff, that if the plaintiff would extend its road to a point beyond the limits authorized by its charter, the defendants would make certain subscriptions, pay the in- ‘stalments thereon, procure rights of way, and obtain needful legislation to enable the plaintiff to merge or consolidate itself with other railroad companies named in the agreement. The plaintiff at this time had no authority to extend its railroad, but subsequently obtained authority from the legislature; an action was sustained against the defendants for failure AT THE CORPORATE EXPENSE. 221 Vance v. East Lancashire Railway Company,’ is a case in point. This wasan application by ashareholder to restrain his directors from issuing certain shares, &c. At an extraordinary general meeting the directors had been authorized, almost unanimously, to apply for a bill for an extension of their line; and in contemplation of, and conditional upon, the passing of the act, to dssue new £5 per cent. preference shares upon certain terms, &c. The directors, by their affidavit, stated that the subscription to these shares was entirely conditional upon the act, that they did not intend to pay any dividend till the same was obtained, and that the £3 deposit paid upon these shares, was carried to a separate account, and devoted solely to the preliminary expenses. The vice chancellor, after admitting the right of 13 K. & J.50. Compare Hattersley v. Earl of Shelburne, 31 L. J. Ch, 873. to secure the right of way. The court say: ‘‘It is true that at the date of this transaction the plaintiff had no authority to extend their railroad farther north than Northampton, and if their contract had been simply to do what they had no legal capacity or right to do, it would have been wholly void. But this is not the true interpretation of the contract. It .was a part of the defendants’ proposition to obtain from this legislature. of the commonwealth a statute, for the purpose of removing the difficulty, that is to say, as we understand it, they undertook to make an applica- tion, and to take the usual and proper means for obtaining such a statute. This was a matter in which neither party had reason to apprehend difli- culty, and the desired authority was in due time granted for the extension of the road and the increase in the capital stock of the company necessary for that purpose. * * * The agreement was in substance to do some- thing not at that time legal, but which the passing of an expected statute would render legal; and both parties must have understood that, if the sanction of the legislature should be withheld, the contract would not go into effect. The contract does not import that the plaintiffs bound them- selves to construct the road at all events and without legislative authority. Many cases have arisen in which contracts made in anticipation of such authority have been before the courts,” See Mor. & Es. R. R. Co. v. Sus- sex R. BR. Co. 4 C. E. Green, 13; 8. c. 5 C. E. Green, 542; Strasburg R. R. Co. 2, Echternacht, 21 Penn. St. 222. 222 APPLICATIONS TO PARLIAMENT. the directors to apply for the act, held that they were not justified in the way they were issuing the shares. « All this is done, it is true, in anticipation of a new act of parliament. But I apprehend that it was a course of proceeding altogether irregular. It may not have been intended perhaps so to be; but it strikes me as being a very irregular course of proceeding on the part of the directors. They are not put forward as the servants and agents of the promoters of the proposed new line, and as authorized to receive subscriptions to that line, and to engage in inducing parties so to subscribe; that the act to be applied for, shall enact that all the shareholders in the undertaking: shall be deemed to be shareholders in the old undertaking ; that the shares shall form part of the original stock, and shall have a preferential dividend of £5 per cent. That, as it seems to me, would have been the regular and ordinary course of proceeding. * * * It may be difficult at this moment to show that any positive liability would be cast upon the plaintiff or any other shareholder of the company by issuing these specific shares; but that is a question which he may fairly say, is not now to be mooted. * * * The ‘broader ground which the plaintiff may take is this: ‘I am a shareholder in a company which has nothing to do with the C. & B. extension; you are acting as directors of my company, and you are not to put anybody in possession of documents, and tell those persons that on the faith of those documents they are to be treated as shareholders in my railway; and that if a certain act of parliament shall pass, making them shareholders in a certain other railway, then they are to have a con- siderable advantage over me.’” AT THE CORPORATE EXPENSE. 293 VII. If the necessary powers be taken in the con- stating instruments, it will riot be ultra vires to make these applications even at the corporate cost. It is quite possible for the constitution of a cor- poration to be such as to enable it, at the corporate expense, to apply to parliament for additional powers, and the like. And when this is so, the authority to make such application may be vested, either expressly or impliedly, in the directors or other governing body. Under such circumstances, no shareholder, nor any number of shareholders less than a majority, will be competent to prevent the corporation, or its manag- ing body, from defraying, out of the corporate funds, the costs of any application to the legislature which. may be thought necessary. Lyde v. The Eastern Bengal Railway Company,’ establishes this proposition. The defendants were incorporated by an act of parliament. Subsequently to the act, their deed of settlement was executed, whereby, among other very wide powers, it was provided that “the directors shall have the fullest power from time to time, at their discretion, to apply to parliament for an act or acts for conferring on the com- pany all such powers for extending the undertaking * * as the directors from time to time think fit.” The directors introduced a bill into parliament to enlarge the objects and purposes of the company; thereupon, the plaintiff, on behalf of himself and the other share- holders, filed a bill, and moved for an injunction to restrain the payment of the costs of this bill out of the company’s funds, but the master of the rolls refused the motion, holding that the powers—unprecedented 1 36 Beav, 10. 924 APPLICATIONS TO PARLIAMENT. and, indeed, dangerous, as far as the shareholders were concerned—given to the directors fully justified them in their application. VIII. It is not ultra vires of corporations to make applications to the supreme legislature, and to support them at the corporate expense, if none of their members raise objections. Hitherto these applications have been considered as between corporations and their members, and it has been seen that they are ultra vires in the narrower signification of the term—in other words, they may be, and very generally are, a breach of trust on the part of the corporation, considered as a partnership as against its members. But thisis all; if the members acquiesce, it is not open to any one else, whether the corporation itself or third parties, to make the objection of illegality. Such, at least, is the effect of the decision in Bateman v. Mayor &e. of Ashton-under-Lyne.’ A company had been incorporated by 5 & 6 Will. IV, ¢. 61, to supply A. with water; and by 18 Vict. c. 70, the waterworks were transferred to defendants. The original act fixed the share capital of the company, and defined the area from which the water was to be taken and to which the it was to be supplied. Complaints having arisen of the defective supply, the committee of management resolved, having obtained the sanction of the shareholders, to apply to parliament for power to make fresh works, so as to include a much larger area; and they entered into a contract with the plaintiff to prepare the neces- sary parliamentary plans. It was held that such con- tract was not ultra vires. 13H. & N, 828; 27 L, J. Ex, 458, AT THE CORPORATE EXPENSE. 225 Now, in comparing this case with those immediately preceding, it must be remembered that the latter arose in chancery, where the question was whether a majority of shareholders could compel a dissentient to submit to a considerable variation in both the nature and the magnitude of the undertaking; the reply was, that ac- cording to the elementary principles of partnership, the majority have no such power. The question was not raised as to whether the application was ultra vires of the corporation. In Bateman’s case, on the other hand, this was the exact point in dispute; and Martin. and Channell, BB., though Bramwell, B., dissented, held the negative. Unquestionably the decision arrived at in this case satisfied the requirements of justice, but whether it is in perfect accord with the judgments de- livered under other not very dissimilar circumstances may, perhaps, be open to doubt. Bateman’s case then involved the question of ultra vires in its true and primary meaning. Hitherto we have seen that a corporation may not, in opposition to the wishes of even one member, apply to parliament for an extension of its capacities. Sup- posing, however, no member dissents, how far will such an application, together with agreements incidental to it, be ultra vires of the corporation—to what extent will it be liable for, and can it take advantage of such agree- ments? What engagements collateral to such applica- tions, and made with reference to, and often in aid of them, will be binding? Of these collateral engagements, the most important are such as relate to the purchase of lands for, and the payment of compensation for lands injariously affected by, railways, waterworks, and the like. 15 226 APPLICATIONS TO PARLIAMENT. Eastern Counties Railway Company v. Hawkes! is a leading and important decision in point. The Eastern Counties Railway Company having a bill before parlia- ment for enabling them to make a railway from W. to S., entered into an absolute agreement with Hawkes, a landowner on the proposed line, in consideration of his withdrawing his opposition to the bill, to purchase a house and six acres of land, which stood settled on him for life, with remainders over, for the price of £8,000, and £5,000 additional by way of compensation, and undertook to obtain all such powers and to do all such acts as would enable Hawkes to sell the estate. The bill was passed, containing no special powers as to Hawkes’ estate, but the company, under their compul- sory powers, could have taken two acres of the estate as within their line of deviation. No funds were raised under the act, and no part of the line was commenced. The company having totally aban- doned the line, sent a notice to Hawkes that they should not require his estate. Upon a bill filed by Hawkes against the company, before their com- pulsory powers had expired, both the Vice Chancellor and the Lord Chancellor decided that the contract was good and binding upon the company. The latter then finally appealed to the House of Lords, who also held the contract to be neither illegal nor ultra vires—‘“it was to apply the funds of the company to purposes ?5 H. Lds, 331, affirming the judg- ments of Knight-Bruce, V. C., and St. Leonards, L. é, 22 L, J. Ch. 77. This case was preceded by three other simi- lar decisions, very questionable on grounds of public policy if not on legal . principles, viz., Stanley v. Chester and Birkenhead Railway Company, 3 My. & Cr. 773; 9 Sim. 264; 1 Rail. Cas. 58; Simpson v. Lord Howden, 9 Cl. & F. 61; I Rail. Cas. 326; 8 L. J. Ex, 261; and Lord Petre v, Eastern Counties Railway Company, 1 Rail. Cas. 462. Compare Webb vw. Direct London é&c. Railway Company, 21 L. J. Ch. 887; and Stuart v. London and North-Western Railway Company, 21 L. J. Ch. 450; Preston v, Liverpool &c. Railway Company, 6 H. Lds, 605. See also on the question of the legality of agreements of this de- scription entered into by or with peers, Earl of Lindsey v, Great Northern Rail- way Co. 10 Hare, 664. AT THE CORPORATE EXPENSE. 227 within the scope of its original incorporation” —and therefore affirmed the decree for specific performance thereof. This isa very strong case—the sum to be paid was exorbitant, none of the land referred to was taken or to be taken by the bill which passed, and the line was abandoned, so that the company received abso- lutely nothing for their outlay. Yet specific perform- ance was decreed, thus showing that the House of Lords were satisfied, not only as to the clearness of plaintiff's title at law, but also that an action for dam- ages would not give him fully compensation. It will, however, be observed that the contract was dependent upon the passing of the bill. This is most material, and will probably be found to be the ratio decidendi. It is a condition of which particular notice was taken by the House of Lords in the very recent case of Taylor v. Chichester and Midhurst Railway Company.” The defendants, being about to apply to parliament for an act to sanction a branch railway which would pass through the plaintiff’s property, entered into ar- ticles of agreement with him, in the second of which they covenanted to purchase from him (he covenanting to sell) at the price of £2,000 the land required, d&e, and in the third, to pay to him within three calendar months of the bill passing the further sum of £2,000, “ag and for a personal compensation to him for the an- noyance, inconvenience, and disturbance, &c., which he has sustained and may or will sustain in respect of the sporting and preservation of game upon his said estate, by or in consequence of the construction of the said 15H. Lds. 381, 349. 421; Earl of Shrewsbury v. North Staf: 27, RB. 4 H. Lds, 628,638. Com- fordshire Railway Company, L. R. 1 Eq. pare Preston v. Liverpool Railway (‘om- 598 ; Scottish North-Kastern Railway pany, 5 H. Lda. C. 605; 25 L. J. Ch, Company v, Stewart, 3 Macq. 382. 228 APPLICATIONS TO PARLIAMENT. intended railway, and of the parliamentary and other surveys and other works connected therewith and inci- dental thereto.” Each of the stipulations began: “In the like event ”—7. ¢, “ of the said bill in its present or any amended, modified, or altered. form with the like object being passed into an act in the present session of parliament.” - The bill did pass, and on action brought by Sir Charles Taylor for the £2,000 stipulated for in the third clause, the house of lords held that the agree- ment was not ultra vires. In his judgment, Lord Hatherley, L. C., after stating the position of affairs at the time the above covenants were entered into, thus proceeded: “Now what was there in that state of cir- cumstances, assuming the bill passed (the agreement being founded, as it is founded, wholly on the con- dition of its passing), what was there on the face of this state of things to make it apparent to Sir Charles. Taylor, that he, on the one hand, was incompetent to enter into such a contract, or that the directors, on the other hand, were incompetent to enter into it on behalf of the company? Dependent as it was entirely on the passing of the act, he would have a right to contemplate it as if the act had been passed, and the agreement had been entered into under its powers—though, in fact, the powers had to be obtained before the agreement could have any force or validity. He, accordingly, would find individuals incorporated as a company, with the ordi- nary powers of purchasing lands and paying compensa- tion in respect of damage, paying it out of their funds. When I say out of their funds, I will state in a few moments what exactly constitutes the character of those funds. The company. was in existence, its directors were persons capable of entering into engagements un- der a common seal—-engagements conditioned, of course, AT THE CORPORATE EXPENSE, 229 upon obtaining powers, but in a state in which they could enter into a contract subject to that condition. “He found them in possession of an act whereby they were authorized to make a certain line of railway; he found them about to extend that line. He must be taken to have made his engagement entirely subject. to their obtaining the act authorizing them to do so. When we come to that act we find that they meant to raise a larger amount of capital than they before pos- sessed. Their first act, of course, restrained the appli- cation of their capital to the purposes authorized by that act. It is not necessary to read the clauses to that effect: they are always inserted in every railway act. ‘These clauses restrained them from applying their capital to anything but the original railway which, un- der its powers, they brought into existence; so they sought new powers to raise additional capital to make a new line.” In connection with this question of the legality of contracts for the acquisition of lands which are made dependent on the passing of an act, Lord Wensleydale, in Scottish North-Eastern Railway Company v. Stewart," jaid down broadly that “no objection can, I think, be made on the ultra vires doctrine to a contract by a com- pany who wish to alter one of the branches of its rail- road, and are about to apply to parliament for authority to do so, engaging to purchase land from a neighboring proprietor if they should obtain their act. The contract to purchase land in this case will therefore, I think, probably prove valid.” . It sometimes happens that the agreement is worded, or construed to be worded, so as to be conditional on the lands referred to in it being taken. In such cases 1 3 Macq. 382, 416. 230 APPLICATIONS TO PARLIAMENT. the whole agreement will be held conditional on this: event, and none of its stipulations will be enforceable,. not even those which provide for personal compensation, unless the lands be in some way interfered with. TX. It is ultra vires of a corporation to promote ap- plications to parliament not made directly and bona fide by itself or its constituted agents for its own proper purposes. But although corporations may themselves apply to. parliament, and defray the expenses of such applications. out of the corporate funds—that is, assuming no mem- ber objects—yet such applications must be really and: bona fide their own. Bills promoted and measures of other kinds instituted by other persons or by them- selves as the nominees of or for the benefit of other persons, they cannot legally concern themselves with. All such proceedings will be ultra vires in the wider: sense, and cannot be made binding upon the corporation. or chargeable upon its assets, either by resolutions. antecedent or by subsequent attempted ratification. East Anglian Railway Company v. Eastern Coun- ties Railway Company,’ is not only the first case on this point, but also the first case where the question of ultra vires was distinctly raised at common law. The defendants had agreed with the plaintiffs by a deed duly sealed, inter alia, to pay the costs of preparing and soliciting bills introduced by the plaintiffs, and. then pending in parliament. Two of the bills passed ;: the defendants. refused to pay the costs; and on an ? Gage v. Newmarket Railway Com- way Company, 5 H. Lds, 605; 26 L. J. pany, 18 Q. B. 457; 21 L. J. Q. B. Ch. 421, 398; Scottish North-Eastern Railway °11C.B. 775; 21 L. J.C. P. 28; Company v. Stewart, 8 Macq. 382; Pres- Hill v. Manchester &c, Waterworks- ton v, Liverpool and Manchester Rail- Company, 2B. & Ad. 644; 5 Jb, 866, AT THE CORPORATE EXPENSE. 2931 action brought it was decided that the agreement was ultra vires. Six months later, Macgregor v. Dover and Deal Railway Company‘ was taken to the Exchequer Cham- ber. The action was originally brought by the manag- ing committee of the proposed Dover and Deal Railway Company, but it was subsequently carried on by the official manager appointed under the winding-up acts. The plaintiff, in error, as chairman of the South-Eastern Railway Company, had covenanted with this com- mittee that—in consideration that they would not abandon their objects, but would proceed therewith and apply to parliament for an act to authorize the making of the Dover and Deal Railway, and would hand over the scheme to the South-Eastern Railway Company in the event of an act being obtained—in the event of the application failing, the South-Eastern Rail- way Company would insure the company represented by the committee against any loss which might be caused to the said company by such rejection and fail- ure, and would defray and pay all expenses that should be incurred by them in endeavoring to obtain the act of parliament. This covenant was also unanimously adjudged to be not binding upon Macgregor, upon the ground that if made by the South-Eastern Railway Company itself, it would have been ultra vires, and that this being so, both the plaintiff and defendants must be taken with full knowledge of the powers con- ferred on the South-Eastern Railway Company to have made a contract by which the plaintiff in error was to bind the company to do an illegal act. These two decisions have ever since been recognized. 118 Q. B. 618; 22 L. J. Q. B. 69; Mayor d&e. of Norwich v. Norfolk Rail- way Company, 4 E. & B. 397. 232 APPLICATIONS TO PARLIAMENT. and followed; some of the dicta put forward have not been implicitly acquiesced in; but the principle actually involved stands unshaken. Indeed, if any meaning at all is to be attached to the expression ultra vires, it is difficult to conceive how it could be within the scope of one corporation to assist the efforts of another cor- poration to modify its constitution, as in Hast Anglian Railway Company v. Eastern Counties Railway Com- pany, or a fortiori in the creation of such other, as was the object of the contract made by Macgrevor. In Maunsell v. Midland Great Western (Ireland) Railway Company,’ an agreement that a railway com- pany should contribute towards the parliamentary de- posit required for bills promoted by another company, and in Spackman v. Lattimore® a similar agreement that it should assist in repaying money subscribed by the promoters in compliance with the standing orders, were each adjudged to be ultra vires. From the above cases we may gather that it is not ultra vires, taking the term in either of its meanings, for a commercial corporation— (1) to apply to parliament for further powers: Or (2) to make the necessary contracts preliminary to the same? These two propositions must probably be to this ex- tent qualified, viz. that the additional powers sought must be to enable it to develop its existing business or to add to it other business of an analogous.nature. If the object of the application were a total change in its constitution, or the extending its operations in directions totally uncontemplated by its founders, it is probable that, if such an application were not itself ultra vires, 71H. & M. 180. * Bateman v. Mayor de. ‘of Ashton- 23 Giff. 16. under-Lyne, 8 H. & N. 328. AT THE CORPORATE EXPENSE. 233 at least the preliminary and incidental contracts would ‘be so, and would require express provision in the new act to legalize them. Nor (8) is it ultra vires to make contracts conditional upon the passing of the proposed act. But here a further question arises. Out of what funds are these contracts to be discharged? Not out of the original capital—this would be ultra vires, as is admitted by the Lord Chancellor and by Lord West- bury in Taylor v. Chichester and Midhurst Railway Company: “Their first act, of course, restrained the application of their capital to the purposes authorized by that act. * * * So they sought new powers to raise additional capital to make a new line.” Conse- quently, the new act must provide, either that the old capital shall be liable for the contracts made with ref- erence to the new act, or that new capital may be raised. But it is ultra vires for a corporation, ir the further- ance of such a bill— Either (4) to enter into unconditional and absolute contracts, and not dependent on the passing of the bill ; Or (5) to form agreements, disguised under the name of contracts, but which are in reality bribes to secure the countenance and support of influential per- sonages :?* . 1L, R, 4H. Lds. 639. 2 Ex. 377; referring to Earl of Shrews- 7 See per Lerd Cranworth, in 5 H. bury v. North Staffordshire Railway Lds, 622; and per Blackburn, J.,L.R. Company, L. R. 1 Eq. 598. * Personal solicitation to influence legislation cannot constitute the sub- ject-matter of a legal contract. Agreements for services as a lobby agent before the legislature, are void, as being against public policy and preju dicial to sound legislation. Harris v. Roof’s Executors, 10 Barb. 489; Powers v. Skinner, 34 Vt. 281; Rose ». Truax, 21 Barb. 361; Brown 2. Brown, 34 Barb. 583; Hatzfield ». Gulden, 7 Watts, 152; see also Frank- 234 APPLICATIONS TO PARLIAMENT. Or (6) to contribute towards or otherwise to assist applications made by or on behalf of other corporations. fort ». Winterport, 54 Me. 250; Fuller » Dame, 18 Pick. 479; Gray 0. Hook, 4 N. Y. 449; Davison v. Seymour, 1 Bosw. 89; Clippinger ». Hep- baugh, 5 W. & S. 315; State ». Reed, 4 H.& McH. 6; Hunt ». Test, 8 Ala. 719; Bryan v. Reynolds, 5 Wis. 200; Wood v. McCann, 6 Dana, 366; Coppell v. Hall, 7 Wall. 542. But there is a distinction between the services of a lobbyist who works by secret personal influence and those of an agent who appears before the legislature, or a committee thereof, as a body, to exert an honest in- fluence by the open statement of facts and arguments. Persons may, no doubt, be employed to conduct an application to the legislature, as well as to conduct a suit at law; and may contract for and receive pay for their services in preparing or making oral or written arguments, provided these are used before the legislature itself, or some committee thereof, as a body; but they cannot with propriety be employed to exert their per- sonal influence with individual members. The one class of services tends to pervert, the other to enlighten, the legislative mind. Public policy, therefore, forbids the former, but allows the latter. Sedgwick v. Stanton, 14.N. Y. 289; see, also, Marshall v. Balt. & Ohio R.R. Co. 16 How. 314; Powers ». Skinner, 34 Vt. 281; Frost v. Belmont, 6 Allen, 159; Lyon 2. Mitchell, 36 N. Y. 235; Mills o, Mills, 40 N. Y. 548; 8. c. 86 Barb. 482; Barker 0. Cairo & Fulton R. R. Co. 3 N. Y. Supr. Ct. (Thomp. & Cooke,) 328; Hatzfield o. Gulden, 7 Watts, 152; Wildey v. Collier, 7 Md. 272. The courts, however, have not been slow to find, in a contract for services in procuring legislation, evidence of a purpose to use improper means. Where a contract is general in its terms—as, ¢g., ‘to labor faithfully before the legislature for a charter”—the courts, in their eager- ness to protect the public morality, seem almost to have discarded the rule that a contract is to be presumed to be fora legal rather than an illegal pur- pose, and to have held that the terms of the instrument must. distinctly indicate legal services only, or the contract will be void. They have found in the mere tendency of such general contracts, a principle which public policy condemns. Powers 0, Skinner, 34 Vt. 274. In Mills». Mills, 40 N. Y. 548, the court uses the following language: ‘‘It is not necessary to adjudge that the parties stipulated for corrupt action, or that they intended that secret and improper resorts should be had. It is enough that the contract tends directly to those results. It furn- ishes a tempation to the plaintiff, to resort to corrupt means and im- proper devices to influence legislative action. It tends to subject the legislature to influences destructive of its character, and fatal to public confidence.” So, too, in Marshall 0. B. & O. R. R. Co. 16 How. 314, Mr. Justice Grier, says: ‘‘Public policy and sound morality do, therefore, AT THE CORPORATE EXPENSE, 235 Lastly (7), corporations may always, if no members object, and sometimes even against the wishes of a minority, oppose such application when made by other parties, if the consequences thereof would be detrimental to themselves. Secondly — Applications to Parliament by non-trading Corporations and quasi-Corporations. In the authorities hitherto cited in this chapter, the ratio decidendi has been the principle of ultra vires, pure and simple. Corporations have or have not been restrained according as they were acting or proposing to act in excess of or within their powers. But with respect to corporations and analogous bodies existing for other than commercial purposes, a different principle comes in and qualifies the former, if it does not actually become the sole ground of decision. X. Corporations which possess their property under conditions, express or implied, constituting a trust in respect of such property, may not apply to parliament in breach of the trust so imposed upon them. This trust will be created in various ways. Chari. table corporations evidently hold their property upon trust; so do municipal corporations since the statute 5 & 6 Will. IV, c. 76; so apparently do all corporations and quasi-corporations which have been called into being for the accomplishment of public purposes. imperatively require, that courts should put the stamp of their disapproval on every act, and pronounce void every contract, the ultimate and proba- ble tendency of which would be to sully the purity or mislead the judg- ments of those to whom the high trust of legislation is confided.” See post, Part III, chap. 7, sect. 2. 236 . APPLICATIONS TO PARLIAMENT. However the trust be created, it appears that each and every application to parliament at the expense of the trust * funds will amount to a breach of trust, and be restrained. Att. Gen. v. Mayor &e. of Norwich?! where the defendants were restrained from paying out of the borough fund the expenses of a bill in parliament to enable them to improve the navigation of the river flowing through their city, Shadwell, V. C., holding that the acts regulating the corporation did not author. ize them to apply funds in obtaining powers which were not then vested in them, and could not be vested in them except by an act of parliament specially passed for the purpose. He grounded the jurisdiction of the court on the fact that the mayor, &c, were trustees, who would have been allowed their expenses if application had been made to the court. In Att. Gen. v, Eastlake,” which is perhaps now the leading case, and which was a precisely analogous application, Page-Wood, V. C., went very carefully into the question, as to whether commissioners empowered to levy rates for paving, lighting, cleansing, watching, and improving the streets of a town were trustees of the money levied by them. He decided that these purposes being beneficial, not only to the inhabitants of the town, but to all others having occasion to visit it, were within 43 Eliz. c. 4, and that the commissioners were trustees. He therefore granted the injunction prayed, viz., to restrain them, the commissioners, from applying the funds they had raised towards soliciting an act to increase their powers which had been diminished by the municipal corporation act (5 & 6 Will. IV, «7 6). 116 Sim. 225; affirmed on appeal, 2 11 Hare, 205. 21 LL. J, Ch. 141. AT THE CORPORATE EXPENSE. 237 To the same purport is Att. Gen. v. Andrews.’ By a local act, the commissioners thereby appointed were authorized to construct reservoirs and other works for supplying the town of S. with water, and to do all things necessary for that purpose, to levy rates, &c. The supply of water being insufficient, the commission- ers were desirous of extending their works. It was held that they were not justified in applying the moneys so raised to defraying the expenses of an application to parliament for another act to extend their powers. Almost exactly similar to the facts and decision in this case were those in the Att. Gen. v. West Hartle- pool Improvement Commissioners.” This was an infor- mation at the relation of certain ratepayers to restrain the defendants from applying the rates: and funds under . their control in payment of the costs and expenses’ incurred by them in the promotion of a bill in parlia- ment to extend the area, of their district. Their existing act empowered them, inter alia, to “ do all acts, matters, and things for promoting the health, comfort, and con- venience of the inhabitants.” James, V. C., being of opinion that these words did not include the power of applying to parliament, and, moreover, that the case was governed by Att. Gen. v. Andrews and Att. Gen. ». Eastlake, issued the injunction as prayed. XI. Corporations of this description may oppose at the corporate expense application to parliament by other parties, which may, in the result, be damaging to the interests of the trust under which, or of the persons for whose benefit, they possess their property. 19 Mac. & G. 225; 20 L.J.Ch. 467, cision of Shadwell, V. C., 19 L. J. Ch. on appeal before Lords Commissioners 197. Taoedets and Rolfe, confirming the de- *L, R. 10 Hq. 152. 238 APPLICATIONS TO PARLIAMENT. Whether this statement is correct as a general prop- osition is doubtful. In Bright v. North} it was held, that river conservators were authorized to apply a por. tion of their funds in watching, and, if necessary, opposing a bill in parliament for a project lower down the river, which was likely to be injurious to the banks under their own superintendence. The bill in this case was filed by three landowners on behalf of themselves and all other persons subject to be assessed under the act, constituting the conservators. Lord Cottenham observed: “ You do not find on the face of the act an authority to apply funds for that purpose, because it is incident to every trust. Every trustee would be allowed the proper expenses incurred in defending the property intrusted to his care.” This judgment taken in its full significance appar- ently laid down that such opposition so supported is not ultra vires in either the wide or the more restricted meaning. There is also one other decision to the same effect, viz., that any corporation—municipal, charitable, &e.—may resist proceedings which, if successful, will prevent the due discharge of its own duties,and aims. This was in Att. Gen. v7. Mayor &ec. of Wigan, where an application for an injunction to restrain the raising of a borough rate was refused under the following cir- cumstances: A bill had been introduced into parlia- ment which would very materially diminish the volume of water in the river running through Wigan, and as the river acted as a sewer for the town, such a result would have been very detrimental to the inhabitants; the corporation, therefore, opposed the bill, and obtained the insertion of clauses which provided for the restora- ? 2 Phil. 216. Compare Att. Gen. v. ? Kay, 268; on appeal, 5 De G. M. & West Hartlepool Improvement Commis- G. 62; 23 L.-J. Ch. 488; Reg. v, Lich- sioners, L, R. 10 Eq. 152. field, 10 Q. B. 684; 16 L. J, Q, B, 383, AT THE CORPORATE EXPENSE. 239 tion of the water so abstracted. To meet the expenses entailed by thus opposing the act, the mayor and cor- poration proposed to levy a borough rate, and both Page-Wood, V. C., and the Lords Justices, on appeal, held that they were justified in what they had done. Per Turner, L. J.: “The act of parliament has devoted. the whole income of the corporate property to public and municipal purposes. It has made no express pro-’ vision for the expenses which are incident to the pro- tection of the property, and it has left the provision for those expenses to the general law. * * * * They (#. e. the expenses in question) have been bona fide in- eurred for the benefit and protection of the corporate property, and, having been so incurred, this court ought not to interfere by injunction in the present stage of the * suit.” * But it would seem from subsequent authorities, that, under many circumstances, persons interested in or lia- ble to contribute towards corporate funds, may refuse to allow those funds to be devoted even to opposing in parliament projects which may be detrimental, directly or indirectly, to the corporation, and therefore to them- selves! However, in most if not all of these decisions, it will be observed that the application of the funds in question has been limited Spreng, or impliedly to certain defined purposes. 1 See Reg. v. Mayor d&c. of Sheffield; L. R. 6 Q. B. 652, and other similar de- cisions, ante, pp. 189-96. * No duty is by law imposed upon a town to resist, before the legis- lature or a committee thereof, a change in its boundaries, or its an- nexation to another city or town; and therefore a town has no authority to tax its inhabitants for expenses incurred in such proceedings. Coolidge ». Brookline, Mass. Sup. Ct. 1 Cent. L. J. 182. A Massachusetts town has no authority to appropriate money for the payment of expenses incurred by individuals, prior to the corporate exist- ence as a town, in procuring the passage of its charter. Frost 0. Belmont, .6 Allen, 153. CHAPTER VII. LIABILITIES OF CORPORATIONS EX DELICTO. Ir is now completely established that a corporation can commit most varieties of torts, and, consequently, expose itself to actions for the same. At first sight it _ would seem that such acts must ex necessitate ret be ultra vires, that torts and crimes cannot by any species of reasoning be brought within the objects for the at- tainment of which a number of individuals are incorpo- rated. This is true enough, but it is only one-half of the case. The fallacy consists in assuming that the commission of torts and crimes is one of such objects, and in overlooking the fact that in the pursuit of its legitimate ‘business a corporation may, from inadvert- ence, render itself guilty of a tort or crime. The whole argument has been met, and the fallacy exposed on sev- eral occasions. Thus, in Ranger v. Great Western Rail- way Company,’ Lord Cottenham said: “Strictly speak- ing, a corporation cannot itself be guilty of fraud. But where a corporation is formed for the purpose of carry- _ ing on a trading or other speculation for profit, such as forming a railway, these objects can only be accom- plished through the agency of individuals; and there ean be no doubt that if the agents employed conduct themselves fraudulently, so that if they had been acting for private employers, the persons for whom they were acting would have been affected by their fraud, the same 7 6 H. Lds, 72, Compare Lord Chancellor Chelmsford in Royal British Bank, ex parte Nicol, 28 L. J. Ch, 257. LIABILITIES EX DELIOTO. 241 principles must prevail where the principal under whom the agent acts is a corporation.” Similarly, per Erle, C. J., in Green v. London Gen- eral Omnibus Company:' “I take the whole tenor of authorities, from Yarborough v. The Bank of England down to the case of Whitfield v. The South Eastern Railway Company, to show that an action for a wrong does lie against a corporation, where the thing done is within the purpose of the incorporation, and that it has. been done in such a manner as to constitute what would be an actionable wrong if done by a private individual.”* 17 CO. B. N.S. 290; 29L. J.C. P. 13. * “Corporations are liable for the acts of their servants while engaged in the business of their employment, in the same manner and to the same extent that individuals are liable under like circumstances. Corporations are liable for every wrong of which they are guilty, and in such cases the ‘doctrine of uléra vires has no application.” Merchants’ Bank »v. State Bank, 10 Wall. 604. ‘‘The liability of the corporation for the conse- ‘quences of acts of its officers, done within the scope of their general powers, is not affected by the fact that the act which the officer has assumed to do is one which the corporation itself could not rightfully do. A corporation Imay do wrong through its agents as well as a private individual.” Booth 2. Farmers’ & Mechanics’ Bank, 50 N. Y. 396. A corporation is liable to the same extent and under thé same circumstances as a natural person for the consequences of its wrongful acts, and will be held to respond in a civil action at the suit of an injured party for every grade and description of forcible, malicious or negligent tort or wrong which it commits, how- ever foreign to its nature or beyond its granted powers the wrongful trans- action or act may be. N.Y. & N. H.R. R. Co. o. Schuyler, 34 N. Y. 30; ‘see, also, Phil. & Balt. R. R. Co. 0. Quigley, 21 How. 209; Frankfort Bank v. Johnson, 24 Me. 490; Thayer v. Boston, 19 Pick. 511; Goodspeed 2. East Haddam Bank, 22 Conn. 541; Life and Fire Ins. Co. », Mechanics’ Fire Ins. Co. 7 Wend. 31; Bissell o. Mich. 8. & N.I.R. R. Co. 22 N. Y. 258; Albert ». Savings Bank, 2 Mary. Dec. 169. A corporation aggre- gate being an artificial body—an imaginary person of the law, so to speak —is from its nature incapable of doing any act except through agents, to whom is given by its fundamental law, or in pursuance of it, every power of action it is capable of possessing or exercising. Hence, the rule has been established, and may now also be stated as an indisputable principle, that a corporation is responsible for the acts or negligence of its agents 16 949 LIABILITIES EX DELICTO. SECTION I. ° FRAUDS. Frauds form the most important class of torts in connection with the liability of corporations, and they have given rise to many complicated and difficult ques- tions. The requisites to support, at common law, an action for fraud are well known. First, the defendant, a. é., the party guilty of the fraud, which is oftenest a misrepresentation, and must be as to a matter of fact, must have committed the fraud knowingly, recklessly, or with negligence.t Secondly, he must have intended some other to act upon it.’ Thirdly, the plaintiffs must have relied upon the fraud, dolus dans locum contractui,® though it is sufficient if there was a fraudulent repre- sentation as to any part of that which induced him to enter into the contract. Fourthly, the plaintiff must have sustained damage. These requisites should be carefully kept in mind when examining a case of fraud at common law, whether it concerns a corporation or a priyate individual. But chancery proceeds upon somewhat different’ considera- tions, often holding, that to be constructive fraud, which would afford no ground for an action at law, and very frequently granting to a suitor some redress when he would be utterly remediless at law, as by ordering the ? Taylor v. Ashton, 11 M. & W.415. prospectus or advertisement. Gerhard ? Thom v. Bigland, 8 Ex. 725; butit »v. Bates, 2 E. & B. 476. is sufficient if a misrepresentation be 5 Attwood v. Small, 6 Cl. & F. 232. made to the public generally, asin a ‘Kennedy v. Panama Royal Mail Company, L. R, 2 Q. B. 580. while engaged in the business of the agency, to the same extent and under the same circumstances that a natural person is chargeable with the acts or negligence of his agent. N. Y. & N. H. R. R. Co. v. Schuyler, 34 N. Y. 30. FRAUDS. 943 wrong-doer to recoup the plaintiff, as far as he (the wrong-doer) has benefited by the wrong. In considering the question of fraud, it will be convenient to take first, frauds and misrepresentations which can be imputed to corporations, directly and im- mediately, and secondly, those which can be imputed to them only indirectly, and by implication. (a) Frauds which may be imputed to a Corporation immediately. I. Corporations are liable, like other individuals, for frauds committed directly by themselves or by their direction.* . * In Sharp 0. Mayor, 40 Barb. 273 (see 3 Keyes, 133; 40 N. Y. 454; Ib. 573), the court say: “The suggestion that a corporation cannot be liable for a fraud committed, may be correct as to fraud not in any way connected with or committed in the course of, and tending to carry out, some power or act. which it is authorized to perform. But it is not cor- rect as to fraud so connected or committed. A fraudulent representation is, in effect, a wrongful and unlawful action; and the argument is, that a corporation has no power to commit a wrongful or unlawful act, and hav- ing no power to commit it, it is not liable therefor. But it is held that a corporation may be sued for an unlawful conversion of goods, and dam- ages recovered if it be found to have unlawfully converted them. Beach ». Fulton Bank, 7 Cow. 485. So, also, it may be sued and damages re- covered for an unlawful refusal to permit stock to be transferred. Bank of United States v. Davis, 2 Hill, 451. In these cases, the argument that the corporation is not invested by its charter, or by its stockholders, with, power to commit any unlawful act or wrong, and that it could not by any wrongful or unlawful act affect the interests of the stockholders, was applicable to the same extent as it is in the present case; and those argu- ments were strenuously urged in the case in 7 Cow. It is urged, that corporations will not be affected by any representation made by an agent, unless the agent was directly authorized by resolution to make the par- ticular statement. The principal is liable for the false representations of the agent, made in and about the matter for which he was appointed agent, not on the ground of express authority given to the agent to make the statement, but on the ground that, as to the particular matter for which the agent is appointed, he stands in the place of the principal, and o 244 LIABILITIES EX DELICTO. Not a shadow of doubt now exists either at law or in chancery as to a corporation’s liability when the cir- cumstances are such that the fraud can be imputed to the corporation itself. When will this be the case? The answer given by Lord Chancellor Westbury’ is: “That if reports are made to the shareholders of a com- pany by their directors, and the reports are adopted by the shareholders at one of the appointed meetings of the company, and these reports are afterwards indus- triously circulated, misrepresentations contained in those reports must undoubtedly be taken, after their adoption, to be representations and statements made with the authority ’of the company, and, therefore, binding upon the company.” Similarly in National Exchange Com- , 19H. Lds, 725. whatever he does or says in and about that matter, is the act and declara- tion of the principal, for which the principal is just as liable as if he had personally done or made the declaration. The power of the agent to render the principal liable for representations, flows from his mere appoint- ment to do the act or transact the business, in and about which the repre- «sentations are made. This is clearly the doctrine of the case in 23 Wend. There is no principle of the common law, by which the incidents attaching to the appointment of an agent, when that appointment is made by a corporation, are more restricted than when the appointment is by an in- dividual. No train of reasoning has presented itself which leads to the conclusion, that there is any necessity or propriety in establishing the doctrine, that when an agent is appointed by a corporation, the incidents attaching to that agent are more restricted or of a different nature, than in other cases. It is not meant to be asserted, that a corporation can bind itself in afl matters, to the same extent as an individual can, or that by the appointment of an agent it can bind itself in matters as to which its own act would not bind. But it is meant to be said, that where a cor- poration has-power to do some act, and, as incident to that act, to render itself liable for representations made in and about the doing of that act, it can appoint an agent to do that act, and from the mere fact of such appointment, the same powers will flow to the agent, as if he had been appointed by an individual; provided only, that the powers so flowing could have been exercised by the corporation itself.” FRAUDS. Q45: pany of Glasgow v. Drew,! Lord St. Leonards said: “T have certainly come to this conclusion that, if represen- tations are made by a company fraudulently, for the purpose of enhancing the value of thgir stock, and they induce. a third person to purchase stock, these repre- sentations so made by them for that purpose do bind the company. I consider representations by the direct- ors of a company as representations by the company ; and, although they may be representations made to the company, it is their own representation.” This was explained or rather restated in a subsequent case? by Kindersley, V. C., thus: * “It was laid down in the. National Exchange Company v. Drew (I do not say that the point was actually decided, but the opinion of some of the most eminent judges of the present day was expressed), that where there is a body like this, con- sisting of a great number of shareholders, and the directors make a report to the body at large, in per- formance of their duty, then, if such report contain a representation of the affairs of the company which is false, and if that is made to a public and general meet- ing at the shareholders of the company, and is adopted by the company as the report of the directors to that general meeting; although there be no order to publish it, either by the directors or the body at large, yet, from the very nature of the case, it must be regarded as the representation of the company.” 19 Macq. 103. Company, ex parte Worth, 4 Drew. 529, 2 Re National Patent Steam Fuel 532; 28 L, J. Ch, 590, * See Kerr on Fraud (Amer. ed.), p. 117; Nicol’s Case, 3 D. & J. 427. Quere. Is there any sound distinction to be made between statements published under the express sanction of the whole body of the stock- holders, and those made by officers, directors, or other agents while acting within the apparent scope of their ‘aihority ? 246 LIABILITIES EX DELICTO. As illustrating the liability at common law, may be mentioned, Denton v. Great Northern Railway Com- pany. This was an action against the defendant for fraudulently publishing in their time tables a train which had ceased to run, whereby the plaintiff, who had, relying on the tables, left London for Peter- borough, with the intention of going on thence to Hull by the train, which, on arriving at Peterborough, he learnt had been discontinued, was put to expense; and it was unanimously held by the Queen’s Bench that the defendants were liable for the expenses so incurred. (0) Frauds imputable to a Corporation, but only mediately. * II. Corporations are, at common law, liable to an action for damages for the frauds and misrepre- 15 E, & B. 860; 25 L. J. QB. 129; Williams », Swansea Harbor Trustees, 14C. B. N.S, 845. * 1. As corporations can act only through agents, the liability of cor- porations for fraud depends upon the rules adopted as to the liability of principals for the frauds of agents. “As directors and managing officers exercise all the powers of the corporation, and are its only direct medium of communication with outside parties, they must, in respéct to all ex- ternal relations, be considered as identical with the corporation itself.” Perkins». N. Y. Central R. R. Co. 24 N. Y. 218; Lee», Village of Sandy Hill, 40 N. Y. 451. Hunter ». Hudson River Iron Co. 20 Barb. 507, was a case where a purchasing agent, while contracting for goods for the corporation defendant, made certain false representations in regard to the condition of the company. The court held the rule concerning principal and agent applicable, and that the corporation as a principal was liable for the fraud or misconduct of the agent, while acting apparently within the limits of his authority, in the same manner as if the principal were an individual. See Brokaw v. N. J. R. R. & T. Co. 3 Vroom, 331. Fraudulent represen- tations by a railroad company through its officers or agents as to its pecuniary condition are ground for avoiding a contract of sale of land obtained thereby. McClellan v, Scott, 9 Wis. 81. ‘On general princi- ples, it would seem not to admit of question, that one who, by false and- fraudulent representations and inducements, held out to him by the com- FRAUDS. 947 sentations of their agents in the due course of their employment. These are such frauds as are committed by the pany, had been deceived and misled into making an injurious contract, by which he became a stockholder and member of the company, might maintain an action against it, to rescind the contract and dissolve the connection. * * The representations, declarations and admissions of the agent of a corporation, stand upon the same footing with those of the agent of an individual. And nothing is better settled than that the fraud of an authorized agent will invalidate a contract, though, in perpetrating the fraud, the agent acted without the knowledge or consent of the principal.” Henderson v. R. R. Co. 17 Tex. 560. 2. The cases in which fraud is alleged against corporations grow, for the most part, out of misrepresentations in soliciting subscriptions, or -out of false statements as to the condition of the company during its ex- istence, in circulars and other documents drawn in extravagant terms. See Fogg ». Griffin, 2 Allen, 1; Litchfield Bank v. Peck, 29 Conn. 384; Kelsey ». Nor. Light Oil Co. 54 Barb. 111; 8. c. 45 N. Y. 503; Hughes ». -Antietam Mfg. Co. 34 Md. 316; Rives ». Montgomery 8S. P. R. Co. 30 Ala. 92; Henderson v. Railroad Co. 17 Tex. 560; Miss. &c. R. R. Co. o. Cross, 20 Ark. 443; Wight v. Shelby R. R. Co. 16 B. Mon. 5; Nugent 2. ‘Cincinnati &. R. R. Co.2 Disney, 302; McCoun ». Ind. &, R. R. Co. 9 Ind. 262; Johnson ». Crawfordsville R. R. Co. 11 Ind. 280; Brownlee v. Ohio &. R. R. Co. 18 Ind. 68; Carey v. Cin. & Chic. R. R. Co. 5 Ia. 357; Waldo ». Chicago, St. P. & F. du L. R. R. Co. 14 Wis. 575. In order to avoid the -contract of subscription, it must appear to have been made on the faith of false representations of the agent, in regard to a matter of fact, material to the value and success of the enterprise. The mere statement that the -company would earn certain dividends is regarded as matter of opinion upon which the subscriber had no right torely. Hughes v. Antietam Mfg. Co. 34 Md. 316; Vawter v. Ohio & Miss. R. R. Co. 11 Ind. 174; Oregon Cent. R. R. Co. v. Scroggins, 8 Oreg. 161. It is not competent for a sub- scriber (his subscription being general and unconditional) to prove declarations, made by a soliciting agent, in his speeches, as to the location of the road, unless the substance of them had been incorporated in the «contract of subscription. Miss. 0. & R. R.R.R. Co. v. Cross, 20 Ark. 443; ‘Piscataqua Ferry Co. v. Jones, 39 N. H. 491; Conn. & Pass. Rivers R. R. Co. v. Bailey, 24 Vt. 477; Kennebec &c. R. R. Co. ». Waters, 34 Me. 369; Buff. & N. Y. City R. R. Co. 2. Dudley, 14 N. Y. 886; N. C. R. R. Co. . Leach, 4 Jones (Law), 340; Thigpen ». Miss. Cent. R. R. Co. 32 Miss. 847; Vicks- -burg &. R. R. Co. o. McKean, 12 La, Ann. 688; E. Tenn. & Virg. R. R. 248 LIABILITIES EX DELICTO, agents of the corporation in the management and furtherance of its business. For these frauds it is now Co. v. Gammon, 5 Sneed, 567; Wight ». Shelby R. R. Co. 16 B. Mon. 5; compare N. Y. Exchange Co. v. De Wolff, 31 N. Y. 273. 8, Persons setting up fraud on the part of corporations in obtaining subscriptions will not be relieved, where they either are participes eriminisy or have acquiesced so long that the rights of creditors or of other persons acting bona fide have supervened. Ogilvie v. Knox Ins. Co. 22 How. 380; Upton ». Hansbrough, 8 Biss, 417; Blodgett ». Morrill, 20 Vt. 509. In Custer v. Titusville Gas & Water Co. 63 Penn. St. 381, the court held that when the representation of the agent is contrary to the interests and duty of the corporation, as that he will release or has authority to release the subscription he is taking, it is not a reasonable presumption that he has such authority, and a subscriber on such terms would be particeps criminisa, and held to all the responsibilities of a bona jide subscriber. See Litch-. field Bank v. Peck, 29 Conn. 384; Railroad Co. v. Rodrigues, 10 Rich. (8. C.) 278. ; 4, Actions for fraud arising otherwise against corporations, are not. frequent. There is, however, an important class of cases, in which cor- porations have been held liable for the fraudulent representations of their agents, as of officers in overissuing stock, or of cashiers or tellers in falsely certifying checks, not on the ground of express or implied au- thority given to the agent, which is generally the basis of the principal’s responsibility, but rather because these agents have been held out to the world as the proper sources of information, in regard to those matters con- cerning which their false representations have been made. This is an application of the rule as expressed by Ashhurst, J., in Lichbarrow 2. Mason, 2 T. R. 63, that where one of two innocent persons must suffer by: the acts of a third, he who has enabled such third person to occasion the: loss must sustain it. Merchants’ Bank ». State Bank, 10 Wall. 604; Bar- net 0, Smith, 30 N. H. 256; Farmers’ & Mechanics’ Bank ». Butchers’ & Drovers’ Bank, 14 N.Y. 623; s. c. 16 N. ¥.125; s.0, 28 N. Y. 425; Meads ». Merchants’ Bank of Albany, 25 N. Y. 143; New York & N. H.R. RB. Co. 2. Schuyler, 84 N. Y. 30; Irving Bank v. Wetherald, 36 N. Y. 335; Girard Bank ». Bank of Penn Township, 39 Penn. St. 92; Rounds ». Smith, 42 Ill, 245 ; Bickford ». First Nat. B. of CO, Ib. 288; Brown. Leckie, 43 Ill, 497; see Story on Agency, § 127. In Griswold »v. Haven, 25 N. Y. 596, it is said: ‘The idea that the responsibility of a principal for the frauds of his agent rests in all cases upon the ground that he has in some way, either actually or apparently, authorized the fraudulent act, or has received the benefit of the fraud, and therefore adopted it, must be given up. It would be a very artificial and unnatural mode of reasoning that should apply that doctrine to FRAUDS. 249 fully established at common law that the corporation is able, provided the agents guilty of the frauds kept the principal’s liability for the negligence of his agent, and this liability and that for fraud belong to the same class, and rest upon the same reason. That reason is, that every person employing an agent is under obligation to pay some regard to the diligence, skill and integrity of the agent he selects, and to his fitness to perform the duties with which he is charged. The decision of this court in the case of the Butchers’ & Drovers’ Bank, supra, was placed explicitly upon this ground, and can be sustained upon no other. The act of the teller, in that case, in certifying the checks was wholly unauthorized. There was not even a semblance of authority, if the holder was bound to ascertain whether the drawer had funds to meet them. The court, nevertheless, held the bank liable, and every judge. who wrote in the case (except Judge Comstock, who dissented), concurred in the rule laid down in the case of the North River Bank v. Aymar, 3 Hill, 262. This rule is restated in the case of the Butchers’ and Drovers’ Bank, as follows: ‘ Where the party dealing with an agent has ascertained that the act of the agent corresponds, in every particular in regard to which such party has or is presumed to have any knowledge, with the terms of the power, he may take the representation of the agent as to any extrinsic fact, which rests peculiarly within the knowledge of the agent, and which cannot be ascertained by a comparison of the power with the act done under it, * * * The doctrine must be considered as estab-- lished, that where the authority of an agent depends upon some facts dut- side the terms of his power, and which, from its nature, rests particularly within his knowledge, the principal is bound by the representation of the agent, although false, as to the existence of such fact.’” In Butler v, Wat- kins, 13 Wall. 456, an action was sustained against a foreign corporation and its managing agent sent to conduct its affairs in this country, for fraudulently pretending a purpose to conclude an agreement with the plaintiff to make use of his patent, while the real purpose of the defend- ants was, by means of protracting the negotiations, to keep the plaintiff's invention out of the market, the defendant corporation being largely in- terested in another invention, which would have been interfered with by that of the plaintiff. The court held that, if the fraud and deceit which lay at the basis of the action were proved, the action could be maintained against both the defenddnts. This case would seem to reach the extreme: limit to which the doctrine should be carried. 5. Corporations cannot, any more than individuals, repudiate part of a. transaction. If theagent of a corporation has made false statements in re- gard to matters of which it claims the benefit, it will be bound by them, for it cannot ratify the contract and at the same time avoid responsibility for- the representations which formed its basis or led to its being made. Story 250 LIABILITIES EX DELICTO. within the limits of their authority. In Barwick ». English Joint Stock Bank,! the Court of Exchequer Chamber, on a bill of exceptions, held the defendants responsible for the fraud of their manager. No ob- jection was taken—in fact, the point was not even raised by either the counsel or the bench—to the action itself, as being against a corporation. It was assumed throughout that a corporation, like any other principal, is liable for the acts of its agents. So in Kennedy v. Panama, &c., Mail Company,’ which was an action brought on the ground of misrep- resentation in a prospectus, issued by the directors, to recover calls paid by plaintiff, the same liability was assumed as beyond all argument. Indeed, the judgment of the court notices it only incidentally. “'These would not be legitimate consequences if there had been fraud in those acting for the company. Doubtless, in such a case, the company must bear all the consequences of the Fraud of those they employ.” III. Corporations are not liable in chancery for the frauds of their agents—sembdle ;* but they can- 1L. R. 2 Ex, 259; recognized and 7 L.R, 2 Q. B. 580, 589. followed in Swift », Winterbotham, P. 0., L, R. 8 Q. B. 244. t on Agency, §§ 239, 250; Concord Bank »v. Gregg, 14 N. H. 381; Crump 2. U.S. Mining Co. 7 Grat. 352. As to suits against directors personally for fraudulent representations, see Bruff v. Mali, 36 N. Y. 200; Wakeman ». Dalley, 51 N. Y. 27; Arthur ». Griswold, 56 N. Y. 400; Cazeaux v. Mali, 25* Barb. 578; Newberry 2. Garland, 31 Barb. 121; Cross v. Sackett, 2 Bosw. 617; Mabey v. Adams, 3 Bosw. 846; Morse v. Switz, 19 How. Pr. 275; in which cases the lia- bility of corporations is incidentally discussed. * The distinction as to remedies at law and if equity in cases of fraud by corporate bodies and their agents, indicated in the text, will, on exam- ination, be found to be rather in the dicta of judges, consequent upon the FRAUDS. 951 not retain any benefit derived by them from such frauds. But the authorities and dicta in chancery are very peculiar circumstances of each case, than in any well established principle. Courts of chancery have undoubted jurisdiction to relieve against every species of fraud, and it would indeed be ‘‘strange” if that deemed fraud by courts of law should be refused to be recognized as such by courts of equity. When it has been settled, as cannot now be disputed, that the same rules of law are to be applied in cases where a corporation is a party as where private individuals are litigants, there can be no difficulty in determining the general principles upon which any given controversy is to be decided. The only difference, between actions at law to recover dam- ages for false representations and suits in equity to relieve against such representations, is that in the one case, the scienter is the gist of the action, and, therefore, the representations must not only be false, but known to be so by the party making them (Kerr on Frauds (Am. ed.), p..825, notes; Pettigrew v. Chellis, 41 N. H. 95; King v. Eagle, 10 Allen, 548; Marshall v. Gray, 57 Barb. 414; Allen » Wannmaker, 2 Vroom, 370): while in equity, ‘‘ whether the party misrepresenting a material fact knew it to be false, or made the assertion without knowing whether it were true or false, is wholly immaterial.” Story Eq. Juris. § 193. The case of Bennett v. Judson, 21 N. Y. 238, has sometimes been re- lied on as establishing a different doctrine, and as applying the rule in equity to actions at law, and thus as sweeping away the great mass of cases in which knowledge of the falsity of the representations or fraudu- lent intent, on the part of the person making it, must be proved, in order to entitle the injured party to recover. Kelsey ». Northern Light Oil Co. 54 Barb. 111, 180. But ‘‘that case has always been considered to have carried the doctrine of liability for an alleged fraudulent representation to the extremest verge of the law, and the courts have been very careful to discriminate and apply it only to the state of facts presented by the case itself.” Ward v. Chase, 55 Barb. 534, 548; see Marsh v. Falkner, 40 N. Y. 562; Craig ». Ward, 3 Keyes, 387; Lefler ». Field, 52 N. Y. 621; Du- bois ». Hermance, 56 N. Y. 673. The question, what kind of fraud could be set up as a defense in an action at law (see Hartshouse v. Day, 19 How. 211, 222; Dorr ». Munsell, 18 Johns, 430; Champion v. White, 5 Cow. 509; Hazard ». Day, 18 Pick. 95), has ceased to be a practical question in those States which, like New York, California, and Ohio, have abolished distinctions between actions at law and suits in equity, and allow defendants to interpose equitable as well as legal defenses in all actions. See Dobson »v. Pearce, 12 N. Y. 156; Despard v. Walbridge, 15 N. Y. 374. 252 LIABILITIES EX DELICTO. conflicting, if not absolutely irreconcilable. On the one side it is urged that the agents of a corporation are its agents for carrying on its operations honestly and le- gally, and cease to be so when they act fraudulently and illegally. On the other side itis urged, with equal justice, that no distinction can be .drawn between a principal, who is merely a legal entity, and an ordinary human being; and that, as a corporation must act by agents, so, like other principals, it ought, in common fairness, to be responsible for the frauds as well as the other acts of these. In support of the former view we have the follow- ing: (1) North of England Joint Stock Banking Com- pany, ee parte Bernard,’ per Parker, V. C.: “As to the argument that Mr. Bernard was induced to take these shares by incorrect representations, that point was taken in Dodgson’s case, and Knight-Bruce, V. C., said that, whatever fraud there might be, if fraud there -was, it was charged against the directors, who could not be the agents of the body of shareholders to commit a fraud. For these reasons the motion must be refused.” (2) Re Atheneum Life Assurance Company, ex parte Sheffield,’ per Page-Wood, V. C.: “With regard to any fraud in misrepresenting what the deed itself _ was, I apprehend nothing can be made of that. Of course, the representations made by the secretary could have no effect at all if the deed were different from what it was represented to be; for, though companies have been held to be bound in some cases by the act of all the directors, acting in the due execution of their powers, it has never yet been held that an officer of a "6D. G. & Sm, 283; 21L.J.Ch, 71 John, 481; 28L, J. Ch. 825. See 468, 470, following Dodgson’s Case, 3D. ex parte Richmond and Painter, 4 K. & G. & Sm. 85, which, however, is not J. 305, two cases also growing out of the clearly reported. winding up of the Atheneum Company. FRAUDS. 953 company misrepresenting the effect of a deed, it being no part of his functions to explain or expound that deed, could release a shareholder.” (3) Duranty’s Case,’ per Romilly, M. R.: “The directors are not the agents of the company to commit a fraud.” (4) Ae Hull and London Life Assurance Company, ex parte Gibson,? where Lord Chelmsford, L. C., ex- pressed himself thus: “There is no doubt that, if a person has been drawn in by the misrepresentations of of an individual member of the company, he cannot exonerate himself from liability by reason of such false representation. If he has any remedy, it is against the individual shareholder who has deceived him. With respect to misrepresentations by the company itself, or its agents, the case would be different; but there has always appeared to me to be great difficulty in estab- lishing such a case. The company is represented by its directors, who, for certain purposes, are its agents; but the difficulty is in saying that they are its agents for the purpose of making false representations.” (5) In &e Royal British Bank, Mixer’s Case,’ Lord Campbell, L. C., said: “Clearly there was fraud, and gross fraud, on the part of the directors, and I have no doubt that he (¢. ¢., the appellant) was induced by fraud to take his shares. I think, however, that it was a fraud on the part of the directors, which cannot be imputed to the company.” The above cases, however, cannot be considered binding at the present time, at least not to the full ex- tent of the language employed. It would indeed have been strange if that could have continued to be deemed 196 Beay. 268, 274. °4D,G. & J. 575, 586. 22D. G. & J, 275, 283. 254 LIABILITIES EX DELICTO. fraud in a court of law which chancery refused to recognize as such; and if a party, injured by the mis- representations of the agents of a company, would have been compelled to apply to Jaw for the relief and re- dress which equity denied him. Three recent decisions of the Supreme Court of Appeal have partially removed this anomaly, and. have at length determined that a cor- oration cannot in chancery, any more than at common law, shield itself from liability for the frauds of those it employs, by the absurd fiction that, not possessing real existence, mental or bodily, the mental element, in- tention, requisite to constitute fraud, is wanting. In the first of these decisions, New Brunswick Rail- way Land Company v. Conybeare,’ Lord Cranworth said: “If the directors, or the secretary acting for them, had fraudulently represented something to him (i. @, the plaintiff’) which was untrue, he then adhered to the opinion which he had expressed in former cases, that the company would have been bound by that fraud.” In the Western Bank of Scotland v. Addie,’ Lord Chelmsford laid down that, “ where a person has been drawn into a contract to purchase shares belonging to a company, by fraudulent misrepresentations of the di- rectors, and the directors, in the name of the company, seek to enforce that contract, or the person who has been deceived institutes a suit against the company to rescind the contract on the ground of fraud, the mis- representations are imputable to the company, and the purchaser cannot be held to his contract, because a company cannot retain any benefit which they have ob- tained through the fraud of their agents.” In Oakes v. Turquand,’ the same judge quoted this 19H, Lds, 725; 31 L. J. Ch. 307. SL, R. 2 H. Lds, 825, 344. 7L, R18. & D145 154, FRAUDS. 255 last extract, and adhered to it as being a correct expo- sition of the liability of a corporation for the fraud of its agents. But even the above decisions do not go as far as those at law. In Barwick v. The English Joint Stock Bank, the Exchequer Chamber held unanimously, and in the most unqualified manner, that an action for fraud lies against a corporation as against any private indi- vidual, whether the fraud be that of the principal di- rectly, or of the agents employed, provided only that the latter are acting within the ordinary scope of their occupation. But in Western Bank of Scotland v. Addie, the Lord Chancellor said: “But if the person who has been induced to purchase shares by the frauds of the directors, instead of seeking to set aside the contract, prefers to bring an action for damages for the devel such an action cannot be maintained against the com- pany, but only against the directors personally.” To the same effect was the decision of Lord Cranworth :1 “ An attentive consideration of the casés has convinced me that the true principle is, that these corporate bodies, through whose agents so large a portion of the business of the country is now carried on, may be made responsi- ble for the frauds of those agents to the extent to which the companies have profited from these frauds ; but that they cannot be sued as wrong-doers, by imputing to them the misconduct of those whom they have em- ployed. A person defrauded by directors, if the sub- sequent acts and dealings of the parties have been such . as to leave him no remedy but an action for the fraud, must seek his remedy against the directors personally.” Most of the cases, however, which have come before 1L, RB. 18. & D. 167; see, also, Lord Chelmsford in Peek v. Gurney, L. Barry v. Croskey,2 J.& H.1;and per R, 6 H. Lds. 877, 390. 256 LIABILITIES EX DELICTO. courts of equity have arisen from the attempts of per- sons who, induced by flowery prospectuses and glowing reports, have taken shares, to get themselves relieved from their responsibilities upon the statements put forth, and relied on by them turning out incorrect. In all such cases, if the fraud be imputable to the corporation, and the injured party has not debarred himself by laches, relief will be granted. Conybeare v. New Brunswick c&c, Land Company? is a leading authority. Here the House of Lords, re- versing the decision of the Lords Justices, decided that the plaintiff was not entitled to have his name removed from the list of shareholders, on the grounds, first, that there had not been any concealment, inasmuch as an act of parliament—the absence of which from a certain report published by the company was the concealment alleged—was recited in the articles of association, which he (plaintiff) must be held to have perused; and, sec- ondly, that the misrepresentation complained of, thus stated in the bill: “The said report of July, 1858, re- ferred to the lands of the said company in terms calcu- lated to convey to the mind an impression that such lands were the absolute and indefeasible property of the company ”—was not a representation, but an infer- ence that was left to be drawn from the expressions used in the report. Their lordships, however, threw no doubt on the liability of a corporation for frauds which can be imputed to itself directly. The general tenor of their judgments is well expressed in the foot-note in the House of Lords’ Reports, viz: “If reports are made to the shareholders of a company by their directors, and the reports are adopted by the shareholders, and after- 19 H. Ids. 711; 31 L. J. Ch. 297; Ch, 242; Ross v. Estates Investment New Brunswick Railway Company v. Company, L, R. 3 Ch. 682. Muggeridge, 1 Dr, & Sm. 363; 30 L. J. , FRAUDS. 257 wards industriously circulated, representations contained in those reports must be taken to be representations made with the authority of the company, and there- fore binding the company. And if those reports hav- ing been industriously circulated be clearly shown to, have been the proximate and immediate cause of shares having been bought from the company, the company cannot be permitted to retain the benefit of the contract, and keep the purchase money that has been paid. Rep- resentations made by the secretary to a person in a gen- eral conversation, without a view to any definite state- ment by that person that he wants to purchase shares, are not binding on the company.” Another very recent case is that of Central Rail- way Company of Venezuela Limited v. Kisch1 The defendant, the original plaintiff, filed a bill to have his name removed from the list of shareholders in the rail- way, and to have the payments he had made on account of calls returned him. He had taken the shares on the faith of a prospectus which referred to a concession made by the Venezuelan government to the company for making a railway, and stated that the contractor had guaranteed a dividend of two and a half per cent. on the paid-up capital during the construction of the works, while, in fact, this guaranty was limited to £20,000, and that the contract had been entered into “at a price considerably within the available capital,” when, in reality—on account of the company having paid £50,000 for the concession, which payment was not mentioned in the prospectus, and which conceal- ment the defendant alleged as a ground of complaint— it left but a margin of £30,000 out of £500,000. On 1L, R. 2 H. Lds. 99, affirming the way Company of Venezuela Limited, Lords Justices, Kisch v, Central Rail- 3D.G. J. & Sm. 122. 17 258 LIABILITIES EX DELICTO. these grounds of misrepresentation and concealment, and more especially of the latter, the House of Lords granted the relief prayed. So, in many other cases, shareholders have been re- lieved of their shares on the ground that they were in- duced to take them by misrepresentation, the false statements being on one occasion with respect to the capital subscribed or shares taken ;* upon another, as to the nature of the business to be undertaken,” or as to the value® or locality* of property already or to be thereafter acquired by the company. In a word, mis. leading facts of any description, material to the con- tract to take shares, and actually the inducement to such contract, render such contract voidable on the part of the person so induced to enter into the same, always, providing that the misleading facts in question were promulgated by the company itself, or its duly author- ized agents. IV. Contracts induced by fraud being only voidable, the parties aggrieved must take the necessary steps to repudiate such contracts, within a rea- sonable time, and before other porns have ac- quired rights in respect thereof. 1 Ross v. Estates Investment Com- Smith, L. R. 4 H, Lds. 64; Denton ». pany, L. R. 3 Ch. 682; Henderson v. Macneil, L. R. 2 Eq. 852. Lacon, L. R. 5 Eq. 249; Waterhouse ». * Lawrence’s Case, L. R, 2 Ch, 412; Jamieson, L. R. 2 Se. & D. 29; com- re Russian Vyksounsky Ironworks Com- pare Wright’s Case, L..R. 12 Eq. 331. pany, Stewart’s Case, L, R. 1 Ch, 575. 2 Blackburn’s Case, 3 Drew. 409. > See Frowd’s Case, 30 L. J. Ch, 322; * Reese River Mining Company »v. Burnes ». Pennell, 2 H, Lds. 497. *Itis too late for stockholders, induced to become such by false or fraudulent statements in regard to the condition of a company, to seek to avoid their liability on such grounds, after the company has become insolvent, and the investment has been found to be unprofitable. Upton v. Hansbrough, 8 Biss. 417; see Payson 0. Stoever, 2 Dill. 427; Gloucester Bank v. Salem Bank, 17 Mass. 38; Kelsey v. Northern Light Oil Co. 45 N. Y. 505; ex parte Booker, 18 Ark. 838, and cases cited ante, p. 248, note. FRAUDS. 259 It must not here be forgotten that, in determining whether a company can hold a shareholder to the con- tract into which by their own fraud they have induced him to enter, other equities have to be considered, and a totally different result will be arrived at than when we are examining whether that person will be liable to third parties, the creditors of the company, for its debts. Between the company and the person whom they have duped, the subject is clear, if we put the question on the simple ground that no one can be allowed to retain that which he has acquired by fraud; but, as regards third parties, such person is a de facto shareholder, as long as he has not, from whatever cause, taken measures to denude himself of his shares; and it has, consequently, been decided that,.as such, as a member of the company, he is subject to the company’s lia- bilities.t Moreover, it is only the party originally defrauded —with, perhaps, exceptions arising in very special cases—who can repudiate the contract. For instance, a person who buys shares from one who could have repudiated these shares as having been issued to him under circumstances of fraud, cannot, on the ground of the original fraud, have such shares canceled.? * At common law an action of deceit may be brought at any time against a corporation as against a private individual, till the plaintiff’s right is barred by the statute of limitations; but it is different when a share- holder seeks the relief of the Court of Chancery. A ' Oakes v. Turquaud, L, R. 2 H. Lds, 7 Duranty’s Case, 26 Beav. 268; 325; Peek v, Gurney, L. R. 13 Eq. 79: Grisewood’s Case, 4D. G. & J. 544; I. RB. 6 H. Lds, 377; compare Pawle’s Peek v. Gurney, wbi supra. Case, L, R. 4 Ch. 497. * See Cross v. Sackett, 3 Bosw. 617, and the arguments of Mr. Lord and Mr. O’Conor. 260 LIABILITIES EX DELICTO. contract induced by fraud is voidable, not void, and the injured party will be deemed to have acquiesced, unless he displayed ordinary precautions and care at the making of the contract, and has been prompt in appealing to the court on discovering the fraud.’ We may thus summarize the authorities :— I. At law. However the fraud be committed, if it. ’ can be imputed to the corporation, whether di- rectly or indirectly, an action for fraud may be brought against the corporation for the damage thereby caused. Il. In chancery. (1) If the fraud be imputable to the corporation directly—that is, if it has been done or ratified by the shareholders in general meeting, then the corporation is liable for the consequences resulting therefrom. (2) If it be imputable only indirectly, then the cor- poration can neither take advantage of the fraud, nor retain against the wish of the injured party any benefits that may have accrued to it (the corporation) from such fraud. But the person aggrieved may, at his election, confirm or re- | pudiate the transaction. (8) It seems that the corporation cannot, by any pro- ceedings in chancery, be rendered liable for damages resulting from fraud imputable to it indirectly. ?Depcesit and General Life Assur- British Bank, Nicol’s Case, 28 L. J. Ch. ance Company v. Ayscough, 6 E, & B. 961; 26L. J. Q. B. 29; Clarke v, Dick- son, 27 L, J. Q. B, 223; Scholey v, Cen- tral Railway Company of Venezuela, L. R. 9 Eq. 266, n.; Heymann vy, European Central Railway Company, L. R. 7 Eq. 164 ; compare the judgments in re Royal 257; In re Reese River Silver Mining Company, Smith’s Case, L. R. 2 Eq. 264, and L, R. 2 Ch. 604; Central Rail- way Company of Venezuela v. Kisch, L. R. 2 H. Lds, 99, and in Peek v. Gur- ney, ubi supra. TORTS OTHER THAN FRAUDS. 261 If the limitation last mentioned be correct, then it follows that, in future, corporations will not be liable at law for indirect fraud, since the Supreme Court of Judicature act, 1873, expressly provides that where the rules of law and equity conflict, those of equity are to prevail. This result—the holding corporations not liable for the frauds of their agents—will cause a con- siderable qualification of the law as at present existing of principal and agent, and it will be a strange ex- emplification of the unexpected effects produced by sweeping legislative enactments, passed without a due consideration of the matters affected thereby. SECTION II. OTHER TORTS. V. Corporations are liable, at least at law, for torts of all descriptions committed by themselves, or their duly constituted agents, and not involving intention on the part of the wrong-doer.* 136 & 37 Vict. c. 66, 8. 26, subs, 11, cited ante, p. 177. * In the earlier cases, it was held, that an action of trespass could not be maintained against a corporation aggregate, for the technical reason, that a capias and exigent, the proper process in actions of trespass, would not lie against a corporation; but this technical objection was not uni- formly yielded to, as instances of actions of trespass against corporations are to be met with as early as the Year Books. As corporations became more numerous, and were multiplied, until aggregated capital, seeking investments for the purposes of business, is generally invested under acts of incorporation, to protect individuals from personal liability, technical objections, which stood in the way of subjecting corporations to actions founded on torts, have been entirely swept away, and corporations have been held liable for all torts, the same as individuals, That they may be sued in trover, case, trespass guare clausum fregit, trespass vi et armis, and ejectment, is abundantly established by the cases cited by Green, C. J., in 262 LIABILITIES EX DELICTO. What has been said with regard to fraud will apply with proper qualifications to other torts. Corporations. are not created—it is no part of their business—to commit torts. Nevertheless courts of law have de- cided that they must be held liable for torts committed by their agents and servants acting within their au- thority, upon the same principles and by precisely analogous reasoning as they have been made responsi- ble for fraud. Thus an action for trespass to the per- son, * or the property, ¢ g., trover, will lie against a 7 Seymour v. Greenwood, 7H. & N. Great Northern Railway Company, 30- 855; 380 L. J. Ex. 327; Limpusv.Lon- L, J. Q. B. 148. don General Omnibus Company, 1 H. *Tattan v. Great Western Railway & C. 526; 32 L. J. Ex. 34; Goff v. Company, 29 L, J. Q. B. 184; Mears State 2. Morris & Essex R, R. Co. 3 Zab. 367. And generally it may be stated, that a corporation is liable cividiter, the same as a natural person, for- the tortious acts of its servants or agents in the course of their employ-- ment, committed by the authority of the corporation, express or implied, whether such acts fall within the designation of forcible,: negligent, malicious or fraudulent torts, without regard to the form of action by which the appropriate remedy is sought. See Brokaw v. N. J. R. & T. Co. 3 Vroom, 328. * That a corporation may be sued for trespass to the person for assault and battery, see Phil. R. R. Co. 0. Derby, 14 How. 468; Moore 2. Fitch-- burg R. R. Co. 4 Gray, 465; Ramsden 2. Boston & A. R. R. Co. 104 Mass. 117; Coleman v. N. Y. & N. H.R. R. Co, 106 Mass. 160;°Crocker ». N. London &c. R. R. Co. 24 Conn, 249; Jackson ». Second Ave. R. R. Co. 47,.N. Y. 274; Hamilton o. Third Ave. R. R. Co. 85 N. Y. Superior Ct. (3 J. & 8.) 118; 8. o. 55 N.Y. 25; Brokaw » N. J.B. & T. Co. 8 Vroom, 328; Phil. &c. R. R. Co. v. Wilt, 4 Whart. 148; Penn. R. R. Co. 0. Van- diver, 42 Penn. St. 365; Evansville &c. R. R. Co. ». Baum, 26 Ind. 70;. Jeffersonville R. R. Co. o, Rogers, 38 Ind. 116; Chic. & N. W. BR. R. Co. v. Williams, 55 Ill. 185; Kline ». Cent. Pac. R. R, Co. 39 Cal. 587. Com-. pare Little Miami R. R. Co. ». Wetmore, 19 Ohio St. 110. The authority of Orr o, Bank of U. 8. 1 Ohio, 25, has been expressly denied in the cases. of St. Louis, A. & OC. R. R. Co, », Dalby, 19 Ill. 358, and Brokaw ». N. J.. R. & T. Co. 3 Vroom, 828. In the latter case the court say that the case: in 1 Ohio proceeds on principles long since obsolete, and is against all the later authorities. As to actions for negligence causing death or injury- to persons, see Shearman and Redfield on Negligence, chs. 17, 27, 38,. and Sedgwick on Damages, 6th ed. p. 694, and note page 276. TORTS OTHER THAN FRAUDS. 263. corporation as against an individual.* The agent of the corporation must of course be acting within his authority, and upon this point difficult questions arise as to the extent of the agent’s authority, and more especially of his implied authority. In Edwards ». London and’ Northwestern Railway Company; it was decided that a foreman porter in the service of a rail- way company, who, in the absence of the station master, isin charge of a station, has no implied authority to give in charge a person whom he suspects to be stealing the company’s property; and, consequently, that if he gives in charge on such suspicion an innocent person, the company are not liable.+ In Allen v, London and South-Western Railway Company,’ a similar decision was come to with regard v, London and Southwestern Railway iL, R. 5 C. P. 445. Company, 110. B. N.S. 850; 31 L. 271. RB. 6 Q. B. 65. J.C. P. 220. * The cases.against corporations for trespass to property are too numerous to be particularly referred to. Actions will lie for stopping water-courses; for injury to property by canals; for blasting rocks to the injury of another’s jand; for entering and carrying away soil, or cutting timber; for nuisance ; for trover and conversion ; for ejectment; for negligence causing damage to to property. In the light of the modern cases upon the subject, it may be safely stated, that wherever an action for injury to property will lie against an individual, corporations will, in like circumstances, be equally liable for injuries committed by their officers and agents, acting within the apparent scope of their authority. See, among other cases, Lyman 2. Bridge Co. 2 Aik. (Vt.) 255; Hazen 2. Boston R. R. Co. 2 Gray, 575; , Bloodgood ». Mohawk & H. R. R. Co. 18 Wend. 9; Dater 2, Troy Turn- pike Co. 2 Hill, 629; Hay ». Cohoes Co. 3 Barb. 42; Watson ». Bennett, 12 Barb. 196; Lee v. Sandy Hill, 40 N. Y. 442; Chestnut Hill &c. Co. 2. Rutter, 4 8. & R. 6; Delaware Canal Co. ». Com. 60 Penn. St. 3867; Whiteman v. Wil. & Susq. R. R. Co. 2 Harr. 514; Humes v. Knoxville, 1 Humph. 408; Underwood 0. Newport Lyceum, 5 B. Mon. 130; Craw- fordsville R. R. Co. v. Wright, 5 Ind. 252; Terre Haute Gas Co. »v. Teel, 20 Ind. 181; Ill. Cent. R. R. Co. v. Reedy, 17 Tl. 580; Chic. & R. I. R. RB. Co. ». Whipple, 22 Ill. 105. + Owsley ». Montgomery R. R. Co. 87 Ala. N. 8. 560. 264 LIABILITIES EX DELICTO. to the arrest, by direction of a ticket-distributor, of an innocent person whom he had suspected wrongly of an attempt to rob the till. The jury found that the ticket-distributor acted in defense of the company’s property, but the court unanimously held, that he had no implied authority from the company to order the arrest, and that consequently the company was not lia- ble for the same. In this case, as in the former, the court thought that the respective officials concerned had an implied authority to take such proceedings only as were imperatively demanded for the immediate pro- tection of the property under their charge; and that the moment any attempt to injure or steal such prop- erty was abandoned, this implication ended—any steps they might then direct not being called for, for such protection, would be of their own motion and at their own peril. Lex ita seripta. What a corporation cannot do, its agents cannot do so as to bind it. From this it necessarily follows, that’ there can be no authority to an agent, implied or other- wise, to take proceedings which would be ultra vires of the corporation ; and that the corporation cannot in any way be rendered amenable for torts committed by one of their servants in the course of such proceedings. This is well shown by the case of Poulton v. London | and South-Western Railway Company.’ The facts were these: The plaintiff, who had taken a horse to an agri- cultural show by the defendants’ railway, was entitled, under arrangements advertised by the defendants, to take the horse back free of charge on the production of a certificate. The plaintiff accordingly produced a certi- ficate, and the horse was put into a box without pay- ment or booking; and the plaintiff having taken a 7 L. R, 2 Q. B. 534, TORTS OTHER THAN FRAUDS. 265 ticket for himself proceeded by the same train. At the end of the journey the station-master demanded pay- ment for the horse, and the plaintiff, refusing to pay, was ‘detained in custody by two policemen under the orders of the station-master, until it was ascertained by telegraph that all was right. An action having been brought by the plaintiff against the defendants for false _ Imprisonment, it was held, that though a railway com- pany has power to apprehend a person traveling on the railway without having paid his own fare, it can only detain the goods for non-payment of the carriage; that, as the defendants themselves would have had no power to detain the plaintiff, on the assumption that he had wrongfully taken the horse by the train without pay- ing, there could be no authority implied from them to the station-master to detain the plaintiff on this assump- tion; and that they were, therefore, not liable for this act of the station-master. This case decides only, that no implied authority as to detention belonged to the station-master. Of course he might have had express authority to act as he did, and though such authority would have been ultra vires of the company purporting to confer it, yet they would have been responsible for the results thereof. Herein consists a great distinction between tortious and con- tractual liability for acts ultra vires. It is no defense to legal proceedings in tort that the torts were ultra vires. If the torts have been done by the corporation, or by their direction, they are liable for the results, however much in excess of their powers such torts may be. * * See discussion in Sharp v. Mayor, ante, p. 248. 266 LIABILITIES EX DELICTO. VI. Corporations are liable for at least some varieties of torts which require, as an essential ingredient, intention on the part of the tort-feasor. * Other torts there are with respect to which the lia. bility of a corporation may be fairly considered doubt. fal. Ordinarily it is sufficient to render a person re- sponsible for a tort, whether committed by himself or his agent, if only there has been negligence, heedless- ness, or rashness. Sometimes, however, the mental in- gredient becomes intention, actual or constructive. Can a corporation be made amenable for those torts, which require on the part of the wrong-doer knowledge or willfulness ? + * There is a class of cases which, at first sight, would seem to be founded upon the willful misconduct of agents of a corporation, in which it has been held liable. An examination, however, will show that the action is really against the corporation for a breach of contract or neglect of duty, which is confessed and sought to be avoided, by setting up as an excuse, the willful wrong or intentional default of an agent. In every such case, the principal holds out his agent as competent and fit to be trusted, and thereby, in effect, he warrants his fidelity and good conduct in all matters within the scope of his agency. Stokes v. Saltonstall, 13 Pet. 181. The law therefore will not permit @ corporation to set up, as a reason for its breach of contract or neglect of duty, the intentional viola- tion of such duty by agents, to whom it has intrusted the execution of its contracts or the performance of its duties. See Weed o. Panama R. R. Co. 17 N. Y. 862; s.c. 5 Duer, 196, where the distinction is run, after a review of authorities, between cases of willful, unauthorized, wrongful acts by agents, unapproved by their principals, occasioning damage, but which do not involve nor work any omission or violation of duty by their principals to the persons injured, and cases where the principal should be held liable for breach of contract or obligation assumed, unless the willful wrong of the agent is a legal justification. See also Phil. R. R. Co. 2. Derby, 14 How. 468; Goddard ». Grand Trunk R. R. Co. 57 Me. 202; Ford 2. Fitchburg R. R. Co. 110 Mass. 240; Milwaukee & Miss. R. R. Co. vo. Finney, 10 Wis. 388. t Vance ». Erie Railway Co. 8 Vroom, 834, was an action of trespass on the case for malicious prosecution. The declaration was demurred to on the ground, among others, that an action for malicious prosecution can- TORTS OTHER THAN FRAUDS. 267 In Stiles v. Cardiff Steam Navigation Company, it was determined that a corporation would be liable for 14, R. 488; 83 L. J. Q. B. 310. not be maintained against a corporation. The court say: ‘‘It is argued by counsel, that a corporation being an ideal entity, is incapable of enter- taining malice, which is an intent of the mind, and is an essential ingre- dient of an action for malicious prosecution. We have seen by the cases cited in 3 Vroom, 380, that a corporation is liable for false and fraudulent representations; for maliciously obstructing a party in his business; for maintaining a vexatious suit, and for a malicious libel, in each of which actions an intent of the mind is quite as much involved as in an action for malicious prosecution, * * * When the nature of the action is considered, it comes strictly within the principles by which the actions above enumerated are maintainable. It must appear that the prosecution was instituted maliciously and without probaable cause. In a legal sense, any act done willfully, to the injury of another, which is unlawful, “is, as against that person, malicious, and it is not necessary that the per- petrator of such act should be influenced by ill will towards the indi- vidual, or that he entertain and pursue any bad purpose or design. The proof of malice need not be direct. It may be inferred by the jury from the want of probable cause, and involves nothing more than a wrongful act intentionally done. To hold a corporation amenable in this particu- lar action is strictly in accordance with well settled legal principles. The wrong for which the action is the appropriate remedy, is susceptible of being committed by a corporation by means of its agents and servants. No technical difficulties are in the way of the institution of the suit, and. at the trial, the cause can be conducted upon the established rules of evi- dence. To afford redress against a corporation for other intentional wrongs done by them, and deny it in this case, is an anomaly which can only be justified because of the interposition of insurmountable obstacles. No such obstacles stand in the way of the prosecution or maintenance of the action.” See Stevens x. Midland Rwy. Co. 10 Exch. 352; Merrill o. Tauff Mfg. Co. 10 Conn. 384; Jeff. R. R. Co. v. Rogers, 28 Ind. 1. In Childs ». Bank of Missouri, 17 Mo. 213, it is held that an action for assault and battery, or for malicious prosecution, or for slander, cannot be maintained against a corporation ; but in Gillett ». Mo. Valley R. R. Co. 55 Mo, 815, the. court admits that this ruling is too extensive, and that the current of modern authorities does not go to that extent. The court in the case in 55 Mo. reviews the decisions, as to libel, trespass, assault, and other actions founded on torts; and while holding that a corporation for railroad purposes is not liable for a malicious prosecution, instituted by its agents. against an individual in the name of the State, fora erime committed. 263 LIABILITIES EX DELICTO. knowingly keeping a mischievous animal. Mr. Justice Shee asserted broadly, in reference to the scienter, that “corporations are in this respect in no different position from private owners; and if it could be shown that the mischievous propensity of the dog was known to any person having control of the business or of the yard, or even of the dog, or whose duty it would be to inform the company of what the dog had done, it might do, but the evidence fails on that point.” * against the laws of the State, without showing power, given expressly or impliedly, to the corporation to engage in such prosecutions, yet it ap- proves of the doctrine, that an action fora malicious prosecution could be sustained against a corporation, for bringing a civil suit, by way of attachment in the name of the corporation, vexatiously, maliciously, and without probable cause. See dissenting opinion of Adams, J., which it is submitted, is more logical in its conclusions, and more in accordance with the current of modern authority than the prevailing opinion. In Owsley ». Mont. & West Point R. R. Co. 37 Ala. N. 8. 560, the court sustained an action for false imprisonment, but denied it for malicious prosecution, placing its distinction on the ground that a corporation is incapable of malice, as to which see Vance v. Erie Rw. Co. 8 Vroom, 884. In South Royalton Bank o. Suffolk Bank, 27 Vt. 505, a demurrer to a decla- ration for maliciously keeping the bank notes of the plaintiff out of circu- lation, was sustained, upon the ground that as malice, without want of probable cause, will not sustain an action for a vexatious suit, so the plaintiffs could not recover of the defendants, for calling on the plaintiffs without suit to pay the bank’ notes, which they lawfully held, though ‘done with malice. In McLellan v. Cumberland Bank, 24 Me. 566, the court, while doubting whether a corporation can be held liable for mali- cious arrest in a civil suit, place their decision on the ground that there was no proof of want of probable cause, see Goddard ov. G. T. R. BR, Co. 5 Me. 202. Goodspeed v. Hast Haddam Bank, 22 Conn, 535, was an action ‘based on the provisions of a statute to prevent vexatious suits, and was subject to the same general principles as actions on the case for malicious prosecutions at common law. The court held the corporation liable, and that whatever may have been the views of Coke and Blackstone, new relations having been formed, and new interests created in the progress of the development of the nature and influence of corporations, legal princi- ples of a practical character, adapted to such progress, rather than those of a technical or theoretical character, must be applied. * See note ante, p. 251. TORTS OTHER THAN FRAUDS. 269 In Whitfield v. South-Eastern Railway Company,’ it was held that a corporation was liable for publishing a libel contained in a telegram which passed over their wires ; and ¢ converso, a corporation, though intangible and without personal incidents, may sue for libel upon ie In respect of liability for torts it makes no differ- ence, whether the corporation is a trading one making profits out of its undertaking, or exists merely for pub- lic purposes. In the latter case, as in the former, it is equally under obligations to all persons with whom it may come into contact, and is bound so to carry on its affairs as to keep within its powers, and not to cause injury to others. Failing this, it is liable for the dam- age resulting.® Under the same circumstances the various boards of commissioners, and other similar bodies appointed to conduct and carry out public im- 11E. B& E, 115; 27 L. J. Q. B. ‘Southampton and Itchin Bridge 229. See Lawless v. Anglo-Egyptian Company v. Southampton Local Board, Cotton and Oil Company, L. R.4Q.B. 8 E.& B. 801; 28 L. J.Q.B..41; Ruck 262. v. Williams, 8 H. & N. 308; Brownlow ? Metropolitan SaloonOmnibusCom- v. Metropol. Board, 16 C. B. N. 8, 546. pany v. Hawkins, 4 H. & N. 87; 28 L. J. Ex, 201. * Corporations are responsible in damages for the publication of libel- ous matter. P. W. & B. R. R. Co. 0. Quigley, 21 How. 202; Maynard o. Firemen’s Ins. Co. 34 Cal. 48. The self-evident liability for libel of corpora- tions, now common in this country, organized for the printing of newspa- pers and other matter for publication, illustrates the fallacy of the argument used in opposition to the doctrine of corporate responsibility for this class of torts. Aldrich , Press Co. 9 Minn. 133; Daily Post Co. o, McArthur, 16 Mich. 447, were suits against such corporations. See Hovey v. Rubber Co. 57 N. Y. 119; Western C. M. Co. v. Lawes C. M. Co. L. R. 9 Exch. 218. Ag to suits by corporations for defamation, see Trenton Ins. Co. 2. Perrine, 3 Zab. 402; Shoe & Leather Bank 2. Thompson, 18 Abb. Pr. 413; 8. c. 28 How. Pr. 253; Knickerbocker Life Ins. Co. 7. Ecclesine (2 J. & 8.), 84 N. Y. Superior Ct. Rep. 76. + As to liabilities of municipal corporations for torts, see Dillon on Mun, Corps. §§ 752-802; Lee v. Sandy Hill, 40 N. Y. 442. 270 LIABILITIES EX DELICTO. provements, and deriving therefrom no personal ad- vantage whatever, will, in their corporate or quasi-cor- porate capacity—aunless expressly by statutory provision relieved—be responsible to the parties injured. * th es cited in the last note, and also the Mersey Docks Trustees », Porat Gibbs, L, R. 1 H. Lds. 93, * The courts have carried the modern idea, that corporations are capa- ble of evil intention so far as. to allow against them even vindictive dam- ages; so that it may be laid down as the prevailing rule in this country, that corporations stand on the same footing as individuals, as to damages awarded by way of punishment for wrong intent. Corporations may be subjected to exemplary or punitive damages for tortious acts of their agents or servants, done within the scope of their employment, in all cases where natural persons acting for themselves, if guilty of like tortious acts, would be liable to such damages. On the general principle, the courts of the different States seem to be in agreement, but. differences appear as to the extent of its application. Those authorities which carry the doctrine to the extreme, place the liability of the corporation to exemplary damages for the gross negligence of their agents, on the broad grounds that the public have an interest in having these companies employ capable, honest and reliable men, that it is their duty to see that their employees are of a proper character, and that the courts will, therefore, hold them to a strict accountability if this duty is not fully performed. Under this idea, it is held that itis not neces- sary to prove previous authority or subsequent ratification, nor to bring the incompetency of the agent to the knowledge of the corporation. The corporation is thus made absolutely responsible for the, character of its employees, and, under this view, it is not enough to save it from pun- ishment, that it has used the utmost care in the choice and supervision of its agents. See Beale », Railway Co. 1 Dillon, 568. In Goddard ». Grand Tr. R. R. Co. 57 Me. 202 (which see for an elaborate discussion of the cases on this subject), the court reasons from its inability to distinguish between the mind, voice, guilt, or malice of the servant and the mind, voice, guilt or malice of the corporation, and from the impossibility ef the ideal existence called a corporation having any corrective influence brought to bear upon it, except that of pecuniary loss, that the doctrine of exemplary damages is more beneficial in its application to corporations than in its application to natural persons, and therefore concludes that actions against corpora- tions, for the willful and malicious acts of their agents and servants in executing the business of the corporation, should not form exceptions to the rule allowing exemplary damages, The learned judge, in his opinion, uses the following language: ‘If those who are in the habit of thinking CRIMES. O71 SECTION III. CRIMES. The liability of corporations has been extended to even some varities of crimes. The notion of crime, as that it is a terrible hardship to punish an innocent corporation for the wickedness of its agents and servants, will for a moment reflect upon the absurdity of their own thoughts, their anxiety will be cured. Careful engineers can be selected, who will not run their trains into open draws; and careful baggage-men can be secured, who will not handle and smash trunks and bandboxes, as is now the universal custom; and conductors and brakemen can be had who will not assault and insult passengers; and if the courts will only let the verdicts of upright and intelligent juries alone, and let the doctrine of exemplary damages have its legitimate in- fluence, we predict, these great and growing evils will be very much less- ened, if not entirely cured. There is but one vulnerable point about these ideal existences called corporations, and that is the pocket of the moneyed power that is concealed behind them; and if that is reached they will wince. When it is thoroughly understood that it is not profitable to em- ploy careless and indifferent agents, or reckless and insolent servants, better men will take their places, and not before.” A calmer but no less decided opinion of the same learned judge will be found in Henson 2. R. R. Co. 62 Me. 84. On the other hand, there are cases which would never be doubted ex- cept for the influence of the idea of public policy, and which restrict the application of the doctrine by rules which seem to be founded in reason. Thus, it is held, that corporations are not to be visited with punishment for the act of an agent, without proof that they directed the act or sub- sequently ratified it. Hagan ». Prov. & W. R. R. Co.3 R. I. 88; Mil. & Miss. R. R. Co, ». Finney, 10 Wis. 388; Turner v. N. B. & M. R. R. Co. 34 Cal. 594; that notice of incompetency must be brought home to the cor- poration, in order to interpret the retention of an agent who is unfit for his place, as authorizing his future tortious acts or ratifying those which are past. Caldwell v. N. J. Steamboat Co. 47 N. Y. 296. In Cleghorn 2. N. Y. Cent. & H.R. R. R. Co. 56 N. Y. 44; the court say: ‘‘ For injuries by the negligence of a servant while engaged in the business of the master, within the scope of his employment, the latter is liable for com- pensatory damages; but for such negligence, however gross or cul- pable, he is not liable to be punished in punitive damages, unless he is also chargeable with gross misconduct. Such misconduct may be established by showing that the act of the servant was authorized or ratified, or that the master employed or retained the servant, knowing that he was incompetent or from bad habits unfit for the 272 LIABILITIES EX DELICTO. usually held, requires intent on the part of the criminal, . but this is not the view taken by the law. Many acts which, if productive of harm to a single person, are mere torts, become crimes when they result in dam- age to a large number of persons, and all proceedings which are invasions of the rights or privileges not of some one individual specially but of the public at large, position he occupied. “Something more than ordinary negligence is requisite; it must be reckless and of a criminal nature, and clearly established. Corporations may incur this liability as well as private per- sons.” Again, it is held that where a railroad company adopts all rules and regulations needful for the safety of passengers, and employs com- petent agents whose duty is to see that these rules and regulations are observed, the company, in case of injury to a passenger, happening by reason of the failure of an agent to perform his duty, cannot be held lia- ble for punitive damages; Ackerson ». Erie R. R. Co..3 Vroom, 254; and that a corporation is not liable in exemplary damages for the act of its agent, where the plaintiff would not have been entitled to recover such damages, had the suit been against the agent. Hamilton ». Third Ave. R. R. Co. 53 N. Y. 25; Townsend v, N. Y. Cent..& Hud. R. R. R. Co. 56 N. Y.295. See further on the general subject of liability of corpo- rations in vindictive damages, Hopkins 0. A. & St. L. R. R. Co. 36 N. H. 9; Taylor v, Railway Co. 48 N. H. 304; Bannon ». Balt. & O.R.R. Co. 24 Md. 108; Balt. & O. R. R. Co. », Blocher, 27 Md. 277; Vicksburg & J. R. R. Co. ». Patton, 31 Miss. 156; New Orleans &. RK. R. Co. ». Hurst, 36 Miss. 660; New Orleans &c. R. R. Co. v. Bailey, 40 Miss. 395; Hill o.°N. 0. 0. &G. W.R.R. Co. 11 La. An. 445; Bowler ». Lane, 3 Met. (Ky.) 311; Jeffer- sonville R. R. Co. v, Rogers, 88 Ind. 116; Atlantic & G. W. RB. BR. Co. ». Dunn, 19 Ohio St. 162; Frincke v. Coe, 4 Iowa, 555; Perkins v. Mo. K. & T. R. R. Co. 55 Mo. 201; but compare McKeon ». Citizens’ R. R. Co. 42 Mo. 79; Wardrobe v. Cal. Stage Co. 7 Cal. 118; Turner v. N. B. GM. R. R. Co. 34 Cal. 594; Mendelssohn v. Anaheim Lighter Co. 40 Cal. 657. When exemplary damages are allowable against a corporation, the con- dition and circumstances of the defendant are material. Belknap ». Boston & Me. R. R. Co. 49 N. H. 358. As to punitive damages against municipal corporations, see Dillon on Mun. Corp. § 789; Hull ». Richmond, 2 Woodb. & M. 337; Wallace 2. Mayor, 2 Hilt. 440; Chicago », Langlass, 52 Ill. 256; Decatur ». Fisher, 53 Ill. 407. On the general subject of ‘‘ vindictive,” “punitive,” and ‘exemplary ” damages, see Sedgwick on Damages (6th ed.), pp. 566-573. CRIMES. 973 or which are detrimental to the general well-being or to the interests of the State, similarly fall under the category of crimes.* In such cases, the intent is notional and constructive, rather than real; it- suffices if the wrong-doer has caused, whether directly by his own proceedings, or indirectly by those of his agents, the wrong in question.t Manifestly, a corporation can commit such wrongs, can have such an intent, and by consequence, at least to such extent, render itself amen- able to the criminal law. Accordingly, it has been decided, that a corporation may be indicted for misdemeanors which are in reality public torts—e. g., for disobedience to an order of justices requiring them to execute works pursuant to a statute ;* for misfeasance in cutting through and ob- structing a public highway ;* for non-repair of a high- way, and the like. The authorities hitherto have gone only so far as to render them liable criminally for a nonfeasance or misfeasance where the mental element is negligence. Whether this can ever be extended to felonies or mis- demeanors, the essence of which is malice, willfulness, 1 See also upon this point Reg. v. Telegraph Company, 2B. &S. 647, n.; Stephens, L. R. 1 Q. B. 702. 38F. & F, 73. ? Reg. v. Birmingham and Gloucester *Compare Reg. v. Mayor d&e. of Railway Company, 8 Q, B. 223. : Manchester, 7 E, & B, 453; 26 L. J. M. 5 Reg. v. Great North of England C.65; and the many authorities in the Railway Company, 9 Q. B. 315; Reg. books of indictments against counties, v. Longton Gas Company, 2 E. & E. townships, and parishes, for not repair- 651; Reg. v. United Kingdom Electric ing roads, bridges, &c. * See note by Mr. Bennett, 1 Lead. Cases on Crimes, p. 174. + Corporations necessarily transact business by means of agents. If they are held responsible criminally, it must generally, perhaps always, be for acts or neglects of those agents. Boston, C. & M. R. R. Co. ». State, 832 N. H. 215. The rule, that there can be no agency in com- { mission of misdemeanors, applies only to those misdemeanors to which malus animus is essential. See State», Ohio & Miss. R, R. Co. 23 Ind. 362. 18 a74 LIABILITIES EX DELICTO. or other such determinate fact, is very doubtful Being mere abstractions,-they cannot have actually the mental element therein involved, and to raise it by implication is directly opposed to every principle of criminal law.* 1 See the arguments in Reg. v. Great lies v, Willcox, 1 Sim. N.S. 334; 19 L. North of England Railway Company, 9 J. Ch. 488. Q. B. 815; and King of the Two Sici- * There are crimes (perjury for example) of which a corporation cannot, in the nature of things, be guilty. There are other crimes, as treason and murder, for which the punishment imposed by law cannot be inflicted upon a corporation, and, therefore, indictment and trial would be useless formalities which the law never goes through. So, corporations cannot be liable for any crime of which a corrupt intent or malus animus is an essential element. But the creation of a mere nuisance, involves no such element. It is totally immaterial, whether the party erecting the nui- sance does it ignorantly or by design, with a good intent or an evil intent; and there is no reason why for such an offense a corporation should not be indicted. State v. Morris & Essex R. R: Oo. 3 Zab. 360. Corporations are, therefore, liable to indictment for the neglect of duties resting upon them, Mower », Leicester, 9 Mass. 248; Commonwealth o. Central Bridge Cor. 12 Cush. 242; People 2. Corporation of Albany, 11 Wend. 539, People ». Goshen Turnpike Road, 11 Wend. 597; Susquehanna & Bath T. Co. v. People, 15 Wend. 267; Waterford and Whitehall T. Co. ». Peo- ple, 9 Barb. 161; State v. Barksdale, 5 Humph. 154; State 0. Murfrees- boro’, 11 Humph. 217; and see cases cited in Dillon on Mun. Corps, § 745. In Cumb. & Ox. C. Co. v. The City of Portland, 56 Me. 77, which was an action of debt, to recover a penalty for filling up the plaintifi’s canal, the court say: ‘‘Towns are undoubtedly liable to indictment for neglect of duties imposed by statute, when the statute so prescribes. Buta town could not be indicted for assault and battery, though committed by one of its officers in accordance with its express vote. Whether a town might or might not be liable in trespass, in such a case like the present, is a ques- tion not now presented for determination. The object of the statute was to protect the corporation against illegal acts done willfully and mali- ciously. The penalty is imposed on those, who do willful and malicious injury to the corporation, and upon these alone. But towns cannot do an act willfully and maliciously.” See Same v. Same, 62 Me. 504. An attempt has been made to distinguish between the liability of a corporation for non-feasance and for misfeasance, and it has been urged that while a corporation may render itself indictable, by neglecting that which it is its duty to do, yet it cannot be indicted for doing that, for CRIMES. 275 which it has no authority. Thus, in State ». Great Works M. & M. Co. 20 Me. 41, which was an indictment, charging defendant with a nuisance, in the erection of a dam across the Penobscot river, Weston, C. J., says: ‘A corporation is created by law for certain beneficial,purposes. They can neither commit a crime or misdemeanor, by any positive or affirmative act, nor in- cite others to do so, as a corporation. While assembled at a corporate meet- ing, a majority may, by a vote entered upon their records, require an agent to commit a battery; but if he does so, it cannot be regarded as a corpor- ate act, for which the corporation can be indicted. It would be stepping aside altogether from their corporate powers.” See also State v. Ohio and Miss. R. R. Co. 23 Ind. 362; Commonwealth ». Swift Run Gap Turnpike Co. 2 Va. Cas. 862. The contrary view, however, prevails in this country, as well asin England. Bigelow, J., in Commonwealth v. New Bedford Bridge, 2 Gray, 339, says: ‘‘The indictment in the present case is for a nuisance. The defendants contend, that it cannot be maintained against them, on the ground that a corporation, though liable to indictment for non-feasance, or an omission to perform a lega] duty or obligation, are not amenable in this form of prosecution for a misfeasance, or the doing of any act unlawful in itself and injurious to the rights of others. There are dicta in some of the earlier cases which sanction this broad doctrine, and it has been thence copied by text-writers and adopted to its full ex- tent, in a few modern decisions. But if it ever had any foundation, it had its origin at a time, when corporations were few in number and limited in their powers and in the purposes for which they were created. Experi- ence has shown the necessity of essentially modifying it; and the ten- dency of the more recent cases in courts of the highest authority, has been to extend the application of all legal remedies to corporations, and assim- ilate them, as far as possible, in their legal duties and responsibilities, to individuals. To a certain extent, the rule contended for, is founded in good sense and sound principle. Corporations cannot be indicted for offenses which derive their criminality from evil intention, or which consist in a violation of those social duties which appertain to men and subjects. They cannot be guilty of treason or felony; of perjury or offenses against the person. But beyond this, there is no good reason for their exemption from the consequences of unlawful and wrongful acts committed by their agents, in pursuance of authority derived from them. Such a rule would, in many cases, preclude all adequate remedy, and render reparation for an injury committed by a corporation impossible; because it would leave the only means of redress to be sought against irresponsible servants, instead of against those, who truly committed the wrongful act, by commanding it to be done. There is no principle of law, which would thus furnish im- munity to a corporation. If they commit a trespass on private property, or obstruct a way to the special injury and damage of an individual, no one can doubt their liability therefor. In like manner, and for the same reason, if they do similar acts, to the inconvenience and annoyance of the 276 LIABILITIES EX DELICTO. public, they are responsible in the form and mode appropriate to the prosecution and punishment of such offenses. If, therefore, the defend- ants have been guilty of a nuisance, by obstructing unlawfully a naviga- ble stream, an indictment may well be maintained against them. It may be added, that the distinction between a non-feasance and a misfeasance is often one more of form than of substance. There are cases, where it would be difficult to say whether the offense consisted in the doing of an unlaw- ful act, or in the doing of a lawful act in an unlawful manner. In the case at bar, it would be no great refinement to say that the defendants are indicted for not constructing their draws in a suitable manner, and thereby obstructing navigation, which would be a non-feasance, and not for un- lawfully placing obstructions in the river, which would be a misfeasance. The difficulty of distinguishing the character of these offenses strongly illustrates the absurdity of the doctrine, that a corporation are indictable for a non-feasance, but not for a misfeasance.”” See also to the same effect Boston, C. & M. R. R. Co. v. State; 32 N. H. 215; State o. Vermont Cen- tral R. R. Co. 27 Vt. 108; Commonwealth v. Nashua & Lowell R. R. Co. 2 Gray, 54; Commonwealth v. Vt. & Mass. R. R. Co. 4 Gray, 22; State o. Morris & Essex R. R. Co. 3 Zab. 360; Louisville R. R. Co. v. State, 3 Head, 523. A corporation is liable to indictment for the act of its officer or em- ployee in issuing papers, which the law requires to be stamped, without the proper stamps, with intent to evade the provisions of the act of Con- gress. U.S. v. Balt. R. R. Co. 7 Am. Law. Reg. N. 8. 757. Most of the States have provided by statute, in one way or another, for compensation for death caused by the carelessness or negligence of the servants or agents of railroad and other companies. Their purpose has been to obviate a supposed defect of the common law, lying in the prin- ciple that a party is not liable cividéter for the destruction of human life, whether the acts causing death are felonious or not. In Massachusetts, Maine, New Hampshire, Connecticut, and Rhode Island the remedy is by indictment (the penalty, however, to go to the widow, children, or heirs) which gives rise to a peculiar class of cases in those States. The action brought under those statutes is, in form, criminal, but in mode of pro- cedure and practical effect scarcely differs from a civil action, which might have been brought by the injured party himself, had he survived his injuries. It is accordingly held, in State ». Grand Trunk R. R. Co. 58 Me. 176, that ‘‘the same rules of evidence and the same principles of law should be applied as in like cases, when redress is sought by a civil action for damages.” This opinion is approved in State o, Railroad, 52 N. H. 528, where the court, after remarking upon the various provisions of the different States, say: “But in all the different forms of proceeding, the same end is to be attained, and substantially the same rules are to be ap- plied, as though they were civil actions for damages.” See also Boston, C. & M. R. R. Co. ov. State, 82 N. H. 215. On the construction of these . CRIMES. QtT statutes, see State 2. Grand Trunk R. R. Co. 60 Me. 145; State v. Maine Cent. R. R. Co. 60 Me. 490; State v. Grand Trunk R. R. Co, 61 Me. 114; State o. Gilmore, 24 N. H. 461; Commonwealth v. Boston & W. RB. R. Co. 11 Cush. 512; Commonwealth v. Vermont & Mass. R. R. Co. 108 Mass. 7. For the terms of these statutes, and also of those of the other States in which the action is civil, and which resemble Lord Campbell’s act (9 and 10 Vict. c. 98, s.1; Godefroi & Shortt, p. 405), see Shearman & Redfield on Negligence, chap. XVII. A subject akin to the liability of corporations for crime, is their lia- bility for contempt. Baltimore & Ohio R. R. Co. v. Wheeling, 13 Gratt. 40. Compulsion may be exercised against a corporation, in case of disre- gard of the orders of the court; not by attachment, which is a remedy confined to unprivileged natural persons, but by sequestration, which is the proper remedy both against natural persons privileged from attach- ment, and artificial persons not susceptible of it. Lord Mansfield lays down the rule in Rex v. Windham, Cowp. 377, that the personal property is to be taken first, and, if that is not effective, that the rents and profits are to be sequestered. McKim v. Odom, 3 Bland Ch. 407, is an early American case on this point, and contains a discussion of the entire sub- ject of the coercive relation of the court of chancery to corporations. See also Bank of Bellows Falls 2. R. & B. R. R. Co. 28 Vt. 470; Jones ». Boston Mill Corp. 4 Pick. 511;,Atlas Bank 7, Nahant Bank, 23 Pick. 480; Grew ». Breed, 12 Metc. 363; Devoe ». Ithaca & Oswego R. R. Co. 5 Paige, 521; Judson v. Rossie Galena Co. 9 Paige, 598; Ammant o. N. A. & P. Turnpike Co. 18 8. & R. 210; Reid ». N. W. R. RB. Co, 32 Penn. St. 257; 1 Daniell’s Ch. Pr. 477; Ang. & Ames on Corp §§ 667-673. PART III. THE DOCTRINE OF ULTRA VIRES CONSIDERED WITH REFERENCE TO THE POWERS AND PRIVILEGES OF CORPORATIONS, AND THE MANNER AND PURPOSES IN AND FOR WHICH SUCH MAY BE EMPLOYED. CHAPTER I. THE SPECIAL POWERS AND PRIVILEGES OF CORPORATIONS. SECTION I. » e a THE USER OF SPECIAL POWERS AND PRIVILEGES.* I. Powers conferred upon corporations for the attain- ment of certain defined objects must be employed by them strictly and solely with reference to those objects only. ° Ir is now established beyond question, that not only are the capacities of corporations limited in degree, but * Special powers and privileges are granted to corporations by the State as a portion of the sovereignty. Under this head are included the granting of the franchises of taking tolls, making of highways and the like, and also that portion of the right of eminent domain which subjects private property to public use. I. There are certain rights which are incidents of sovereignty and which cannot be exercised without legislative authority. Such are the franchises of ferries, fairs, markets, toll bridges, turnpikes and railroads. “A railroad for public use is publict juris; it cannot be legally erected without a legislative permission.” R. & D. B. R. R. Co. v. Del. & Rar. C. Co. THE USER OF SPECIAL POWERS. 279 so also are the purposes and ends for which they pro- pose to employ those capacities. Corporations are cre- 3C.E. Green, 570. “The right to build and run a railroad and take tolls and fare is a franchise of the prerogative character which no person can legally exercise without some special grant of the legislature.” State o. B. C. & M. R. R. Co. 25 Vt. 483; see Blissett ». Hart, Willes, 508; Bank of Middle- town ». Edgarton, 30 Vt. 182; Newburgh Turnpike Co. ». Miller, 5 Johns. Ch. 101; Auburn & Cato Plank Road v. Douglass, 9 N. Y. 444; 8. ©. 20 NN. Y. 370; Aiken 0. Western R. R. Co. 20 N. Y. 370; Ogdensburg & L. C. R. R. Co. 2, Vt. & Can. R. R. Co. 6 N. Y. Supr. Ct. (Thomp. & Cooke) 488; Erie R. R. Co. v. D. L. & W. R. RB. Co. 6 C. E. Green, 283; Penn. R. R. Co. ». Nat. R. W. Co. 8 C. E. Green, 441; compare Hughes v. Ches- ter & Holyhead R. R. Co.1 D. & S&S. 545; 8.0. 3D. G F.& J. 352; ‘Tuckahoe C, Co. v. Tuckahoe R. R. Co. 11 Leigh, 72. II. “ There exists in every sovereignty, the rightful authority to appro- priate and control individual property for the public benefit, as the pub- Tic safety, necessity, convenience or welfare may demand.” Cooley on Cons. Lim. 524. In the exercise of the power of eminent domain, any real estate, property, franchise or easement of any corporation, however exclusive the grant, may be taken for public use, provided suitable com- pensation be made. Piscataqua Bridge v. N. H. Bridge, 7 N. H. 35; Northern R. R. Co. v. C. & C. R. R. Co. 7 Fost. 183; State ». Canterbury, ‘8 Fost. 195; Crosby v. Hanover, 36 N. H. 404. III. This power of eminent domain may either be exercised by the State itself or in proper cases be delegated to corporations or individuals. ‘‘ Upon the principle of public benefit, not only the agents of the government, but -also individuals and corporate bodies have been authorized to take private property for the purpose of making public highways, turnpike roads, and canals; of erecting and constructing wharves and basins; of establishing ferries; of draining swamps and marshes, and of bringing water to cities and villages. In all such cases, the object of the legislative grant of power is the public advantage expected from the contemplated improvement, whether such improvement is to be effected directly by the agents of the government, or through the medium‘of corporate bodies, or of individual enterprise.” Beekman v. 8. & 8. R. R. Co. 3 Paige, 73; Rens. & Sara. R. “R. Co, v. Davis, 48 N. Y. 137; R. R. Co. . Kip, 46 N. Y. 546; in re Fow- ler, 53 N. Y. 60; Kramer v. C. & P. R. R. Co. 5 Ohio St. 146, and other cases cited in notes to this chapter. And this delegation may be given by general statute to corporations organized thereunder. Buff. & N. Y. R. R. v. Brainard, 9 N. Y. 100. IV. There are no limitations to the exercise of the right, except the necessity arising in order to promote the public interest; and that private 280 SPECIAL POWERS OF CORPORATIONS. ated for the accomplishment of certain ends, or for the transaction of certain business, which could not be so property shall not be taken without just compensation. There is no restraint upon the power, except that requiring compensation to be made. The necessity for appropriating private property for the use of the public, or of the government, is not a judicial question. The power resides in the legistature. People v. Smith, 21 N. Y. 595. It is one of the legislative prerogatives to decide the important question, whether an enterprise or scheme of improvement be of such public utility as to justify a resort for its furtherance to the exercise of the power of taxation or eminent domain. Primarily, the judiciary has no con- cern in such matter; and not only this, but if the public interest be involved to any substantial extent, and if the project contemplated can, in any fair sense, be said to be promotive of the welfare or convenience of the community, the legislative adoption of such project is a determin- ation of the question, from which there is no appeal, and over which no other branch of the government has any supervision whatever. Whether a road, a turnpike, a bridge, or a canal, will subserve public or private. needs, are inquiries addressed exclusively to the law making power, whose answers, according to the genius of our goVernment, must be final and irreversible. This doctrine has been often propounded as the undoubted rule of law, by the most eminent elementary writers, and has received the sanction of much judicial adoption. Tide-water Co. ». Coster, 3 C. E- Green, 518; 8. c. 1did. 55. But, although it rests in the wisdom of the legislature to determine when public use requires the assumption of private property (2 Kent, 340), it is not to be understood by this, that the. legislature is to be the sole judge of what is meant by public use; but that the fact being established that private property of a particular char- acter may be taken and appropriated to public purposes, it is for the wisdom of the legislature to say when that appropriation shall be made. Scudder », Trenton D. F. Co. Sax. 694. The determination of the legis- lature is not conclusive, that a purpose for which it directs private prop- erty to be taken is a public use; but is conclusive, ¢f the use is public, that the necessity exists which requires that property be taken. Talbot 2. Hudson, 16 Gray, 417. The right of eminent domain is to be exercised only when the public exigencies require it. And when such exigency is declared by the legislature, as the representative of the sovereignty, the courts cannot rightfully question the wisdom of the declaration. But if the: legislature attempts, under the power of taking property by the right of eminent domain, to take property’ confessedly not for public use, then the courts may prevent it. Water Works Co. », Burkhart, 41 Ind. 364; see Cottrill 0, Myrick, 3 Fairfield, 222; Concord R. R. Co. ». Greely, 17 N. H. 47; in re Fowler, 53 N. Y.60; People o. Salem, 20 Mich. 452 ; Bank- THE USER OF SPECIAL POWERS. 281 well attained or carried out by individual effort, and in this behalf they are endowed with various powers and head ». Brown, 25 Iowa, 540; Speer v. Blairsville, 50 Penn. St. 150; Sadler », Langham, 84 Ala, 811. V. Asto what isa public use, it is generally conceded that highways, in- cluding turnpikes, canals, railways, courts of justice, school-houses, aque- fucts, sewers, are public purposes, It is now quite too late to object, that the objects and purposes of a. railroad corporation are not public, or that the duties devolved upon them, and the services rendered by them are not of a public character, and in furtherance of public interests. In re N. Y. & H. R. BR. Co. 46 N. Y. 546; Buf. & N. Y. R. BR. Co. v. Brainard, 9 N. Y. 100; Olcott v. Supervisors, 16 Wall. 678; Bonaparte v. C. & A. R. R. Co. Bald. 205; Brailley o. N. Y. & N. H. BR. R. Co. 21 Conn. 294; Davis ». Tus. C.L.D. R. BR, Co. 48. & P. 421; Brown ». Beatty, 34 Miss. 227; Swan o. Williams, 2 Mich. 427; Weir o. St. Paul R. R. Co. 18 Minn. 155; San Francisco A. & 8, R. R. Co. 2. Caldwell, 31 Cal. 867; Gibson 2. Mason, 5 Nev. 283. As to railroad to transport coal, see New Cent. Coal Co. ». George’s Creek Coal and Iron Co. 37 Md. 587; Harvey v. Thomas, 10 Watts, 65. The words “public use ” are not equivalent to the words ‘‘ public ownership.” Concord R. R. v. Greely, 17 N. H. 47. Whether -the power of eminent domain can rightfully be exercised in condemnation of lands for manufacturing purposes, where the manufac- tories are to be owned and occupied by individuals, is a question upon: which the authorities are at variance. See French v. Braintree Mfg. Co. 23 Pick. 220; Great Falls Mfg. Co. v. Fernald, 37 N. H. 444; and other cases cited in note, Cooley on Cons. Lim. p. 534. ‘The legislature of New York, it is believed, has never exercised the right of eminent do- main in favor of mills of any kind; sites for steam engines, hotels, churches, and other public conveniences, might as well be taken by the exercise of this extraordinary power.” Hand, J., in Hay », Cohoes Co. 3 Barb. 47. Judge Cooley remarks: ‘‘It is quite possible that, in any State in which this question would be an entirely new one, and where it would not be embarrassed by long acquiescence, or by either judicial or legislative precedents, it might be held that these laws are not sound in principle, and that there is no such necessity, and consequently no such imperative reasons of public policy, as would be essential to support an exercise of the right of eminent domain. But accepting as correct the decisions which have been made, it must be conceded that the term ‘ pub- lic use,’ as employed in the law of eminent domain, has a meaning much controlled by the necessity, and somewhat different from that which it bears generally.” Cooley on Cons. Lim. p. 536. As illustrative of what. 282 SPECIAL POWERS OF CORPORATIONS. privileges other than such as are possessed by private persons; but these powers and privileges are given to . is a public use, reference may be had to tax cases and cases involving the aid voted to railroads by towns and counties (see Dillon on Mun. Corp. §§ 104, 415), in which cases, the decision has turned upon the question whether the taxation by which this aid was afforded was fora public pur pose; see Loan Ass’n 2. Topeka, 20 Wall. 655, where it is held, that a statute of the State of Kansas, which authorized the town to issue bonds to aid and encourage a company in establishing and operating manufac- tories, is void. See also Allen v. Inhab. of Jay, 60 Me. 124; Lowell ». City of Boston, 111 Mass. ane Jenkins », Anderson, 103 Mass. 74; Olm- stead v. Camp, 88 Conn. 582; Todd v. Austin, 34 Conn. 75; Curtiss 2. Whipple, 24 Wis. 350; People 9: Salem, 20 Mich. 452. In Bloomfield Gas Co. ». Richardson, 63 Barb. 487, the question as to what isa public use is discussed by Talcott, J., in connection with a grant of the right of condemnation to a company chartered to supply a city with natural gas, and he holds, that the use of gas for illuminating purposes having become almost a necessity of modern civilization, its sup- ply and means to that purpose, are within the category of those public improvements which authorize the legislature to delegate the power of eminent domain to the company so supplying it—more especially as the act contemplated the lighting of the streets with the gasso furnished. In the able brief of Mr. Pomeroy, in this case, a classification will be found of the different kinds of uses which have been held public, both in ref- erence to eminent domain and other governmental powers of the same general character. He separates them into the following groups: ‘‘1. All purely governmental purposes, whether carried on by the State itself, through some of its departments, or by local governnients, such as those of counties and towns. Under this class are public school-houses (Williams 2. School district, 33 Vt. 271), forts (Gilmer 0. Lime Point, 19 Cal. 229), and this class would undoubtedly include buildings for State houses, capitols, court-houses, public prisons and the like. 2. All means and methods for transit of passengers or goods, whether constructed by the State or by private enterprise. This class includes public highways, turnpikes, bridges, railroads, canals, docks and wharves. 8. Measures of police, and especially those which are designed to promote health. In this class there are several particular instances, not resembling each othe in their outward and. physical features; but it will be seen that in all of them, the element which makes the use “ public,” belongs to that branch of governmental functions termed police, and in most of them this ele. ment is purely sanitary. This class includes: (1) Waterworks to supply cities with water. Health, the necessity of pure and wholesome water as much as of pure and whclesome air, and not mere conveniences, and em- THE USER OF SPECIAL POWERS. 283 them in a qualified manner only, and not absolutely.* “Tt has become a well-settled head of equity, that any a phatically not gain, is the public use which renders these works and en- terprises valid. Reddall o. Bryan, 14 Md. 444; Burden ». Stern, 27 Ala. 104; Lumbard ». Stearns, 4 Cush. 60; Mayor &c. v. Bailey, 2 Denio, 452; per Gardiner, President. (2) Provisions and means for draining swamps, marshes, and low lands. Hartwell v. Armstrong, 19 Barb. 166; People v. Nearing, 27 N. Y. 306; Anderson v. Kerns Draining Co. 14 Ind. 199, 202. This last case expressly holds that draining for sanitary purposes is a pub- lic use, but for other purposes is not. (8) Provisions and means for re- moving dams and permitting stagnant and offensive waters to flow off, thus abating a great public nuisance, and rendering a whole district salu- brious which was before pestilential. Miller 0. Craig, 3 Stock, 175; Tal- bot », Hudson, 16 Gray, 417; Dingley v. Boston, 100 Mass. 544. (4) Drains and sewers in cities. Hildreth v. Lowell, 11 Gray, 345. (5) Pub- lic burying grounds. Edwards ». Stonington Cemetery Asso. 20 Conn. 456. The cases generally, that is throughout the United States, go no further than the foregoing; but, 4. In Massachusetts, Connecticut, and perhaps in a very few other States, statutes have existed from an early day, known as the ‘flowage acts,’ by which land is permitted to be taken for mill dams, &c. These statutes form part of the peculiar local systems of those States, and have been sustained on the ground that the means of promoting manufactures was a public use; see Hazen ». Essex Co. 12 Cush. 475 ; Boston Mill Dam Co. v. Newman, 12 Pick. 467; and many other Massachusetts cases; Olmstead v. Camp, 33 Conn. 532; Todd ». Austin, 841d. 78. In the latter case the necessities of the position and the logic of the judge force him to hold, that ‘ whenever a person carries on any busi- ness, and furnishes articles which members of the community find it convenient or advantageous to buy, then his business is a public use.’ This is the reductio ad absurdum. It is saying that the legislature may em- power a person to take private property to carry on every trade or occu- pation conceivable. It utterly abolishes the word ‘ public’ from the con- stitutional provisions. These doctrines have not been followed to any ex- tent in other States. In Alabama, a similar statute was recently declared void, although it had stood for along time. Sadler v. Langham, 34 Ala. 311. In Tennessee, a very early case had held that a grist mill was a public * The authority of incorporated companies to take land for their works, is special, limited and conditional, and is not to be extended by inference or implication. Bonaparte v.C. & A. R. R. Co, Bald. 205; Ren. & 8. R. R, Co. ». Davis, 48 N. Y. 137; Browning v. Cam. & Wood. R. R. Co. 3 Green’s Ch. 47; Stevens v. Erie R. R. Co. 6 C. E. Green, 259; Cleve- land & Pitts. R. R. Co. 0. Spear, 56 Penn. St. 325. 284 SPECIAL POWERS OF CORPORATIONS. company authorized by the legislature to take compul- sorily the land of another for a definite purpose, will, use, but that a saw mill or a paper mill was not. Harding »v. Goodlett, 3 Yer. 41, And even the former part of this decision was recently overruled in Memphis Freight Co. 0, Memphis, 6 Cold. 419. Finally, this New En- gland doctrine has been expressly repudiated in New York. Hay ». Cohoes Oo. 8 Barb. 42. The object, to be a public use, must either be, (1) some- thing which ipso facto, by its mere existence and of necessity, produces some great common good to all the inhabitants of a particular district, such as sanitary measures for draining, water supply, and the like; or, (2) it must be something in which the public at large—that is, every indi- vidual if he please—has a legal interest and right, such as a highway, railroad, and the like; or, (3) it must be something directly governmental,, such as a fort, state house, and the like.” See 1 N.Y. Sup. Ct. (T. & C.) 549. VI. So far-reaching is this power that it extends to the condemnation of rights acquired under contracts made by the State for exclusive franchises. and privileges. West River Bridge v. Dix, 6 How. 507; s. c. 16 Vt. 446; Richmond R. R. Co. ». La. R. R. Co. 18 How. 71; Binghamton Bridge Case, 3 Wall. 51; Arnington v. Bennett, 15 Vt. 745; White River T. Co. o. Vt. Cent. R. R. Co, 21 Vt. 594; Piscataqua Bridge vo. N. H. Bridge, 7 N. H. 35; Boston & Lowell R. R. Co. v. Salem & Lowell R. R. Co. 2 Gray, 1; Bridge Co. v. Lowell, 4 Gray, 474; Boston Water Power Co. v. Boston & Wor. R. R. Co. 23 Pick. 360; Springfield v. Conn. R. R. RB. Co. 4 Cush. 68; Enfield Bridge Co. ». H. & N. H.R. R. Co. 17 Conn. 40; Ib. 454; én re Kerr, 42 Barb. 119; Bridge Co. v. Hoboken Co. 2 Beas. 81; D. &N. C. Co. » B.& D. B. R. BR. Co. 1 C. E. Green, 821; Shuter 7. Smith, 9 Ga. 529; R. R. Co. », Kennedy, 89 Ala. N. 8. 807; N. &@R.R.R.Co.vP.&ILR. R. Co. 3 Ind. 464; Bridge Co. v. Clarksville, 1 Sneed, 176; ‘Cal. Tel. Co. ». Alta Tel. Co. 22 Cal. 398; Ill. & Mich. C. Co. v. Chicago & Rock Island R. RB. Co. 14 IN. 321. This doctrine, it may be confidently stated, has proved a bulwark of defense to the rights of the people against monopolies and other aggres- sions of corporate power. The rule established by the Dartmouth Col- lege Case, 4 Wheat. 518, that charters of corporations unlimited in their duration, and not expressly made subject to alteration or repeal, were con- tracts between the States and the corporators, within the meaning of the constitutional inhibition against the passage of laws impairing the obliga- tions of contracts, gave opportunity for the granting of charters, which created monopolies, odious in their nature, and which in some cases, effect- ually prevented legitimate competition, and in others placed the national highways under the absolute control of the corporations, to whom such exclusive charters had been granted. During the time which elapsed be- tween the decision above named and the change of public policy which, THE USER OF SPECIAL POWERS. 985 if attempting to take it for any other object, be re- strained by the injunction of the Court of Chancery either by constitutional or legislative enactment, made charters subject to alteration, amendment, or repeal, many such monopolies were chartered. Where such monopolies, affecting inter-State commerce, were coupled with the payment of revenue to the State as compensation for the grant, as in transit duties, tonnage taxes, &c., the Federal courts declared them un- constitutional, as interfering with the powers to regulate commerce dor- mant in Congress, and which, after a protracted struggle so far as rail- ways and bridges were concerned, has been exercised by Congress. U.S. Rev. Stat. § 5258, p. 1022; see Wilson v. Blackbird Creek Co. 2 Pet. 245; Penn. v. Wheeling Bridge Co. 18 How. 518; s. c. 18 How. 421; Gilman ». Phila. 3 Wall. 713; Crandall v. Nevada, 6 Wall. 36; Reading R. R. 2. Penn, 15 Wall. 284; Minot ». Phila. R. R. 18 Wall. 206; s. c. 2 Abb. U.S. 323; State v. Balt. & Ohio R. R. Co. 34 Md. 344; s.c. U.S, Sup. Ct. Oct. T. 1874, But it-was only by the application of the doctrine of eminent domain to these monopoly contracts, that the judiciary of the several States were able to free their citizens from the burden which, in some cases, careless or corrupt legislation, and in others a narrow-minded and selfish policy, had imposed upon them. See Enfield Bridge case and other cases cited ante. VII. This power of condemnation of private property for public use is not to be confounded with the power of taxation (see Gilman ». City of Sheboygan, 2 Black, 510; People ». Mayor of Brooklyn, 4 N. Y. 419; Litchfield v. Vernon, 41 N. Y. 128), nor with what is called ‘‘the police power” (Com, ». Alger, 7 Cush. 84; Thorpe v. Rut. & Bur. R. R. Co. 37 Vt. 140), nor with the power asserted, to regulate the use of corporate rights, which has given rise to one of the most interesting political and judicial discussions of modern times, known as the ‘‘Granger” question, as to which see Appendix. VIII. The protection of private property from condemnation is guaran- teed by the Federal Constitution, which, however, is a limitation on the power of the Federal government, and was not intended as a restraint on the State governments (Barron 2. Baltimore, 7 Pet. 243; Withers v. Buckley, 20 How. 84; Pumpelly v. Green Bay Co. 20 Wall. 166); and by most, if not all, of the State constitutions. In some of the latter it is provided that just compensation must be made before the property is taken, and this difference in the language of the State constitutions should be borne in mind in comparing the decisions of the courts of the respective States on the subject under consideration. On the general subject of the right of eminent domain, and its exer- cise, consult Sedgwick on Stat. L. 498; Cooley on Const. Lim. ch. XV; 286 SPECIAL POWERS OF CORPORATIONS. from so doing.”** This principle is, with the qualifi- cation mentioned below, strictly enforced. Whatever be the purposes for which special powers and authorities are given, to the attainment of these purposes alone can they be devoted, no deviation therefrom being per- mitted, however slight and however much the corpora- tion would thereby be benefited.t+ ‘ In Bentinck ». Norfolk Estuary Company? the de- fendants had power to make and maintain certain cuts and works, with authority to take and use such of certain lands “as might be necessary or proper for them to enter for the purpose of executing these works.” Within the limits of their line of deviation they pro- ceeded to take lands for the purpose, not of forming 1L, BR. 1H. Lds. 48; compare Cross- 17 L. J. Ch. 235; Flower v, London, man v. Bristol and south Wales Railway Brighton and South Coast Railway Com- Company, 1 H. & M. 531. pany, 34 L. J. Ch. 640; Edinburgh and 28D,.G.M.&G. 714; 26L. J. Ch. Glasgow Railway Company v. Campbell, 404; Webb v. Manchester dc. Railway 9 L. T. N.S. H. Lds. 157; See Evers- Company, 4 My, & C. 116; Cother a, field v. Mid-Sussex Railway Company, 3 Midland Railway Company, 2 Ph. 469; D.G. & J. 286; 28 L. J. Ch. 107. Dillon on Mun. Corp. ch. XVI; Redfield on Railways, ch. X; see notes, pp. 74,75. As to the measure of damages, and principles upon which they are assessed, see Sedgwick on Damages (6th ed.), p. 714. * Asto using land for a purpose other than that for which it was taken, see note to page 86; also, Proprietors of Locks & Canals v. N. & L. R. R. Co. 104 Mass, 1; Lance’s App. 55 Penn. St. 16. + Grants of franchises from the State are construed strictly and most strongly in favor of the public against the grantee, subject, however, to the qualification that the grant must receive a reasonable construction, so as not to defeat the intention of the legislature. See note to p. 68. Es- pecially is this strictness of construction adopted in cases where the right of eminent domain is delegated. The power granted must also be strictly pursued. See Bangor & Piscataquis R. R. Co. v. Harris, 21 Me. 533; Proprietors of Locks ». Nashua & Lowell R. R. Co. 104 Mass. 1; in re N. Y.&N. H.R. R. Co. 46 N. ¥. 546; Van Winkle v. R. R. Co. 2 Green, 166; Doughty ». 8. & E. R.R. Co. 1 Zab. 442; State o. Jersey City, 1 Dutch. 809; Zack v. Penn. R. R. Co. 25 Penn, St. 394; Currier v. M. & C. R, RB. Co, 11 Ohio St, 228; Lackland ». Northern Mo. R. R. Co. 81 Mo. 180; Gilmer v. Lime Point, 19 Cal. 47. THE USER OF SPECIAL POWERS. 287 their works, but of digging materials for the same. It was held by Page-Wood, V. C., that they had no au- thority to do so; and this judgment on appeal was affirmed, and, therefore, an injunction granted by the Vice Chancellor against them was made perpetual. It should be noticed that the act constituting the defend- ants incorporated the company’s clauses and the land clauses acts, but not the railways clauses act, which does contain provisions for the entering upon lands merely for the purpose of obtaining materials.* There have been many subsequent decisions on this subject ; the latest is that of Lord Carington v. Wy- combe Railway Company.’+ The defendants’ company gave to landowners notice to treat in respect of a close of land containing 1 acre 27 perches, part of the C. estate. The price was settled between the parties and the land conveyed to the company by a deed not in the statutory form, including the mines and all the estate of the vendors. The company used about three perches of the land for their railway; and, about two years after. their purchase, they, in pursuance of a contract which, before the notice to treat, they had made with W. Terry, to convey to him all such part of the C. es- IL, R. 2 Eq. 825; L. R. 3 Ch. 377; Beauchamp v. Great Western Railway Company, L. R. 3 Ch. 745. * The power to construct public improvements authorizes the taking of lands for the necessary buildings and other appendages, such as work- shops, depots, turnouts. See Eldridge v. Smith, 34 Vt. 484; N. Y. & H. R. RB. Co. 2. Kipp, 46 N. Y. 546; State o. Mansfield, 3 Zab. 510; Phila. Wil. & Balt. R. R. Co. ». Williams, 54 Penn. St. 103; Hamilton ». Anna- polis & E. R. R. R. Co. 1 Md. 553; New Orleans &. R. R. Co. vo. N. oO. 1 La, An. 128; Knight v. Carrollton R. R. Co. 9 La. An. 384; Protzman v. Indianapolis &c. R. R. Co. 9 Ind. 467; Giesy . Cin, &. R. R. Co. 4 Ohio St. 308; Lackland », N. Mo. R. R. Co. 31 Mo. 180; see, also, Strohecker a, Ala. R. BR. Co. 42 Ga, 509. + As to selling superfluous land, see notes to pages 70 and 89. 288 SPECIAL POWERS OF CORPORATIONS, tate as lay between his land and the railway, conveyed the remaining 1 acre 24 perches to him by a deed which recited that it was superfluous land.*. The land was . situate within the limits of a borough, but was at some distance from the mass of houses forming the town. There were two cottages upon it. The Lords Justices held, that apart from other considerations, the yendors would have been entitled to relief on the ground that the company had taken the land, not for the purposes of their act, but in order to enable them to fulfil their contract with Terry. Lord Justice Cairns in his judg- ment said: “There is no controversy as to the facts; and it appears to me that a more distinct and more openly avowed case of the use of parliamentary powers for purposes not intended by parliament never has been presented to the court; and this is exactly one of those cases which was described by Lord Cranworth in Gal- loway v. Mayor and Commonalty of London; where his lordship said: ‘The principle is this, that when persons embarking in great undertakings for the accomplishment of which those engaged in them have received authority from the legislature to take compulsorily the lands of others, making to the latter proper compensation, the persons so authorized cannot be allowed to exercise the powers conferred on them for any collateral object.’ The land here, in my opinion, was taken, and is avowed to have been taken, for that which was an object entirely 1L, R.1H. Lds, 34, 48. * No more property can be taken compulsorily than is necessary to ac- complish the public purpose contemplated. Stacey o. Vt. Cent. R. R. Co. 27 Vt. 39; Hill o. Western Vt. R. R. Co. 82 Vt. 68; Rens. & Sar. R. R. Co. v. Davis, 43 N.Y. 187; Lance’s App. 55 Penn. St. 16; Giesy ». Cin. &c. R. R, Co. 4 Ohio St. 808; Miami Coal Co. v. Wigton, 19 Ohio St. 560; Oregon Cascade Co. v. Bailey, 8 Or. 164. THE USER OF SPECIAL POWERS, 289 collateral, namely, to give to Mr. Terry that which he had bargained for as part of the consideration for the sale of the £20,000 stock.” * It follows naturally, from what has been stated, that companies may not go beyond or aside their powers in order to benefit or to injure third parties, or even to | benefit themselves.+ * In Aldrich ». Drury, 8 R. I. 554, it is held that a railroad company cannot sell the surplus earth, stone, or other materials found upon con- demned land, though it may use them upon the proverty, and carry them from one point to another of the road, as required for its purposes. See Blake v. Rich, 34 N. H. 382; Chapin v. Sullivan R.R. 39 N. H. 564; Henry v. Dub. & Pac. R. 2 Iowa, 288. + Union Bridge Co. v. Troy & L. R. R. Co. 7 Lans. 240; Rens. & Sar. R. R. Co. v. Davis, 43 N. Y. 137. As to liability, where one acts without fault under the sanction of legislative authority, see note to page 75, and Eaton v. B.C. & M. R. R. Co. 51 N. H. 505, where the cases are also collected and reviewed on the power of the legislature to authorize the erection of works which inflict ‘¢ consequential damage” without making provision for compensation. In Pumpelly v. Green Bay Company, 13 Wall. 166, which was a Wisconsin case, and involved the construction of the Constitution of that State, Mr. Justice Miller observes: “The argument of the defendant is, that there is no taking of the land within the meaning of the constitutional provision, and that the damage is a consequential result of such use of a navigable stream as the government had a right to, for the improvement of its nav- igation. It would be a very curious and unsatisfactory result, if in con-~ struing a provision of constitutional law, always understood to have been, adopted for protection and security to the rights of the individual, as. against the government, and which has received the commendation of jurists, statesmen, and commentators, as placing the just principles of the common law on that subject beyond the power of ordinary legislation. to change or control them, it shall be held, that if the government re- frains from the absolute conversion of real property to the uses of the public, it can destroy its value entirely, can inflict irreparable and per~ manent injury to any extent, can, in effect, subject it to total destruction, without making any compensation, because, in the narrowest sense of that word, it is not taken for the public use. Such a construction would pervert the constitutional provision into a restriction upon the rights of ‘the citizen, as those rights stood at the common law, instead of the government, and make it an authority for invasion of private right under the pretext of the public good, which had no warrant in the laws or 19 290 SPECIAL POWERS OF CORPORATIONS. In Dodd v. Salisbury and Yeovil Railway Company, the defendants were authorized to change the inclina- tion of a road, which was within their limits of devia- tion, so as to carry it over their line. Afterwards they proposed to alter the course of the road according to a new plan, which rendered it necessary to pull down the plaintiff ’s house, which likewise stood within the limits of deviation. Notice of the intention to take the house having been served upon the plaintiff, he filed his bill to restrain the defendants, alleging that the new road was not really required for the purposes of the under- taking, but was intended only as an accommodation to a large landholder in the neighborhood. Stuart, V. C,, granted the injunction prayed for, and on appeal the Lords Justices declined to discharge his order, because, 133 L. T. 254, 311; following Evers- field v. Mid-Sussex Railway Company, 3 De G, & J. 286; 28 L. J. Ch. 107. “practices of our ancestors, We are not unaware of the numerous cases in the State courts in which the doctrine has been successfully invoked, that for a consequential injury to the property of the individual arising from the ‘prosecution of improvements of roads, streets, rivers, and other high- ways, for the public good, there is no redress; and we do not deny that the principle is a sound one, in its proper application, to many injuries to property so originating. And when, in the exercise of our duties here, we shall be called upon to construe other State constitutions, we shall not -be unmindful of the weight due to the decisions of the courts of those States. But we are of opinion that the decisions referred to have gone ‘to the uttermost limit of sound judicial construction in favor of this prin- ciple, and in some cases beyond it, and that it remains true, that where real estate is actually invaded by superinduced additions of water, earth, sand, or other material, or by having any artificial structure placed on it, -so as to effectually destroy or impair its usefulness, it is a taking, within the meaning of the Constitution, and that this proposition is not in con- flict with the weight of judicial authority in this country, and certainly not with sound principle. Beyond this we do not go, and this case calls us to go no further.” As to consequential damages, see cases cited by counsel in last case, and Sedgwick on Damages, 6th ed. p, 125. THE USER OF SPECIAL POWERS. 291 although they considered that the corrupt bargain had not been established, they were nevertheless of opinion that it was a question to be determined in a court of law, whether the defendants actually needed, and if so, were entitled to take for the making of their railway, property situated so far as the plaintiff’s was from their line of railway. If the circumstances are at all doubtful, the corpora- tion will be compelled to adduce clear evidence that the proceedings they are about to institute are requisite for their undertaking. It will, for instance, not be sufficient to put in a vague statement or affidavit by their engi- neer, or other such interested party, to the effect, “that the lands in question are required, or will be required, for the purposes of the act, or for the railway and works authorized by the act.”? * In the next place, compulsory powers of the nature now treated of must be exercised not only for the pur- poses intended, but also in the manner and time pre- scribed. An open cutting. may not be substituted in place of a tunnel, nor a road with an inclination of 1 in 20, if the act of parliament says that the gradient is not 'Flower v. London and Brighton Great Northern Railway Company, 3 D. and South Coast Railway Company,2 G.M. & G. 576; 22 L. J. Ch. 761; and Dr. & Sm. 380; 34 L. J. Ch. 540. Com- the other cases of this kind where the pare Stockton and Darlington Railway court has refused to enforce agreements, Company v. Brown, 9 H. Lads, 246. See although not clearly shown to be ultra also South Yorkshire d&c. Company v, vires. *See Rens. & Sar. R. R. Co. v. Davis, 48 N. Y. 187; 8. C. R. BR. Co. 2, Blake, 9 Rich. L, 228, overruling on this point Hz parte 8. C.R. R. Co. 21d. 434; Jefferson & Pontchartrain R. R. Co. v. Hazeur, 7 La. An. 182; Atlantic & Ohio R. R. Co. v. Sullivant, 5 Ohio St. 276. As to the mean- ing of the word ‘‘necessary,” in connection with special powers, see In- hab. of Greenwich v. Easton & Amboy R. R. Co. 9 C. E. Green, 217, No more of the title is divested, by the exercise of the right of eminent do- main, than is necessary for the public use. Jackson », Rut. & Burl. R. R. Co, 25 Vt. 151. 292 SPECIAL POWERS OF CORPORATIONS. to exceed 1 in 80.1. A well-known decision is that of Simpson v. South Staffordshire Waterworks.’ Here, a waterworks company were, by their special act, author- ized to make and maintain reservoirs, aqueducts, &e, The works authorized, so far as they related to a par- ticular field, which was situated within marked limits of deviation, were described as “an aqueduct constructed in tunnel or otherwise, as shown on the original plans,” which plans indicated no surface works upon the field, but merely showed that it was intended to construct, at a depth of at least forty feet under the same, an aque- duct in tunnel. After the special act was passed, the company served the owners of the field with a notice to treat for the purchase of it, with the view of sinking shafts, in order to obtain an additional supply of water, and also of erecting thereon permanent pumping en- gines for raising water from beneath its surface. Upon a bill filed by the owners of the field against the com- pany for an injunction to restrain the company from proceeding to summon a jury to assess the value of the field, and from using it for any other purpose than the construction of an aqueduct, it was held, on appeal, that . the company were not authorized to take or use the field permanently for any other purpose than that indi- cated upon the deposited plans. * * Attorney General v, Mid-Kent and to take certain land, had first given no- South-Eastern Railway Company, L. R. tice to the plaintiff of their intention to 8 Ch. 100. make a tunnel under his land, but find- 34 L. J. Ch. 380; Lamb v, North ing this operation too difficult, had af- London Railway Company, L. R.4 Ch. terwards determined to make an open 522, With these decisions may be com- cutting, and had given notice to that pared Stamps v, Birmingham dc. Rail- effect; and it was held that they were way Company, 7 Hare, 251; 17 L, J.Ch. not precluded by their former notice 431; where the defendants, empowered from so doing. * A railroad company cannot, under the right of eminent domain, condemn a right of way for the term of three years, to be used until the construction of the main line is completed over another route. Currier THE USER OF SPECIAL POWERS. 293 ‘Att. Gen. v, Mid-Kent Railway Company and South- eastern Railway Company,! is a similar decision. A Jocal board of health, &c., withdrew its opposition to a railway bill upon the insertion in the act of a clause providing that no bridge carrying a road over the rail- way within their district should have an approach with a Slope of more than one in thirty. The making a slope of one in thirty required an encroachment on the land -of a person who obtained an injunction to prevent such encroachment, and the company thereupon made a bridge with a slope of one in twenty. On appeal the Lords Justices (reversing the decision of Stuart, V. C.), decided that the company must not have a bridge with a slope of more than one in thirty, and that it was no answer to say that this requisition could not be com- plied with without stopping the railway. In these and similar cases, although the principles of law and equity are clear, it is generally very difficult to determine what are the special powers and what the *L. R. 3 Ch. 100; Manchester, dc. Tewkesbury and Malvern Railway Com- ‘Railway Company v, Reg. 3 Q. B. 528; pany,'82 L. J. Ch. 482; Raphael v. , Clarke v, Manchester, &c, Railway Com- Thames Valley Railway Company, L. pany, 1 J. & H. 631; Att-Gen, v. R.2Ch. 147. 0, Mar. & Cin. R. R. Co, 11 Ohio St. 228. As to taking land for temporary purposes, see Redfield on Railways, §§ 66, 67; and Bonaparte ». Cam. & Am. R. R. Co. Bald. 205; Cushman v. Smith, 34 Me. 247; Nichols v. Som. & Ken. R. R. Co. 48 Me. 356; Hazen v. Boston & Maine R. R. Co: 2 Gray, 574; Balt. & Susq. R. R. v. Compton, 2 Gill, 20; Fox». W. Pac. R. R. Co. 81 Cal. 588. A railroad company is not confined, in taking land, to im- mediate need. See Lodge »v. Phil. &c. R. R. Co. 8 Phil. 345. But when private property is demanded by a corporation under the power of emi- nent domain, based upon an alleged prospective increase of its business, which will require increased accommodations, it should be established, beyond reasonable doubt, that such increase will occur. Opinions on this subject, based upon conjecture and the execution of collateral enterprises not yet undertaken, should have but little weight. Rens. & Sar. R. R. Co. » Davis, 43 N. Y. 137. 294 SPECIAL POWERS OF CORPORATIONS. exact nature of those powers possessed by corpora- tions.* This question will have to be decided by an examination of the clauses often expressed in crabbed and obscure language of acts of parliament and the like, and it need scarcely be said that judges of the highest eminence not unseldom differ widely in their in- terpretation of such instruments.t Thus where the de- fendants, who certainly had power to take the plaintifi’s land for the purpose of building thereon a market house, were about to take it to erect on it a covered building in addition to the market house, the master of the rolls restrained them from taking it for this latter purpose, saying: “I am satisfied that upon the construe- tion of this act of parliament, it does not authorize that which the company are about to do.”* But on appeal the Lords Justices dissolved the injunction, holding that the company were proceeding within their powers? Assuming, however, that no doubt exists as to the powers, general and special, with which a corporation is endowed, and that it is both keeping within its authori- zation .and acting bona fide, the court will not interfere with its operation. It will be deemed the best judge, not only of what is most conducive to its own interest,. but also of what is proper and fitting as regards third > Richards v, Scarborough Market 723 L. J. Ch, 115, Company, 23 L, J. Ch, 110. * As to conflicting rights, where both corporations claim under like legislative authority; see In re Kerr, 42 Barb. 119; Waterbury 2. R. R. Co. 54 Barb. 388; Morris & Essex R. R. Co. ». Blair, 1 Stock. 685; Erie R. R. Co. ». Del. Lack. & West. R. R. Co. 6 C. E. Green, 288; Penn. R. R. Co. 0. N.Y. & L. B. R. R, Oo. 8 C. EB. Green, 157; Morris & Essex R. R. Co. v. Central R. R. Co. 2 Vroom, 205. + As to construction of charters, see note to page 68; Childs ». Cen-- tral R. R. Co. 4 Vroom, 328. . THE USER OF SPECIAL POWERS. 295° parties, and it will be left unchecked to take or not to take lands, d&c.1 * As to the time within which works have to be car- ried out—in most, if not all acts conferring compulsory powers, a time is fixed for the execution of those pow- ers. Within such period the company may exercise their option of taking lands, &c.,? but not afterwards— the time and the powers expire together. If however, before this period has elapsed they have signified their intention to exercise their powers, they may afterwards continue and complete the works thereby entailed upon them, unless some period be stated before the expiration of which the said works are to be finished,’ or unless they have expressly or impliedly abandoned their inten- tion.* + 1 Richards v. Scarborough Market Company, ubi supra; Beardmer v. Lon- don and Northwestern Railway Com- pany, 1 Mac. & G. 112; 18 L. J. Ch. 432; Cother v. Midland Railway Co. 2 Phil. 469; Stockton dc. Railway Com- pany v. Brown, 9 H. Lds, 246; Compare Att. Gen. v, Ely &e. Railway Company, L. R. 4 Ch. 194; and especially Flower v. London, Brighton, and South Coast Railway Company, 2 Dr, & Sm. 330. Company, 28 Beav. 109; and see Sadd v. Maldon &c. Railway Company, 6 Ex. 148; 20 L. J. Ex. 102; and Richmond v. North London Railway Company, L. R. 3 Ch, 679, ® Sparrow v. Oxford dc. Railway Company, 9 Hare, 436. * Hedges v. Metropolitan Railway Company, wbi supra; Yestalyfera Iron Company v. Neath and Brecon Railway Company, L. R. 17 Eq, 142. * Hedges v, Metropolitan Railway * “ While courts will not allow railroad corporations to avail themselves: of the statutory grant of power, to take lands in invitum, by taking that which they do not require for a bona fide purpose, sanctioned by the act. of the legislature, when really required in good faith for the purposes of the act, they will not interfere to prevent the taking.” InreN. Y. & H. R. R. Co. 46 N. Y. 546. Where there is a difference in the feasibility of routes between designated points, some reasonable discretion must be al- lowed to the corporation in the selection of its location. Newcastle & Richmond R. R. Co. v, Peru & Indianapolis R. R. Co. 3 Ind. 464. Be- fore actual condemnation, a company may abandon proceedings, and change its route. N. Mo. R. R. Co. v. Lackland, 21 Mo. 515; Bensley o. Mountain Lake Co. 13 Cal. 306. + The power of a corporation to take the land of individuals, is de~ termined by the expiration of the time limited for its exercise. More- 296 SPECIAL POWERS OF CORPORATIONS. The doctrines set forth above apply to private per: sons as to corporations and public companies. The only difference in the application of the doctrines arises from the difference in the powers and capacities of the one and the other. A corporation is created for definite purposes; an ordinary individual may direct his atten- tion to any object he pleases,* but the case is altered with respect to special authority given him, whether by express words or by necessary implication, for par- ticular purposes. Thus, where the owners of cotton mills on the banks of a canal, were authorized by the act of parliament under which the canal was made to over, as a rule, this power, when once exercised, is exhausted. Although a railroad company may use some discretion in constructing its road, it cannot, after the road is actually located, make a reiocation or abandon a route once adopted, for a more eligible one, or use this power for the pur- pose of making an extension. Peavey ». Calais R. R. Co. 30 Me. 498; Morris & Essex R. R. Co. 2. Central R. BR. Co. 2 Vroom, 205; Moorehead o. Little Miami R. R. Co. 17 Ohio, 340; Bruning »v. N. O. C. & B. Co. 12 La. An. 541. It is, however, held, in Virsinta& Truckee. R. R. Co. ». Love- joy, 8 Nev. 100, that the fact that a railroad has been completed according to the surveys and maps originally filed, does not prevent it from con- demning other land which may be necessary and proper for its purposes. And under a charter very broad in its terms, it is held in Hx parte S.C. R. R. Co, 2 Rich. Law, 484, and in 8. C. R. R. Co. 0. Blake, 9 Rich. Law, 228, that the corporation can change its location as convenience and in- terest may require. In regard to the exercise of special power for purposes merely inci- dental to the general business, and in respect to those things, the need for which is a continuing one, and one continually changing, such as making side tracks, workshops, taking gravel, &c., from the roadway for the purpose of leveling, and the like, it seems that the completion of the general work is not a limit to such exercise. See Brainard v. Clapp, 10 Cush. 6; Toledo & Wabash R. R. Co. v. Daniels, 16 Ohio St. 390; Chicago, Burl. & Q. R. R. Co. v. Wilson, 17 Ill. 128. Title to land oc- cupied in the construction of a railroad, may be acquired at any time when there is no limitation in the ehanten Coster vo. N. J. R. RB. Co. 4 Zab. 730. * As to whether legislative grant of franchises is necessary, see ante page 278, note. THE USER OF SPECIAL POWERS. 297 ‘draw water from the canal, “for the sole purpose of condensing the steam used for working any steam en- gines” erected in those mills, they were restrained from drawing off the water of the canal for any other pur- pose." It was at one time supposed in England, as it seems to have been thought in Scotland, that permissive pow- ers given by an act of parliament to a company were obligatory upon them. The case of Philip v. Edin- burgh &e. Railway Company,? in Scotland, and that of Reg. v. York and North Midland Railway Company,’ in 1852, in England so decided. The latter case, how- ever, was reversed in 1853 in the Exchequer Chamber, and the former in the House of Lords, in 1857; and there can now be no doubt that corporations will be left free to put permissive powers into action or not, as may seem to them best to advance their own interests.* Rochdale Canal Company ». King, *1E. & B, 178; 22 L. J. QB. 41; 2 Sim. N. S, 78. on appeal, 1 E. & B, 858; 22 L. J. Q. * On appeal, 2 Macq. 514. B, 225. * Although it may be true, in the case of municipal corporations, that where a statute confers a power upon a corporation to be exercised for the public good, the exercise of the power is not merely discretionary but imperative, and the words ‘‘ power ” and “ authority " may be construed as ‘“duty ’ and “obligation ” (as to which see Dillon on Mun. Corps. § 62; Coms. of Public Schools v. Coms. of County, 20 Md. 449; Goodrich ». City of Chicago, 20 Ill, 445), yet in cases of private corporations, it is optional with the company, whether it will exercise the powers bestowed. or undertake the work; and, being so, the grant and acceptance of a rail- road franchise cannot properly be construed as a contract between the State and the corporation, binding the latter to construct and maintain the railroad for the public benefit. The corporation may never enter upon the construction of.the proposed road. The law scems to contemplate such a state of things; and provides that in the event of non-user of the corporate privileges, or a non-completion of the road within a limited period, such corporate privileges shall cease. It follows that the State can- not maintain an action, or a court of equity compel its exercise of the rights and privileges conferred on it. People v. Alb. & Vt. R. R, Co. 24 298 SPECIAL POWERS OF CORPORATIONS. It should also be observed that special powers vested in any body for the express purpose of carrying out some special object will not be overriden by mere general pow- ers given in a subsequent act, upon the maxim that “generalia specialibus non derogant.”** Tl—It seems that a wider and more liberal con- struction will be put upon the powers vested in bodies such as local government boards, munic- ipal corporations, and sewage commissioners, whose duties are the accomplishment of public improvements (sed guere).t+ It is not unfrequently asserted, and asserted without positive contradiction, that the strictness of the principle now in statement is, or ought to be, sometimes modified —that powers given for the public benefit must be in- terpreted liberally, and persons intrusted with the ex- ercise of them allowed very considerable discretion. It is argued that there is a great distinction between acts granting compulsory powers to joint stock companies in . \ * London and Blackwall Railway Ch. 164; Trustees of the Birkenhead Company v. Board of Works for Lime- Docks v, Birkenhead Dock Company, 23 house District, 8 K.& J. 128; 26 L.J. L.J. Ch. 457. N. Y. 261; see remarks of Lord Wensleydale in 1 Ellis & Bl. 858, and in 3 McQueen, 414; see post, p. 317, note. As to forfeiture for non-user, see Angell & Ames, § 774, * See Gowen v. Penobscot R. R. Co. 44 Me. 140; Eaton v. European & N, A. R. BR. Co. 59 Me. 520; Visscher v. Hudson R. R. R. Oo. 15 Barb. 37; Clarkson v. Same, 12 N. Y. 804; Staats». Same, 8 Keyes, 196; North. Mo. R. R. Co. v. Gott, 25 Mo, 540; McRea 2. Port Royal R. R. Co. 38. C. N. 8. 381. + When the power of eminent domain is delegated to a municipal or other corporation, its exercise is subject to the inflexible rule, that the power must be strictly pursued. State o. Jersey City, 1 Dutch. 309; Dil- lon on Munic. Corp. § 469. THE USER OF SPECIAL POWERS. 299 respect of what are really private speculations, and acts empowering and requiring corporate bodies, having no private interests to promote, to carry into effect public improvements.* In the latter case, in order to avoid * The right of eminent domain, extending over all the property in the State, is limited simply by the boundaries of the sovereignty. It is not affected by the character of the owner, whether an individual, a municipal corporation, a private corporation, or even the Federal government. Prop- erty condemned by a corporation is held by no higher or better right than property acquired by purchase, and is no more free from the subsequent. operation of the like right of eminent domain. U. 8. ». Bridge Co. 6 McLean, 517; Barber v. Andover, 8 N. H. 398; Newburyport T. Co. ». Eastern R. R. Co. 23 Pick. 8326; Boston Water-Power Co. v. B. & W. R. R. Co. Ib. 360; Inhab. of Springfield ». Conn. R. R. Co. 4 Cush. 63; Commonwealth v. Erie & N. E. R. R. Co. 27 Peon. 839; Balt. & Havre de Grace T. Co. » Union R. R. Co. 35 Md. 224. Where lands are re- served or held by the general government for specified and national purposes, it may be admitted that a State cannot construct an ease- ment which shall, in any degree, affect such purposes injuriously. No one can question the right of the Federal government to select sites for its forts, arsenals, and other public buildings. But over that land which the Federal government holds only as general proprietor, the right of eminent domain may be exercised, as over the property of individuals. U. §. ». R. R. Bridge Co. 6 McLean, 517. But to enable a corporation to take property which has already been devoted to another public use, authority must be shown, either express or based on necessary implication. Thus, in Jn re Boston & Albany R. R. Co. 53 N. Y. 574, it is said, that this authority ‘‘must be expressly conferred ; that is, in direct terms or by necessary implication; and the implication does not arise, if the powers expressly conferred can, by reasonable intend- ment, be exercised without the appropriation of property already actually held and used for another public use.” So, too, in Inhab. of Springfield », Conn. R. R. R. Co, 4 Cush, 63, the court say: “But when it is the in- tention of the legislature to grant a power to take land already appropri- ated to another public use, such intention must be shown by express words or by necessary implication. There may be such a necessary impli- cation. Every grant of power is intended to be efficacious and beneficial, and to accomplish its declared object; and carries with it such incidental powers as are requisite to its exercise.” Instances are given in which authority to occupy a turnpike or highway would be necessarily implied, as in case of authority to make a railroad through a narrow gorge already occupied by a turnpike. But an act of the legislature, authorizing the construction of a railroad between certain termini, does not prima facie 300 SPECIAL POWERS OF CORPORATIONS. taxing the public, there may well be permission granted to a corporation to take more land than is actually nec. confer power to lay out the road on or along an existing public highway. In State ». Montclair R. R. Co. 6 Vroom, 328, on the subject of taking the highway for railroad purposes, the court say: “The presumption is in favor of the public and against the necessity of taking the highway lon- gitudinally by a private corporation, although for a public purpose, such asarailroad. To authorize it, the legislature should either so indicate it in the language of the act, by express words or necessary construction, or it should result as a necessity, in order to accomplish the object intended in the grant of the franchises;” and the presumption is still stronger against the necessity of taking a reservoir belonging to the public. See also Troy . Cheshire R. R. Co. 3 Foster, 88; Northern R. R. Co. ». Concord & Clare- mont R. R. Co. 27N. H. 182; Boston & Worcester R. R. Co. ». Old Colony R. R. Co. 12 Cush. 605; Lowell & Lawrence R. R. Co. v. Boston & L. R. R. Co. 7 Gray, 27; Eastern R. R. Co. v. Boston & Me. R. R. Co. 111 Mass. 125; N. Y. & Hous. R. R. Co. v. Boston, H. & E. R. RB. Co. 36 Conn. 196; Brooklyn Cent. R. R. Co. v. Brooklyn City R. R. Co. 33 Barb. 420; N. Y. & Harlem R. R. Co. v. Forty-second street R. R. Co. 50 Barb. 309; in re Central R. R. Co. 1 N. Y. Sup. Ct. (T. & C.) 419; Starr o. Cam. & Atl. R. R. Co. 4 Zab. 592; Morris & Ess. R. R. Co. ». Newark, 2 Stockt, 352; Same 2. Central R. R. Co. 2 Vroom, 206; Inhab. of Greenwich v. Easton & Amboy R. R. Co. 9 C. E. Green, 217; s.c. 10 C. BE. Green, 565; Cleve- land & P. R. R. Co. v. Speer, 56 Penn. St. 325; Newcastle & Rich. R. R. Co. » Peru & Ind. R. R. Co, 8 Ind. 464. The general railroad law of California has not given to any company the right to condemn or use any lands owned or previously located and appropriated by another rail- road company, except where it may be necessary for gne road to cross another. Contra Costa R. R. Co. ». Moss, 23 Cal. 324. The law in Oregon is similar. See Oregon Cascade Co. ». Baily, 3 Or. 164. One railroad company may acquire, by condemnation, the right to use the lands of another company, which the latter company holds by lease, if it appear that such lands are not eligible or necessary for any purpose of the latter company, but are indispensable to the former; and especially, if it appear that the latter company had acquired a lease of the lands, to ob- struct the former company in the enjoyment of its franchises, Peoria, P. & J. R. R. Co. o. Peoria & 8. R. R. Co. (Sup. Ct. Ill. 1873) 1 Cent. L, J. 45. There is a class of cases which naturally suggests itself in this con- nection, though not properly coming within the subject of eminent do- main. They arise when the legislature attempts to transfer that which is public property from one public use to another. When property is put THE USER OF SPECIAL POWERS. 801 essary for the purpose of making certain specified im- ‘provements, and by a sale of the superfluous land, ren- into the hands of a municipal corporation, it is not out of the control of the State; but the corporation occupies the position of trustee for the public, amenable to the orders of the cestui gue trust, as expressed by the legislature; and there is no relation of contract, as in the case of private corporations. E, Hartford v. Hartford Bridge Co. 10 How. 511. The property is public property, and therefore, no exercise of eminent do- main is needed to transfer it to a private corporation, as a railroad com- pany. The public gives away its own, and no compensation is necessary. It is accordingly held, in People o. Kerr, 27 N. Y. 188, that the fee of streets being acquired, by the right of eminent domain, by the city of New Yofk, and being held in trust for the public, such property is under the unqualified control of the legislature, and the appropriation by it to the use of a horse railroad is not a taking of private property, so as to re- quire compensation to the city to render it constitutional. See also In re Boston & Albany R. R. Co. 58 N. Y. 574; City of Clinton o. Cedar Rapids & Mo. R. R. R. Co, 24 Ia. 455; Phila. & Trenton R. R. Co. 6 Whart. 43. Similarly, land belonging to the State, and devoted to the use of an asylum under State control, may be taken under authority to take public land for a railroad, without compensation. Ind. Cent. R. R. Co. ». State, 3 Ind. 421. ‘ In Stevens v. Paterson & Newark R. R. Co. 5 Vroom, 582, the corpo- ration had authority ‘‘to construct and run their railroad along the Pas- saic river,” and claimed that this gave them the right to lay their road along the river below high water, as such lands belonged to the State. Depue, J., whose decision against the company was affirmed on appeal, held, that ‘‘to give to a legislative grant the effect of a conveyance to private uses of land, the proprietorship of which isin the State, it must clearly appear that the legislature intended to make a grant of that char- acter and description, or that the use of the public property is necessary to the enjoyment of the franchises which are granted. In this case no consideration was received by the State for the alienation of public do- main, nor does there appear to have been any intent by the legislature to aid the defendants in their enterprise, by donating public property to their use. The course of legislation for the last few years shows the legislative appreciation of the great value of the lands under water which belong to the State. An intent to alienate any portion of them without any consid- eration will not, in the absence of a formal grant, in express words, be implied, except upon the clearest necessity to effectuate the purpose of the legislature in investing the grantee with public franchises.” Many cases 302 SPECIAL POWERS OF CORPORATIONS. dered more valuable by the improvements themselves, to raise funds for the execution of a great public work.* We may admit the full force of this argument, but it only amounts to this, that bodies intrusted with powers for the public benefit will, like persons having analo- gous powers for their own advantage, under ordinary circumstances, be deemed the proper and only judges of the best method of utilizing such powers for the ends designed. We may, perhaps, also admit that it is not “the province of a court of equity to interfere to compel de- fendants who have done something ultra vires, but dona fide, with a view of accommodating the public, to do something other than they have done which would be intra vires, and therefore legal, but would be more in- convenient to the public or the persons complaining than that which exists.”’+ But to admit this would be to do little more than recognize the discretion which the Court of Chancery reserves to itself of refusing to interfere under circumstances where its interference would be productive of far more harm than good. Per Romilly, M. R., in Att. Gen. v. Ely de. Railway Company, L. R. 6 Eq. . 108, 111 e m 2 . are cited as supporting this position. But see Penn. R. R. Co. v. N. ¥. & Long Branch R. R. Co. 8 C.E. Green, 157. See, as to the use of highways for railroads, note to page 86 ante. See also Savannah, Albany & Gulf R. R. Co. v. Shields, 33 Ga. 601; Ingraham ». Chic. D. & M. R. R. Co, 34 Ia. 249; Lexington & Ohio R. R. Co. ». Applegate, 8 Dana, 289. *See Brooklyn Park Com’rs », Armstrong, 3 Lans. 429; s.c. 45 N. Y. 284, t Injunction will not be granted, where, by interrupting traffic carried on over a railroad, it would not only cause great injury to the defend- ants, but might be of serious detriment to the public, without correspond- ing advantage to anyone. Torrey. C. & A. R. RB. Co. 8C. E. Green, 298; Hackensack Impr. Com. ». N. J. Midland R. R. Co. 7 C. E. Green, 94; Erie R. R. Co. ». Del, Lack. & West. R. R. Co. 6 C. E. Green, 283. THE USER OF SPECIAL POWERS. 303 Whether the dictum just quoted of Lord Romilly is in the way he stated it correct and good law may be doubted, but in so far as it is correct it is simply a re- sult of the court’s discretion. Moreover, whether it be correct or not, a corporation, or other person, will not be permitted to avoid specific performance by alleging, as a defense to a bill, that the public would be incon- venienced by a decree being made against him.’ The real existence of this qualification is, however, a matter of doubt. It has not been made the ratio of any de- cision, and, indeed, a logical absurdity would arise by laying down that corporations and other like bodies have certain capacities and powers only, and then say- ing that the same powers given for the same specific purposes are to receive a construction varying with the nature of the bodies to which they are given. A rail- way company, a municipal corporation, and a hospital, are each authorized by act of parliament to pull down certain houses to make room for, say, a station, a new street, an additional wing, respectively. It turns out that in each case only some of the houses are required, and each of the bodies mentioned thereupon proposes to turn the houses which it does not require to some other purpose more beneficial to itself than the return- ing them to their original owners. These owners, how- ever, apply for an injunction. Will it be held that the court will deal differently with each case, and will re- strain the railway company though it will not either of the others ? And if private rights come into collision with pub- lic interests it is the latter, not the former, which will have to give way. This oftenest happens in questions ? Raphael v. Thames Valley Railway Bradford Navigation Company, 6 B, & Company, L. R. 2 Ch. 147; see Reg. v. 8. 631. 304 SPECIAL POWERS OF CORPORATIONS. of sewage * and other nuisances committed, necessarily it may be, by bodies existing for the express purpose of carrying out works for the general well-being. The lea of necessity, however, will be of no avail; the court will not regard the advantage of the public and exact a sacrifice from the individual, but it will, upon the application of the latter, restrain the doing of the acts—e. g., the fouling of streams—which constitute an invasion of his rights.’ + It has been, on many occasions, most emphatically decided that private persons must be protected, conse- quently injunctions will in their favor be granted, al- though compliance therewith be practically impossible, without compelling the corporation to infringe an act of parliament, and though a sequestration to compel ) Att. Gen. *, Mayor of Kingston, 165; compare Biddulph v. St. George’s 13 W. R. 888; Goldsmid v, Tunbridge Vestry, 33 L. J. Ch. 411. Wells Improvement Com’rs, L. R. 1 Eq. * See Dillon on Munic. Corp. §§ 801, 802; Rochester White Lead.Co. v. Rochester, 3 Coms. 464; Columbus ». Woolen Co. 33 Ind. 485. + The statements in the text, that, if private rights come into collision with public interests, the latter, not the former, must give way, and that the plea of necessity will be of no avail, are undoubtedly correct, if it be meant that such necessity is no justification for the commission of a nuiwance (Dillon on Munic. Corp. § 780; Eastman #. Meredith, 86 N. H. 284; Weet v. Brockport, 16 N. Y. 161; Weeks v. Milwaukee, 10 Wis. 258), and that public bodies have no more right than private bodies or indi- viduals, to interfere with private property without just compensation. But the statement is erroneous, if applied to the doctrine of eminent do- main. For, as is said by Hogeboom, J., in People », Mayor of N, Y. 82 Barb. 102, “ Property is subject to be taken under the right of eminent domain. And when it is in this way required for public purposes, the right of the property holder must yield to the paramount right of the public. Title to property is always held upon the implied condition, that it must be surrendered to the government, either in whole or in part, when the public necessities, evidenced according to the established forms of law, demand.” See, also, Patten v. Northern Cent. R. R. Co. - Penn. St. 426. TRANSFER OF, 805 compliance be ineffectual and injurious to the pub- lic,’ * SECTION IL. THE TRANSFER BY ONE CORPORATION TO ANOTHER OF ITS SPECIAL POWERS AND PRIVILEGES. III. Corporations may not transfer to others their own peculiar powers and privileges.+ Such a transfer, whether permanently and absolutely or only for a definite period, is, it has been repeatedly ? Spokes v. Banbury Board of Health, L. R. 1 Eq. 42. * The only protection which is afforded to private persons, is that property shall only be taken for public uses, and upon just compensation. Whatever private right stands in the way of the public necessity, the pub- lic health, the public safety, or the public convenience, must give way, For the paramount condition upon which all property is holden, is that, when properly demanded by the rightful authority of the State, it must be yielded up for the public good. See cases cited ante, and Russell 2. » Mayor, 2 Denio, 461; American Print Works ». Lawrence, 1 Zab. 248; Hale v, Lawrence, J 6. 714; Miller v. Craig, 3 Stockt. 175; Dingley ». Boston, 10 Mass. 544. + See note to page 103, and arguments of counsel and opinion in Black v. Del. & Rar. Canal Co. 7 C. E. Green, 130. A lease by one railroad company of its railroad for a hundred years to another, does not vest in the lessee any power to exercise the right of eminent domain, but this power remains in the lessor, and the legislature may deal with the lessor exclusively in amending its charter. Mayor of Worcester v. Norwich & W. R.R. Co. 109 Mass. 103. A railroad cannot, by leasing its corporate property and franchises, relieve itself from liability to the public for injuries sustained and damages resulting from breach of contract or duty by the lessee. R. R. Co. o. Winans, 17 How. 30; Whitney >. Atlantic & St. L. R. R. Co. 44 Me. 362; Wyman »v. Pen. & Ken. R. R. Co. 46 Me. 162; see Mahony 2 Atlantic & St. Law. R. R. Co.°63 Me. 68; Barter v. Wheeler, 49 N. H. 9; Nelson o. Vt. & Can. R. R. Co, 26 Vt. 717; Langley o. Boston & Maine R. R. Co. 10 Gray, 103; McCluer v. Man. & Law. R. R. Co. 13 Gray, 124; Ohio & Miss. R. R. Co. ». Dunbar, 20 Ill. 628; see Pitts. C. & St. L. R. R. Co. v. Kain, 35 Ind. 291; Scott » Gr. Tr. R. R. Co. 51 N. Y. 655; Wylde ». Northern R. R. 20 306 SPECIAL POWERS OF CORPORATIONS. decided, in the absence of statutable powers, illegal, Thus, Turner, V. C., in Great Northern Railway Com- pany v. Eastern Counties Railway Company,’ observed, with reference to this question: “It is impossible to read the agreement between the plaintiffs and the East Anglian Railway Company, without being satisfied that it amounts to an entire delegation to the plaintiffs of all the powers conferred by parliament upon the East Anglian Railway Company. All the stock of that company is to be taken by the plaintiffs, without any obligation to restore it. The plaintiffs are to manage and regulate the railways of the East Anglian Railway Company, for the purposes of the agreement; and al- though in form it is declared that the instrument shall not operate as a lease or agreement, it amounts, in sub- stance, either to one or the other. It is framed in total disregard of the obligations and duties which attach to these companies, and is an attempt to carry into effect, without the intervention of parliament, what cannot lawfully be done except by parliament, in the exercise of its discretion, with reference to the interest of the publi. * * * TI think it is the duty of this court to withhold its interference, when called upon to act in aid of agreements of such a nature.” He accordingly refused an injunction prayed for by the plaintiffs, to re- strain the defendants from obstructing the engines, &c., of the former, in passing over the junction of the East 1911. J, Ch. 837; Winch v, Birkenhead &c. Railway Company, 7 Rail. Cas, 334. Co. 53 N. Y. 156. In Noll o, Dubuque, B. & M. R. R. Co. 82 Ia. 66, it is held that, as the right of way for a railroad, acquired under the general right of way act, is taken by the State for a public use, it is competent for the legislature to provide for its transfer to another company on fail- ure of the first, upon compensation made to the latter. TRANSFER OF. 807 Anglian Railway with the Eastern Counties Railway, near Wisbeach. In Beman v. Rufford; a bill was filed by certain Shareholders in the Oxford, Worcester and Wolver- hampton Railway Company, to restrain the directors from applying the funds of the company in carrying out an agreement entered into by the directors with the London and Northwestern Railway Company, under which a narrow gauge rail was to be Jaid down, and the line, when completed, to be worked by the London and Northwestern Railway Company. ‘The court was of opinion that the agreement was invalid, for, although the directors had power under their act of parliament to lay down narrow gauge rails, they had no power to allow the line to be worked by another company. Lord Cranworth, V. C., said: “What they (7. e the Oxford, Worcester and Wolverhampton Railway Com- pany) are to do is this: the whole concern, without incumbrance, when completed, is to be worked by the London and Northwestern Railway Company, who shall have perfect control and exercise all the rights of the Oxford, Worcester and Wolverhampton Railway Com- pany. Now, I need not go farther into the case than to say, in my opinion that is delegating the functions which the legislature has given them to other parties, which they have no possible right to do.” It is not unfrequently. very difficult to determine whether a certain agreement is nothing more than a traffic arrangement, or whether it amounts to a transfer 14 Sim. N. S. 550; 20 L. J. Ch. London, Brighton and South Coast Rail- 587; London and Southwestern Rail- way Company v. London and South- way Company v. Southeastern Railway western Railway Company, 28 L. J. Ch. Company, 8 Ex. 584; 22 L. J. Ex. 198; 521; and see also Rhymney Railway West London Railway Company v.Lon- Company v. Taff Vale Railway Com- don and Northwestern Railway Com- pany, 30 L, J. Ch. 482. pany, 11 C, B. 327; 22 L. J.C. P. 117; 308 SPECIAL POWERS OF CORPORATIONS. of special powers. Trading corporations, it need scarcely be repeated, may make all such bona fide business ar- rangements as will tend to their own emolument, and at the same time are not contrary to public policy. They may covenant to use or not to use their powers in cer-. tain modes and under certain restrictions; but the line must be drawn somewhere, and it is drawn at the point where such covenants expressly, or by implication, amount to the abandonment or the transfer of powers. The best illustration of this part of our subject, and of the difficulties involved therein, is afforded by the series of cases reported as the Shrewsbury and Birmingham Railway Company v. London and Northwestern and Shropshire Union Railways and Canal Company. These cases will be dealt with at some length in the next chapter; but in so far as they more particularly con- cern the present subject (7. ¢, the user and transfer of special powers), reference may be made to the decision of the Lords Justices... The facts involved in the par- ticular case which came before the Lords Justices were these: The plaintiffs, viz., the Shrewsbury Company, had withdrawn their opposition to a bill brought into parliament by the London and Northwestern Railway Company, to authorize a lease to them of the Shropshire Union Railway, on an agreement that the profits arising from the Shrewsbury and Shropshire lines should be divided between the plaintiffs and defendants in stated proportions. The act passed, and the agreement was re-executed under seal. The London and Northwestern Railway Company, however, did not carry out their contract. Thereupon the Shrewsbury Company filed a. bill for the specific performance of the agreement, but the vice chancellor dismissed the bill. ‘4D.G.M. &G. 115; 22 L, J, Ch, 682. TRANSFER OF. 309 They appealed against this dismissal, and the Lords Justices held, that the directors of the London and Northwestern Railway Company were trustees for their shareholders, and that their entering into such a con- tract was a breach of trust as between them, and the shareholders, since it created a partnership between the London and Northwestern Railway Company and the Shrewsbury Company, determinable only at the option of the latter, which varied the rights of the London and Northwestern Company’s shareholders in the gross receipts of their business, and that the Shrewsbury Company knowingly participated in such breach of trust.* IV. Corporations may sometimes be enabled, either by authority in their constating instruments or by general statutes, to enter into contracts regu- lating their business, and otherwise to deal with their powers in a manner which would be abso- lutely ultra vires without such provisions, Few words need be added to this statement. Mani- --festly, the supreme power which has endowed corpora- tions with peculiar privileges, may endow them with the further privilege of using, or even misusing, those priv- ileges in any way that pleases them. This has been done with certain classes of corporations by general acts. Thus, 26 & 27 Vict. c. 92, by sections 22 to 29 * Although corporations cannot, without the consent of the legisla- ‘ture, lease their corporate works and property, with their franchises, to another corporation, yet, upon such legislative authority being granted, and upon provision being made for compensation for the shares of such -of the stockholders as dissent, such lease will be valid. In the exercise of the right of eminent domain, the legislature may authorize shares in corporations and. corporate franchises to be taken for public uses upon just” -compensation. Black ». Del. & Rar. Canal Co. 9 C. E. Green, 455. 310 SPECIAL POWERS OF CORPORATIONS. enables railway companies, with the sanction of three- fifths of their shareholders, and the approval of the board of trade, and now of the railway commission, to enter into working agreements of the kind indicated. The railway and canal traffic act, 1854, contains various compulsory clauses, viz.: In section 2 as to through traffic, and in sections 2 and 38 as to affording equal fa- cilities to all parties! The jurisdiction to enforce these clauses was given to the Court of Common Pleas; and it is now, by 36 & 387 Vict. c. 48, vested in the railway commission. So the railways clauses consolidation act (8 & 9 Vict. c. 20, 8. 87) enables railway companies to. make certain contracts of this description, and 8 & 9 Vict. c. 42,’ contains somewhat similar enactments with regard to canal companies, providing that they may, subject to certain conditions, lease their tolls, &c. So, in many special acts, provisions have been inserted giv-» ing similar powers. In all such cases all the regulations and formalities imposed by the statutes as to conditions. precedent must be duly observed. This well appears from the case of the Kent Coast Railway Company ».. London, Chatham, and Dover Railway Company.’ An, act had Gone one railway company to grant, and another to accept, a lease of a railway upon certain terms, provided that the power to lease should not arise till the board of trade had certified, &c. Heads of an agreement were subsequently entered into, and duly sanctioned by majorities of three-fifths at meetings of the two companies, but without the certificate of the board. of trade first obtained, and were acted upon for several years, but no formal lease was ever executed. The heads of the agreement were also invalid, as pro- ? See also 31 d& 32 Vict. ¢, 119, 5. 16. *L, R. 8 Ch, 656, 2See also 21 & 22 Vict. c. "5, 8. 8; and 23 & 24 Vict. c. 41. ” TRANSFER OF. 811 viding for payment of the rent out of profits not so applicable; held, that the arrangement was not rati- fied by references to it in subsequent local and per- sonal acts of parliament, not expressing any direct in- tention to confirm it, nor had it been rendered valid by acquiescence.* V. Corporations may decline to use special powers and rights conferred upon them, and may de; cline to complete or carry on the whole of their undertakings, semble.+ Somewhat allied to the transfer is the abandonment of special powers and privileges. Questions of this description, like those relating to the transfer, have generally arisen in connection with railway companies. These companies are incorporated for the specific pur- pose of constructing a line between two given termini. Their authorities are conferred upon them with distinct reference to the accomplishment of such object, and the * As to legislative recognition or ratification, see cases cited in note, p. 21. + See cases cited in notes, pp. 70, 71, 297; Dillon on Munic. Corps. |. §§ 62, 669. A franchise granted to a railroad company can only be legally exercised by the corporation operating its entire road. There is no privilege granted or right obtained to operate a part thereof, and if it should undertake so to do it is exercising a franchise without legal sanc- tion. People v. Albany & Vt. R. R. Co. 24 N. Y. 261. A-sale and con- veyance by a turnpike company of a part of its road to a municipal cor- poration, and neglect thereafter to repair that portion, is a willful, de- liberate act in violation of its plain duty, which warrants a judicial de- cree of forfeiture of its charter, State ». Pawtuxet Turnp. Co. 8 R. I. 182, 521. See Supervisors v. United States, 4 Wall. 435; State x. H. & N. H. R. R. Co. 29 Conn. 538; Lauman v. Lebanon Valley R. R. Co. 20 Penn. St. 42; Canal Co. v. R. R. Co. 4 G. & J. 1; Buck Mountain Coai Co. ». Lehigh Coal Co. 50 Penn. St. 91; Louisville & Nash. R. R. Co. ». Coving- ton, 2 Bush (Ky.) 526; City of Columbus ». Col. & Shelby R. R. Co. 37 Ind. 294. , 312 SPECIAL POWERS OF CORPORATIONS. whole of it. Persons become shareholders and sub. scribe to its funds, with a view to the attainment of the whole of such object, and they may justly complain of and refuse to acquiesce in any proposal to complete a portion only of the total project. Not unseldom, how- ever, before the railway is finished, circumstances arise which may make it desirable to modify the original scheme, by abandoning a portion of the undertaking _or the like. It has been determined that such proceed. ings are, unless provided for in the act, ultra vires, and that this will be restrained at the instance of any shareholder or creditor. “The company is not like a partnership for general trading—a partnership in which one portion of the business may be encouraged and another discouraged, or abandoned, according to the contingencies of trade, and in which there is a general authority to use the capital to the best advantage; but it is a partnership for a public purpose, for effecting a work which tt is a duty to complete, and for which alone the capital is advanced in shares, or authorized to be raised. The obligation to complete the work appears to be coextensive with the authority to make it. Neither this act nor any of these acts contains authority to substitute a less work or part for the whole.” This was the decision of Lord Langdale, M. R., in Cohen ». Wilkinson,’ in which case the directors of a company "12 Beay. 125; 18 L. J. Ch. 878, Birkenhead dc. Railway Company, 2 411; Reg. v. Eastern Counties Railway Mac, & G. 160; 20 L. J. Ch. 446, where Company, 8 L. J. Q. B, 340; Bagshaw plaintiff was debarred by his laches v. Rast Union Railway Company, 2 Mac, bovine remained passive eighteen & G, 889; 18 L, J. Ch, 198; Logan v. months.* Courtown, 20 L. J. Ch. 347; Graham », * As to acquiescence, it is held that in public works, the shortest period of clear acquiescence, so as fairly to lead the company constructing them to infer that the party intends to waivg any claim, or consents to the work proceeding, will be held to conclude the right to assert the claim ee ef ih TRANSFER OF. 313 who had obtained powers to construct a line from Ep- som to Portsmouth, were restrained, on bill filed by one of the shareholders, from completing it as far as Leather- head only. But there is considerable doubt as to whether this is the law now. In the first place, it is extremely diffi- cult to point out how such a decision could be carried into effect—how such an injunction could be practically worked. The directors could not be compelled to raise the funds, and to do all the other multitudinous opera- tions necessary for completing the work. Even if they were willing, whence is the requisite capital to be ob- tained, supposing that already raised to have been spent ? Moreover, as already seen,’ corporations may, even as between themselves and their members, relinquish some of their objects, and confine their attention to the remainder. They may also put into force or not, as it pleases them, powers which are permissive only, and not obligatory.? This being so, can it be maintained that they are—considering the question merely as one of legal :principle—compellable to do works, and to carry out the entirety of an undertaking for which com- pulsory powers have been given them? That they can- } Re Norwegian Titanic Iron Com- * See ante, p. 297. pany, 35 Beav. 223, ante, p. 71. in any such form as to stop the company in the progress of its enterprise, and especially to stop the running of the road after it has been put in operation, and thus affect the interests or convenience of the public. Bas- set o. Salisbury Mfg. Co. 47 N. H. 426; McAulay v. Western Vt. R. R. Co. 83 Vt. 311; Hentz v. Long Island R. R. Co. 13 Barb, 647; Sherman 2. Mc- Keon, 38 N. Y. 266; compareeJessup ». Loucks, 55 Penn. St. 351; see Fooks v. London & 8. W. Rwy. Co. 1 Sm. & G. 142; Erie R.R. Co. o. D. L. & W. R. R. Co. 6 OC. E. Green, 283; Calkins ». Bloomfield & Roch. Gas Co. 1 N. Y. Supreme Ct. (T. & C.) 541. 314 SPECIAL POWERS OF CORPORATIONS. not be so compelled by information by the attorney general on behalf of the public, was expressly decided by Shadwell, V. C., and by the lord chancellor on ap- peal in Att. Gen. v, Birmingham and Oxford Junction Railway Company.’ The remedy, if any, the vice chancellor said, was by mandamus, but the Exchequer Chamber has since decided that a mandamus will not be granted under such circumstances.* *4D.G, & S. 490; 3 Mac. & G. 453. *In York & N. Mid. Rwy. Co. ». Reg. 1 El. & BI. 858, in the Ex- chequer Chamber, reversing same case, I>. 178, in Queens Bench, where a portion only of the line was constructed, the decision was put on the ground that the act being enabling, not compulsory, mandamus would not lie. Jervis, C, J., in delivering the unanimous opinion of the Exchequer Chamber, declined to pass on the question whether the exercise of com- pulsory powers might in any case be enforced by mandamus. See opinions of Lord Wensleydale (who was of the court in 1 El. & Bl. 858), in Edin- burgh &. Rw. Co. 2. Philip, 2 McQ. 514, and Scottish 8. E. Rw. Co. ». Stewart, 3 McQ. 382; Rex v. French & Wye Rwy. Co. 2 B. & Ald. 646; Rex v. Brecknock C. Co. 3 A. & E. 217; Reg. v. Eastern Counties Rw. Co. 10 A. & E, 531; Reg. o. Bristol Dock Co. 2 A. G E. N.S. 64; Reg. 2. Bris- tol & BE. Rw. Co. 4 A. & E. N. 8. 162; Reg. 0. R. & H. T. Co, 12 A. GE. N. 8. 448; Reg. ». York, New. & B. Rw. Co. 16 A. & E. N. 8. 886; Reg. v, Ambergate Rw. Co. 17 A. & E. N. 8, 362; 8.c.1 E. & B, 872; Reg. 2. Great Western Rw. Co. 1 E. & B. 253; rev’d Ibid, 874. The law in this country may be thus stated: I. Mandamus will not lie, where there is an adequate remedy at law, by the ordinary modes of procedure. There is a dictum of Bronson, J., in McCulloch v. Mayor, 23 Wend. 458, to the effect that this is not universally true in relation to corpora- tions, but which, when critically examined, does not militate against the Tule as above expressed. See People v. Supervisors of Chenango, 11 N. Y. 578; People ». Green, 1 Hun, 1; Com. v. Rosseter, 2 Binn. 360; Fire- man’s Ins. Co. ». Mayor of Balt. 28 Md. 297; People v. State Ins. Co. 19 Mich. 392. II. Mandamus will le only to enforce a statutory duty, and not the performance of an obligation, or the satisfaction of a liability arising out of contract. State vo. Zanesville Turnpike Co, 16 Ohio St. 308. Il. Before the precise provisions of the legislative act granting the privileges are accepted or acted upon by the corporation, the grant is TRANSFER OF. 315 permissive merely, not obligatory; and, of course, no mandamus will lie —the remedy being forfeiture for non-user. People »v. Albany & Vt. R. R. Co, 24 N.Y, 261. But, after the grant is accepted, the writ will be issued to compel the performance of duties owed to the public. In Treadwell o. Salisbury Co. % Gray, 404, it is said, that corporations may perhaps be compelled to appropriate their property to specific Bur- poses by mandamus or proper process; and in State v. Hart. & N. H.R. R. Co. 29 Conn. 538, a railroad corporation was compelled by mandamus to operate a portion of its road to a station, which it had discontinued, and to carry passengers to a steamboat wharf at such station. Mandamus is a proper remedy to compel a railroad company to de- liver to a particular warehouse or grain elevator, grain consigned thereto in bulk, the warehouse itself being situated upon the line of the respon- dent’s road, with facilities for the delivery*of grain equal to those of other werehouues at which the railway delivers, and the carriage of the grain in bulk being part of the regular business of the road. Chicago & North- western R. R. Co. v, People, 56 Ill. 365; See People v. Chicago & Alton R. R. Co. 55 Il. 95. In People ». Manhattan Gas Co. 45 Barb, 186, it is held, that where a gas-light company have by law the exclusive right and duty of furnishing gas to the public, a mandamus lies, on the relation of an individual whom they refuse to supply, to compel them to do so. In State of Minnesota ». Southern Minnesota R. R. Co. 18 Minn. 40, the court say: ‘‘ Where the charter of a corporation, or the general statute in force, and applicable to the subject, imposes a specific duty either in terms or by fair and reasonable construction and implica- tion, and there is no other specific or adequate remedy, the writ of man- damus will be awarded. But the writ will not be awarded unless the tight sought to be enforced is a complete and perfect legal right, and, of course, the reciprocal obligation is a complete and perfect legal obligation.” In R. R. Com’rs 2. P. & O. OC. R. R. Co. 63 Me. 269, it is held that rail-. road corporations ‘‘ being creatures of law, intrusted with the exercise of sovereign powers to subserve public necessities and uses, are bound to. conduct their affairs in furtherance of the public objects of their creation. ‘It is true’ observes Shaw, C. J.,in Worcester v. Western R. R. Co. 4 Metc. 564, ‘that the real and personal property necessary to the establish- ment and management of the railroad is vested in the corporation, but itis in trust for the public. The company have not the general power of disposal incident to the absolute right of property; they are obliged to use it in a particular manner, and for the accomplishment of a well- defined public object.’ In order to enforce sych use of their franchises, the writ of mandamus has been held to be an appropriate process. * * * his writ lies to compel persons or corporations to do a certain specific act, as being the legal duty of their office, character or situation (A. & A, 694). In State » R. R. Co. 29 Conn. 588, the court say: ‘ All jurists and judges will at once agree that chartered companies are obliged * 316 SPECIAL POWERS OF CORPORATIONS. fairly and fully to carry out the objects for which they were created, and that they can be compelled by mandamus to do so.’ In that case, the court compelled the company to run its cars over its track to a railroad station that it had discontinued. This writ lies to compel a railroad com- pany, bound by act of parliament to set out their deviations‘and make thir compulsory purchases within stated periods, to do those acts within the times limited; also to compel a company to reinstate and lay down again the railway it had taken up, or a water power company to erect and maintain a bridge at its own expense, rendered necessary by extending its trench across the highway, at the suit of the attorney general, where the public interests are involved, or to compel a railroad company to keep railroad crossings in repair, or to remove obstructions to navigation, caused. by the improper manner,in which the road was built. A. & A. 711 & 713; State v. Gorham, 37 Me. 461; State v. N. E. R. R. Co. 9 Pick. 212;” see Rogers Locomotive Works ». Erie R. R. Co, 5 C. E. Green, 879. IV. ‘‘There is some contrariety of opinion in this country, whether private persons may be prosecutors or relators in a mandamus proceeding to enforce a public duty, but the decided weight of authority is in favor of the doctrine. The leading case asserting it is The People ». Collins, 19 Wend. 56, 1837, where the court, after an examination of the English decisions and practice, reaches the conclusion that, in a matter of public right, any citizen of the State may, where mandamus is the proper remedy, be a relator, or enforce the execution of the common law, or an act of the legislature, though it was admitted to be otherwise in cases of private or corporate rights, where the rule or right of the relator to relief must ap- pear.” Dillon, C. J., in U. 8. v. Union Pacific R. R. Co.1 Cent. L. J. 288; citing, also, to the same effect, Hamilton ». State, 3 Ind. 452; Ottawa v. People, 48 Ill. 283; State v. County Judge, 7 Iowa, 186, 202; Td. 390, 397; People v. Halsey, 87 N. Y. 344; 8. c. 58 Barb. 547; State v. Rahway, 4 Vroom, 110; Watts ». Carroll Parish, 11 La. An. 141; Dillon Munic. Corp. § 695, and cases cited; State v. Turnpike Co. 16 Ohio St. 808; contra, People v. University Regents, 4 Mich. 98; Sanger o. Comrs. 25 Me. 291; Heffner v. Comm, 28 Penn. St. 108; compare Comm. ». Meeser, 44 Penn. St. 341. And the court held that the attorney general was not a necessary party to the proceedings. This case, in an earlier stage, will be found in 2 Dillon Rep. 527. Upon the return of the alternative writ, a motion was made for a peremptory writ, and the opinion delivered on the decision of that motion, will be found in 9 Western Jurist, 356. This was a pro- ceeding by mandamus to compel the railroad company to operate its road as a continuous line, by running its regular through trains to and from the Iowa or eastern shore of the Missouri river, ata point in the State of Iowa, claimed by the relator to be the eastern terminus of the road; while, on the other hand, the respondent insisted the legal as well as actual terminus was on the western shore of the river, in the State of Nebraska. The court held that the legal terminus was on the Iowa shore, that the bridge TRANSFER OF. 317 over the river was part of the continuous line of the road contemplated by the acts of congress empowering the corporation, that a peremp- tory mandamus should issue to compel the company to operate its road over the bridge in the same general manner that it operates the other por- tions of the road, and that the device of a separate transfer over the bridge by local trains, was in violation of the duty of the company to the public. V. There is some diversity of opinion, whether a bill in equity will lie against a railroad company for the specific performance of a duty im- posed by its charter; but all authorities agree that if such bill is sustained it must be brought not by a private person, but by the attorney general. See People v, Albany & Vermont R. R. Co. 24 N. Y. 268; s.c. 87 Barb. 216; People v. Troy & Boston R. R. Co. 87 How. Pr. 427. In Buck Mountain Coal Co. v. Lehigh Coal Co. 50 Penn. St. 91, it is held that if a corpora- tion is formed for the performance of a public duty, a bill in equity will not lie against it, at the suit of a private person, to enforce the per- formance of such duties, in the absence of special right or authority, but the court remark, ‘‘it may not be out of place to add that we have no doubt but the remedy by an injunction sued out on the part of the com- monwealth by the attorney general, would lie against a company to com- pel them to observe their chartered obligations,” In Port Clinton R. R. Co. v. Cleveland & Toledo R. R. Co, 18 Ohio St, 544, the court refused specific performance of a contract to operate a railroad, doubting whether: it would in any case be competent to decree specific performance of such a contract requiring, as it would, personal acts involving the continuous ex- ercise of skill and judgment under varying circumstances and emergencies. VI. There are cases where writs of mandamus have been issued to com- pel corporate bodies to construct bridges over streams, in accordance with their charters, and to maintain crossings over public highways, which seem to be based upon the rule that common law courts can remove by mandamus all common nuisances or anything done to the prejudice of the public. Rex v. St. John College, 4 Mod. 237. And the fact that an in- dictment or presentment would lie, furnishes no objection, for the fine may be satisfied or the penalty paid, and yet the public duty be unper- formed. State v. Halliday, 3 Halst. 205; see In re Trenton Water Power Co, Spen. 659; State 0. Wilmington Bridge Co. 3 Harring. 312; State o. Northeastern R. R. Co.9 Rich. L. 247; Habersham v. Sav. & Ogechee Canal Co. 26 Geo. 665; Ind. & Cin. R. R. Co. v. State, 37 Ind. 489. As to mandatory injunctions in like cases, see Del. & Rar. Canal Co. v. Cam. & Atl. R. R. Co. 1 C. E. Green, 321, and authorities cited; s. c. 3 C. E. Green, 546. As to mandamus to municipal corporations, see Dillon, ch. XX. On the general subject of this chapter, and of the writ of mandamus to enforce public duties by railway corporations, see Goddefroi & Shortt, pp. 156, 177, 188, 204, 320, 359, 371. CHAPTER IL. TRAFFIC ARRANGEMENTS. A corPoRATION may carry on and extend its legiti- mate business by every legal means; it may conse- quently, in the furtherance of these objects, enter into all such engagements with rival companies and other competing bodies as it may deem most conducive to its own interests, provided, however, that it does not, in so doing, either exceed its powers or enter into engage- ments which, however skillfully disguised, are only a transfer or delegation of special powers and privileges. Of these engagements the commonest, as well as, the most noticeable, are the arrangements entered into by railway companies for the forwarding and division of traffic.* Such arrangements, if Jona jide what they purport to be, viz. conventions for more economically -or expeditiously conducting their several business in circumstances where they clash, are valid, and:are valid only when of this description. It is, however in many cases, extremely difficult to say under which head—that of legal traffic arrangements or illegal transfers of pow- ers—a particular agreement is to be placed, and differ- ent courts come to contrary conclusions. I. Arrangements giving to one company running pow- ers over the line of another company are valid.t * The rule is now well settled in this country, that a railroad company may contract as a common carrier for transportation beyond its own line. See ante, p. 94, and Appendix for cases, + Contracts giving to one railroad company running powers over the TRAFFIC ARRANGEMENTS. 319 One of the earliest cases determining the validity of such arrangements is that: of South Yorkshire and River Dun Company v. Great Northern Railway Com- pany, the conflicting judgments rendered in which in chancery and at common law well evidencing the di- verse interpretation put upon these agreements, and the difficulties involved in a determination of their true legal nature and bearing. This suit arose thus: In 1851 and 1852 negotiations were carried on between the South Yorkshire Railway and River Dun Company and the Great Northern Railway Company, chiefly with reference ‘to the regulation of the coal traffic, and the division between the two companies of the tolls re- ceived therefrom. In the result an agreemevt was en- tered into under seal between the two companies, by which it was covenanted that the latter company should have the use of the line of the former for a term certain at stated tolls, according to the tonnage carried ; and it was agreed that these tolls should be charged on the tolls and dues of the company who had the use of the line, and that upon non-payment the other company might take and impound such tolls and dues, and deal line of another, are common in this country. But whether they can be made without legislative authority, is doubtful. For instances, see Webb ». Portland &c. R. R. Co. 57 Me. 117; Sawyer v. Rut. & Burl. R. R. Co. 27 Vt. 370; Murch ». Concord R. R. Co. 9 Foster, 9; Boston & Lowell R. R. Co. ». Boston & Maine R. R. Co. 5 Cush. 375; Boston & W. R. R. Co. 2. Western R. R. Co. 14 Gray, 253; Naugatuck R. R. Co. ». Waterbury But- ton Co. 24 Conn. 468; Parker v. Rens. & Sar. R. R. Co. 16 Barb. 315; Smith v. N. Y. & Har. R. R. Co.19 N. Y. 127; Wylde v. Northern R. R. Co. 53 N. Y. 156; Stanley v. C. C. & C. R. R. Co. 18 Ohio St. 552; Indian- apolis & Mad. R. R. Co. v. Solomon, 23 Ind. 534. Judge Storer, in Ohio & Miss. R. R. Co. o. Ind. & Cin. R. R. Co. 5 Amer. Law Reg. N. 8.°733, holds, that a railroad chartered in one State cannot contract with’ com- panies in other States for the permanent privilege of running cars on their lines. See Ogdensburg & Lake Cham. R. R. Co. ». Vt. & Can. R. R. Co. 6N. Y. Sup. Ct. (T. & C.) 488, 494. : 320 TRAFFIC ARRANGEMENTS, with the same in the same way as with distress for rent. In accordance with the agreement the Great Northern Railway Company had the use of the other company’s line for a time, but refused to make any payments in respect thereof. Thereupon a bill was filed’ by the former company to restrain the other company of the line from dividing their funds among their shareholders, by way of dividend, until the debts alleged to be due to the other company were paid. The court of chancery, however, declined to interfere by way of injunction, but left the plaintiffs to proceed by action or distress, as they might be advised. But though the Lords Justices de- clined to interfere, they inclined to the opinion, first, that a railway company cannot, legally or equitably, mortgage its undertaking without the authority of parliament ;* and, secondly, that such—the agreement here in question—was not a contract for the use of the line, nor for an apportionment of tolls, within the 87th section of the railways consolidation act, 8 & 9 Vict. ce, 20. An action was then brought at law, and the Court of Exchequer Chamber, affirming the judgment of the court below, considered the contract to be not only in other respects legal, but also within the powers of the directors.’ “It is a contract, the object of which is, and by which it is provided, that the plaintiffs in error may pass their carriages laden with coals over the line of the defendants in error; and so far as its purpose and general stipulations provide for effecting this, it is clearly a contract which the two bodies are competent to enter into, But it is a condition imposed on which cae 30. G. M. & G, 676; 22 L. J. Ch. * 9 Ex, 642; 23 L, J, Ex, 186, * See ante, pp. 123-130, and notes. TRAFFIC ARRANGEMENTS. 821 the validity of the contract depends, that this use of the line shall be granted on payment of tolls.” And the court came to the conclusion that the payments to be made under the contract were “tolls” within the meaning of the 87th section of the railways clauses consolidation act, 8 & 9 Vict. c. 20. In Great Northern Railway Company v. Manchester &e. Railway Co.’ an agreement that two companies might mutually use the railway of one of the companies on certain specified terms, was held good as being con- sistent with a proper user of the railway and with the rights of the granting company. The latest decision on this subject is that of Midland Railway Company v. Great. Western Railway Com- pany.? The H. Railway Company, whose line ran into the defendant company’s line at B., had a parliamentary right to use the defendant’s station at B. The plaint- iff’s company had running powers over the defendant’s line, and were anxious to run trains through the B. station over the H. line. The H. company applied to parliament for power to lease their line to the plaint- iffs, but through the opposition of the defendants the proposed bill was thrown out. The H. company then entered into an agreement with the plaintiffs, termina- ble on six months’ notice, by which they agreed to allow 15D. G. & Sm. 188; compare Mid- land Railway Company v. Ambergate &c, Railway Company, 10 Hare, 359. 71, R. 8 Ch. 841; see also Llanelly Railway and Dock Company v. London and North-Western Railway Company, L. R. 8 Ch, 942; Wolverhampton and Walsall Railway Company v. London and North-Western Railway Company, L. R, 16 Eq. 433; see also, as to the ef- fect of acquiescence * by one company in the enjoyment by another company of rights of user, Great Northern Rail- way Company v. Lancashire and York- shire Railway Company, 1 Sm. & Giff. 81; and Shrewsbury and Birmingham Railway Company v. Stour Valley Rail- way Company, 2 D. G. M. & G. 866, As to the import of an arbitrator’s award, see Eastern Union Railway Company v. Eastern Counties Railway Company, 2 E. & B, 680; 22 L. J.Q. B. 871. * See ante, p. 21 312, note. 822 TRAFFIC ARRANGEMENTS, the plaintiffs to use the H. line, and all its stations, sid- ings, &c., and to afford them every facility for so doing ; the plaintiffs to keep the line in repair and appoint and pay their own officers, and fix the rates and fares of through traffic, paying to the H. company a propor. tion of the through rates and fares by way of com- muted toll. It was also provided that if the H. com- pany should desire the plaintiffs to undertake the local traffic of the H. line the plaintiffs would do so, paying the H. company a proportion of the fares. The plaint- iffs, under this agreement, claimed the right to run their trains over the defendants’ junction at B., and filed their bill to establish the right, which the defendants resisted on the ground that the agreement between the plaintiffs and the H. company was ultra vires and illegal. The Lords Justices, reversing the decision of the master of the rolls, held that the agreement was not ultra vires or illegal, and that the plaintiffs were entitled to the relief prayed. ‘We may then, perhaps, lay down broadly that dona Jjide traffic arrangements for the more economical work- ing of the traffic which comes to a group of companies —usually railway companies—will be supported. But such arrangements must be in reality what in name they purport to be, simply agreements by which the business that comes within the scope of all is carried on commodiously and cheaply, and for the common benefit, and not transfers of the powers of some of such companies to the others.* No test exists, no fixed line marking off legal busi- ness regulations from illegal delegation of special pow- ers, but here may be mentioned the case of London, * See post, p. 836, note. TRAFFIC ARRANGEMENTS. 823 Brighton, and South Coast Railway Company v. Lon. don and Southwestern Railway Company’ as illustrat- ing the nature of agreements which will be considered not to come under the head of traffic arrangements. ‘The Brighton Company and the Southwestern Company became jointly entitled to a line of railway under an act of parliament made in 1847, by which this joint line was placed under the management of a joint com- mittee. By this act it was provided that each of the two companies might use the joint line for all pur- poses necessary for the traffic of the same respective company. The Southwestern Company afterwards, without parliamentary authority, entered into agree- ments with the Portsmouth Company, by which the Southwestern Company was to have the exclusive use of the line of the Portsmouth Company, paying £18,000 ayear. On bill filed by the Brighton Company to pre- vent this agreement being carried out, it was decided that the act of 1847 did not create a joint tenancy, car- rying with it the right of using for every kind of traffic a station appurtenant to the joint line, and that the Southwestern Company had no right to use it except for what was .properly traffic of that Company. The Court also held that the agreements between the South- western Company and the Portsmouth Company were ultra vires and illegal, and that the conveyance of passengers and goods under them did not constitute traffic which could be considered .traffic of the South- western Company within the meaning of the act of 1847, and that therefore the Brighton Company were entitled to an injunction restraining the Southwestern Company from using the joint station for the purposes 14D, G.& J. 362; 28L.J. Ch. 521; way Company v. Chester dc. Railway Furness Railway Company v. Smith, 1 Company, 14 L. T. 217, 433, D. G. & Sm, 299; Shrewsbury dc. Rail- Pes, omer 324 TRAFFIC ARRANGEMENTS. of any traffic destined for or coming from the Ports- mouth Railway or any part thereof.* II. Agreements for apportioning. between different companies the “tolls” receivable by the whole of them collectively may be valid. * See Del. Lack. & Western R. R. Co. v, Erie Rw. Co. 6 C. E. Green, 298, for a case, somewhat similar in facts to the case cited in the text, but in which the court declined to pass upon the point on motion for a preliminary injunction, and in which the matters in controversy having been adjusted by an agreement between the companies, the suit did not come to a final hearing. See, also, Sussex R. R. Co. 2, Morris & Essex R. R. Co. 4 C. E. Green, 13; s.c. 5 Jd. 542. + Contracts between railroads for the purpose of providing through transportation of passengers and freight between distant points, over sev- eral lines, and which are generally knownas ‘‘ pro rata” agreements, are exceedingly common in this country. The authority to make such ar- rangements, provided that they are bona fide, and do not create a legal monopoly, cannot be denied. In Hartford and New Haven R. R. Co. ». N.Y. & N. Haven R. R. Co. 8 Rob. 411, an agreement providing for a pro rata Givision of the fares of through passengers on three continuous roads, owned and operated by different corporations, was held legal. In Stewart ». Erie and Western Transportation Co. 17 Minn. 872, it is said: “In view of the present modes of transacting business of this. kind, this authority would seem to be an incident of railroad corpora- tions, unless withheld by the terms of their charters; and contracts of this kind when made with a bona side purpose to regulate traffic in a reasonable and just manner, are generally held good.” The division of the tolls and fares in such case may be according to any plan which is agreed upon, and need not be based upon the relative distances traversed by the connecting roads. Stewart v. Erie & Western R. R. Co. supra. The Sussex R. R. Co.v. Morris & Essex R. R. Co. 4 C. E. Green, 18; 8. 0.5 Jd. 542, involved a kindred question; it was, whether the defendant could make a contract with the complainant (a connecting railroad company), to allow the complainant one-third of the amount received from each pas- senger brought by the complainant to the defendant’s road, or in any way to pay more than what was paid by the passenger for the complainant's fare. The chancellor, after a review of the English cases, says: ‘‘I find no adjudication whatever in this country upon the point. Yet we know that it is, and has been for years, the constant practice of railway com- panies to run in connection, passing freight and passengers over a number of lines forming one route, and to divide the receipts by an arbitrary schedule fixed upon, and not always, or in most cases, giving to each line TRAFFIC ARRANGEMENTS. 825 Whether such agreements would, apart from statu- tory enactment, be considered good is doubtful. Con- tracts between companies which create in fact if not in the share earned on it, and that only. In many cases, as in the present, there may be good reasons for making a difference in the division of the profits. If an advantageous arrangement can be made by a line at the south end ofa route, with a line at the north end, for carrying passengers in common, which could not profitably (and therefore would not) be en- tered into by the north line, unless it received a larger proportion of the earnings than in proportion to its work, there is no reason or principle of law why the south line should be prohibited from making an arrangement profitable to its shareholders, on the ground that the division of earnings must be unequal. The directors of such companies have the right to make contracts as to carrying passengers and freight. They can make such contracts for one trip, for one day, for one year, or for the whole ex- istence of the company. They can make such contracts at prices lower than those limited in their charter, and lower than charged to others. The commutation contracts constantly made on all leading roads, are in exercise of this power. They are made for months, a year, and sometimes for life. Their validity is founded upon well settled principles of law, and has never been doubted. They are made for the supposed advantage of the business and of the shareholders; and the expediency of making them must depend on the judgment of some one, and in all these corpo- rations, the management of all the concerns is committed to the directors. There is nothing in such contracts against public policy or any law of this State. The want of such power would be a great injury to most railway corporations, as well as to the public, who, as in this, are much benefited by the arrangement. Contracts by which commuters are carried for less than cost, have been held good policy by railway managers, as tending to build up and populate towns along their lines. They may misjudge as to the policy, but contracts thus made in good faith are valid.” See, also, March v. Eastern R. R. Co. 48 N. H. 515; Darling». B. & W. R. R. Co. 11 Allen, 295; Gass 0. N. Y. P. & B. R. R. Co. 99 Mass, 220; Hartford & N. H. RB. R. Co. ». N. ¥. & N. H.R. R. Co. 3 Rob. 411; Root o. Great Western R. R. Co. 45 N. Y. 524; 8. c. 2 Lans, 199. An agreement by a railroad to build its road so as to connect with another, and that the charges for transportation shall be regulated by both companies together, is a valid contract which will give ground for injunction, restraining such a change of gauge as would break up the connection. Columbus P. & I. R. R. Co. v. Indianapolis & B. R. R. Co. 5 McLean, 450. A contract to _Iaintain a connection between two railroads is valid. Androscoggin & Ken. R. R. Co. ». Androscoggin R. R. Co. 52 Me. 417; see also Bartlette a. Nor. & Wor. R. R. Co, 33 Conn. 560. 826 TRAFFIC ARRANGEMENTS, name, partnerships, are void on the double ground of being ultra vires and also contrary to public policy, and any arrangement for the division of tolls must, it is presumed, be objectionable upon the same grounds. With regard, however, to railway companies it is ex- pressly provided by 8 and 9 Vict. c. 20, s. 87, that “Tt shall be lawful for the company from time to time to enter into any contract with any other company, being the owners or les- sees, or in possession of any other railway, for the passage over or along the railway, by the special act authorized to be made, of any engines, coaches, wagons, or other carriages of any other company, or which shall pass over any other line of railway, or for the passage over any other line of railway of any engines, coaches, wagons, or other carriages of the company, or which shall pass over their line of railway, upon the payment of such tolls and under such conditions and restrictions as may be mutually agreed upon; and for the purposes aforesaid, it shall be lawful for the respective parties to enter into any contract for the division or apportionment of the tolls to be taken upon their respective railways.” * What will be “tolls” within the meaning of this section is by no means clear; the authorities on this point, as upon so many others, in connection with ultra vires being very conflicting. It would seem that any payment of money, whether a lump sum or not, in consideration of the conveyance or passage over the line of the contracting company, of goods or passengers, is a “toll,” although the payment be not calculated by reference to the number of individuals or separate articles." But an agreement providing for a fixed divi- dend upon the capital of either of the contracting companies is not so. The best cases illustrative of ? Great Northern Railway Compan any, 9 Ex, 65, in the Exchequer v, South Yorkshire and River Dun Osc. Risscber: ‘ * Simpson v, Denison, 10 Hare, 51.. ; * See Goddefroi & Shortt, p. 896. TRAFFIC ARRANGEMENTS, 827 this point are those arising out of the agreement, which has already been referred to and commented upon,’ made between the Great Northern Railway Com- pany, the South Yorkshire Railway Company, and the River Dun Company.’ III. Agreements providing for the division of profits arising from the whole existing traffic of a dis- trict, in proportions calculated on the past course of traffic, are not ultra vires or otherwise void.* ? See ante, pp. 319-321. Company v, Eastern Counties Railway ? See also East Anglian Railway Company, 21 L. J.C. P. 23. * Agreements of the nature referred to would not only be ultra vires, unless expressly authorized by the legislature, but illegal, and therefore void as preventing competition and tending to create a monopoly. Pow- ers for such purpose, or having such effect, cannot be implied, nor can privileges of this sort be enlarged by implication. Taney, C. J., in Charles River Bridge v. Warren Bridge, 11 Pet. 420; see post, p. 346, and note; see Currier ». Concord R. R. Corp. 48 N. H. 321, which was a suit in equity by private citizen against railroad corporations under an act of the legislature, which provides that rival and competing lines of railroad shall not be allowed to be consolidated, and that neither of said lines shall be run or operated by any such rival or competing. line, under any business contract, lease, or other arrangement, but each and every such railroad shall be run, managed and operated separately by its own officers and agents, and be dependent for its support on its own earnings from its local and through business in connection with other roads, and the facili- ties and accommodations it shall afford the public for travel and transpor- tation under fair and open competition, unless such lease, contract or ar- rangement be authorized by the legislature and approved by the governor and council. The court say: ‘‘The object of the law is to prevent the consolidation of rival and competing lines of railroad by contracts or ar- rangements between them, by means of which competition is removed, the purpose being to prevent the increase of the charges of such railroads beyond what might be expected under the influence of a free competition. In the promotion of this object every citizen having occasion to use such roads, or to purchase articles transported over them, has an interest; but his interest is not of a character that may be protected by a suit to recover damages. It is much like the interest which every citizen has in a public highway—its being kept in repair—and there, independent of statute 328 TRAFFIC ARRANGEMENTS. This proposition seems to be established, but it re- quires the greatest care and consideration to discriminate provisions, he can maintain no action on account of any defect in its condition; and by statute he can maintain action only in case he suffer special damages while in the use of the road, and not for being deprived. of the use of it altogether by its being permitted to become impassable, as held in Griffin v. Sanborntown, 44 N. H. 246. Upon the same principle no person has such an interest in preserving free competition between rival railroads, as to be entitled to maintain a suit for diminishing or removing such competition; but the wrong which arises from the violation of the provisions of the statute is essentially a public wrong in which no citizen has a special or private interest.” In Hart. & N. Haven R. R. Co. v. N. Y. & N. H. R. R. Co. 3 Rob. 411, a contract was adjudged void as against public policy as an infringement of the rights of travel. The court say: ‘‘It is a compact between the parties, intended to affect the facilities for public travel over a route of railroad, which had been or might be authorized by law. The defend- ants were lessees of the New Haven & Northampton railroad, then in part constructed. The lessors had covenanted not to extend the road northerly beyond Granby station (a point a little north of the Connecticut line) without the consent of the defendants, and had given over to the defendants all the franchises and corporate powers of such lessors, for the purpose of locating or constructing any railroad or extension of any railroad northerly from Granby station. By the agreement with the plaintiffs, of March 16, 1850, the defendants covenanted to hold the fran- chises and corporate powers conveyed to them by such lease, until the ist of July, 1869, and during such time not to extend such railroad north of Granby station, Such an arrangement was intended to prevent the ex- tension of the N. H. & N. railroad to any point north of its terminus at Granby, and to prevent any competition in travel, detrimental to the in- terests of the plaintiff’s road, which had a monopoly of the carrying trade from Springfield and points north of Springfield via Northampton and Springfield road, which such extension might afford. The completicn of the N. H. & N. R. R, to Northampton, would open a new line for travel southward, which would be a competitor and rival of the road of the plaintiffs. Such competition and rivalry it was not lawful for these parties to prevent or attempt to prevent, and any contract to effectuate suck purpose is void, Public policy is opposed to any infringement of the rights of travel, or of any of the facilities which competition may furnish; and the law will not uphold any agreement which does or may ftomnaaly affect such rights or facilities.” Citing Doolin », Ward, 6 Johns. 194; Hooker v. Vandewater, 4 Den. 349; Stanton »v. Alten, 5 Id. 434; State o. Hart. & N. H.R. R. Co. 29 Conn. 538; Hood ». Same, 22 Id, 502. TRAFFIC ARRANGEMENTS. 329 agreements of this class, on the one hand, from transfers of powers, and, on the other hand, from partnerships between the various companies concerned. In the last chapter* the well-known Shrewsbury Railway Com- pany’s cases were mentioned, as exemplifying these difficulties. These arose out of the following circum- stances: The London and Northwestern Railway Company and the Shropshire Union Railways and Canal Company, together promoted a bill to enable the former to use a portion of the line of the latter com- pany. This bill the Shrewsbury and Birmingham Rail- way Company opposed. To get rid of their opposition an agreement was entered into with the opposing com- pany, by which the other two companies agreed to con- duct their traffic in a certain specified manner, to keep certain accounts, and to pay over to the Shrewsbury Company a portion of their receipts. This agreement gave rise to an enormous amount of litigation. On the opening of the Shrewsbury and Birmingham Railway, in 1847, that company called upon the London and Northwestern Railway Company to keep the accounts stipulated for in the agreement, and this being refused a bill was filed to compel then to do so. This bill was met by a demurrer on the part of the London and Northwestern Railway Company, and the demurrer was allowed by the vice chancellor of Eng- land, on the ground that the agreement had not come into operation.?, From this there was an appeal, and Lord Cottenham overruled the demurrer, being of opinion that the agreement had come into operation and was ? See the agreement at length, 2 Mac. 720 L. J. Ch. 90. & G, 331-385. * Page 308. + See Sussex R. Co. v. Morris & Essex R, R. Co. 4 C. E. Green, 13, 22. 330 TRAFFIC ARRANGEMENTS. valid and binding! Thereupon a motion for the injunc- tion prayed by the bill—z. ¢, that the London and Northwestern Railway Company should not (see the third clause of the agreement) carry traffic on certain specified portions of their lines, was made and granted by the vice chancellor ;* this also was appealed from, and the then chancellor, Lord Truro, dissolved the in- junction upon the ground of comparative inconvenience, and without giving any opinion as to the merits of the case; holding, that the questions both as to the agree ment having come into operation, and as to its legal validity, ought to be tried at law.’ * An action was next brought upon the agreement, and the Court of Queen’s Bench held, that it was not void either as being a fraud on the legislature, or as de- priving the public of the benefit of competition, or as being a fraud on the shareholders. A further motion for an injunction was then made before the master of the rolls, to whom the cause had been transferred; and he ultimately dismissed the bill —or rather all the bills, for three cross suits were pend- ing—and with it the motion for the injunction.’ Against this dismissal there was an appeal unto the Lords Jus- tices, who also decided against the plaintiffs, holding that the agreement was a breach of trust on the part of the directors as between.themselves and their share- holders, and that the plaintiffs had knowingly partici- pated in such breach of trust. They also held, that the 12 Mac, & G, 324; 2 Hall & T. 257; 3 20 L, J. Ch. 95, 17 Q. B. 652; 21 L, J. Q. B, 89. 220 L. J. Ch. 102. 16 Beav. 441. ° e * See Pruden v, Morris & Essex R. R. Co. 4 C. E. Green, 886; 8. c. rev'd, 5 C. E. Green, 5380; Black ». Del. & Rar. Canal Co. 7 C. E. Green, " 180, 425. Mac. & G. 70; 20 L. J. Ch, 108. on TRAFFIC ARRANGEMENTS. 3831 contract, being to alienate the tolls of a given portion of a railway, was contrary to the authority given by parliament, and was against public policy; and that, therefore, whether it were valid or invalid at law, the court could not lend its assistance to. enforce specific performance of the same.! The plaintiffs thereupon appealed to the House of Lords, where, finally, it was determined, that whatever were the character of the covenants in question, the time had not yet come when they were to be put into operation.? The result of these numerous judgments is thus summed up by Page-Wood, V. C.:° “I think the posi- tive opinions are only two—Lord Cottenham on the one hand (@. ¢, in favor of the legality of the agreement), the V. C. Turner on the other; and the present Master of the Rolls, whether bound by the weight of authority or otherwise, adheres to the view of Lord Cottenham and the judges at common law. In equity the authori- ties stand in the manner I have described; there are only two authorities directly opposed, and the others, perhaps, may be taken to be neuter between those two contending views. ‘Then we have the opinion of the Court of Queen’s Bench, which consisted at the time of the present Lord Chancellor, Mr. Justice Patteson, Mr. Justice Coleridge, and Mr. Justice Wightman—certainly a very great weight of authority is there found united in favor of the contract which there existed.” * 14D.G.M.&G,.115; 22 L.5.Ch, 92.5, & H. 113, 114; 80 LJ. Ch. 682. 832. 76H. Lds. 113; 26 L. J. Ch. 482. * The case of Del. Lack. & West. R. R. Co. v. Central R. R. Co. of N. J. (unreported) arose upon a contract between the two corporations pro- viding for the operation and management, as a joint estate, of all the roads. 332 TRAFFIC ARRANGEMENTS. Another equally well known, and perhaps more im. portant as being the more recent, authority is that of Hare v. London and Northwestern Railway Company.! Here two groups of railway companies, being respect- ively the owners of independent conterminous routes (from London to Edinburgh), agreed to divide the profits of the whole traffic in certain fixed proportions, calculated on the experience of the past course of traffic, As a result of that agreement, a portion of the earnings 19 J. & H. 80; 30 L. J. Ch. 817; Carlisle Railway Company ». North- Hodgson »v, Earl Powis, 1 D.G.M.& G. western Railway Company, 2 K. & J, 6; 21 L. J. Ch, 17; Lancaster and 298; 25 L, J, Ch, 223. -of the contracting companies “held as owners, lessees, or otherwise; and also all railroads, properties, and interests thereafter by either or both of said companies built or acquired.” It also provided for equal dividends, and that the receipts should be regarded as joint receipts, and the ex- penses as joint expenses, the surplus to be disposed of as should be di- rected by a joint committee of both boards, in which each company was equally represented. The contract prescribed, that for the present the or- dinary and current business of each company should be managed and controlled by the respective boards and officers of each company, but re- quired that the directors, managers, and officers of each company should do and perform all such legal acts and things as the joint committee should request—the agreement to be perpetual, its purpose and object of being declared to be to effect an equal and perpetual union, and as soon as possible to consolidate their capital stock, property, and assets, to the end that the management might be simplified and rendered more efficient. There was a covenant for such further agreements as in the opinion of the joint committee might be necessary to give perfect effect to the ‘purposes and objects of the agreement. A motion for injunction was elaborately argued before Dodd, V. C. (N. J.), but the point was not decided. The motion was denied, on the ground that the agreement had not been re- corded pursuant to a general act of the legislature. See Laws of N. J. 1871, ch. 426, p. 77. Supplemental bills were afterwards filed and in- junctions obtained, and the American editor is informed by counsel en- gaged in the case, that the agreement was never pronounced illegal or void. The litigation was afterwards settled. It is to be regretted that the profession has not the benefit of the views of the able vice chan- «ellor, or of the able and exhaustive investigations contained in the briefs used in the cause. TRAFFIC ARRANGEMENTS. 3833 of the London and Northwestern Railway Company was handed over to the other companies; and the plaint- iff, a shareholder in this company, applied—though after several years of acquiescence—for an injunction to restrain the companies from carrying out the agree- ment. The application was refused. The vice chan- cellor considered not only that on principle such an arrangement was legal, there being in it nothing preju- dicial to either the shareholders or the public, but also that he was concluded by the judgments of Lord Cot- tenham and the Court of Queen’s Bench in the Shrews- bury Case—“ Until that judgment is overruled by a higher authority, I think I ought to adhere to it in a case which seems to be entirely parallel.” In the present case the validity of the agreement was examined as far as it concerned companies and lines existing at the moment of its making; more recently it has been decided that it is not so, if applied to others not then existing. Midland Railway Company v. Lon- don and Northwestern Railway Company® is the case in point. The plaintiffs here, by extending their old line and by adding a new branch, and thence by run- ning powers obtained over the line of the defendants, one of the parties to the agreement, had acquired, sub- sequently to the date of the same, a new through route from London to Edinburgh; and the suit arose in refer- ence to the proceeds of the traffic on such new through route. Kindersley, V. C., after determining that the agreement did not either expressly or by implication include the plaintiffs, considered that if it had done so it would have been illegal: “It would be ultra vires of 1L. R. 2 Eq. 524. Compare Maun- cided in which was, that an agreement sell v, Midland Great Western of Ireland making traffic regulations applicable to Railway Company, 1 H, & M. 180; 32 future extensions was ultra vires. L, J. Ch. 518, one of the questions de- 334 TRAFFIC ARRANGEMENTS. the board of directors of such a company to enter into a contract fixing and regulating the future traffic which might be carried upon a line of railway which the com- pany might hereafter be empowered to construct, and the profits of such traffic, so as to give to another rail. way company an interest in such traffic and profits.” IV. Agreements between companies which create a partnership between the parties thereto are void.* * The adjudications in this country upon the power of corporations to enter into partnerships vary somewhat, according as the question affects third persons, or only the parties themselves. No authority has been found which asserts this power as between the parties, And, indeed, the general rule here is the same as that stated in the text, that corporations are incapable of forming partnerships, either among themselves or with individuals. In N. Y. & Sharon Canal Co, v. Fulton Bank, 7 Wend. 412, it is said that ‘** corporations at common law have certain powers, but not such as would authorize the forming of a partnership, or the consolidation of two companies into one.” See Angell & Ames on Corp. § 272; Par- sons on Partnership, p. 29; Story on Partnership, p. 20, x; Pearce 0, Mad. &I.R.R. Co. 21 How. 441; Marine Bank v. Ogden, 29 Ill. 248; and as to consolidation, see post, Pt. IIT, ch. VIII. In Van Kuren 2. Trenton Locomotive &c. Co. 2 Beas. 302, the point is raised as ground for the dis- solution of an injunction, but is reserved for a final hearing, as being a nice or doubtful question of law.” When, however, the interests of third parties are concerned, there is not entire uniformity of opinion. And un- der the influence of the modern tendency to assimilate the rules of law regarding corporations to those affecting natural persons, the Supreme Court of New York has held that corporations may become liable to cred- itors as partners with individuals. In Catskill Bank v. Gray, 14 Barb. 471, the court says: ‘‘Strictly, perhaps, corporations should be, and are, restricted from contracting partnerships with individuals or corporations, and as between the parties to the contract, acting upon equal knowledge, a question of validity might be raised; but a corporation may contract with an individual in furtherance of the object of its creation, the effect of which contract may be to impose upon the company, as respects the community, the liabilities of a partner. I cannot think that a corporation may so shape its contracts relating to the business for which it was incor- porated, as to share jointly with an individual in the profits of such busi- ness; subtract its interest in the profits from the fund on which the cred- TRAFFIC ARRANGEMENTS. 335 It has just been seen that certain kinds of agree- ments for the division of the receipts obtained by dif- itors of the concern had a right to rely for the payment of the debts due to them; and when called upon by such creditors, be permitted to escape liability altogether, on the ground that the profits were realized as the partner of an individual, which relation the corporation could not legally occupy. I know of no sound reason why a corporation, more than an in- dividual, who participates in the profits, as such, of a particular business in which it may lawfully engage, should not be holden liable to the pub- lic for losses.” In Massachusetts a different view prevails. In Whitten- ton Mills ». Upton, 10 Gray, 582, the following language is used: ‘‘The second section of c. 38, of the Revised Statutes, provides, that the business of every such manufacturing corporation shall be managed and conducted by the president and directors thereof, and such other officers, agents and factors, as the company shall think proper to authorize for that purpose. It is plain that the provisions of this section cannot be carried into effect, where a partnership exists. The partner may manage and conduct the business of the corporation and bind it by his acts. In so doing, he does not act as an officer or agent of the corporation, by authority received from it, but as a principal in a society in which all are equals, and each capable of binding the society by the act of its individual will. * * * The power to form a partnership is not only not among the powers granted expressly or by reasonable implication, but is wholly inconsistent with the scope and tenor of the powers expressly conferred, and the duties directly imposed upon a manufacturing corporation under the legislation of the commonwealth.” The language of the statute under which this case is decided, is not peculiar to Massachusetts, nor to manufacturing companies, but similar provisions are found in the States generally, in regard to all kinds of private corporations. The reasoning of the court would apply as well in New York, and this case is, therefore, in direct opposition to Catskill Bank v. Gray, supra. This difference of opinion would seem to be not strictly as {othe power of corporations to form partnerships, but as to the admissibility of the plea of ultra vires in certain circumstances. See Bissell ». M. 8. & N. I. R. R. Co, 22 N. Y. 258. There is nothing, however, to prevent a corporation from becoming interested in a transac- tion jointly with another corporation, or with an individual, so as to be joint plaintiffs or defendants in an action. See N.Y. & Sharon Canal Co. ®. Fulton Bank, 7 Wend. 412; Olcott o. Tioga R. R. Co. 27 N. Y. 546; Marine Bank v. Ogden, 29 Ill. 248; Peckham v. North Parish of Haver- hill, 16 Pick. 287; Stanley v. C.C. &C. R. R. Co. 18 Ohio St. 552, and cases cited ante, p. 318, note. That the courts are indisposed to find in a contract of a corporation the creation of a partnership, see Holmes 2. Old Colony BR. R. Co. 5 Gray, 58; Darling v. B. & W. R. R. Co. 11 Allen, 336 TRAFFIC ARRANGEMENTS, ferent companies in fixed proportions between such com- panies are allowable, but it is only such agreements 295; Gass vo. N. Y. P. & B. R. R. Co. 99° Mass. 220; Mohawk & Hudson R. R. Co. ». Niles, 8 Hill, 162. Col. Piqua & Ind. R. R. Co. 2. Indian- apolis & B. R. Co. 5 McLean, 450, was a case where two railroad com- panies agreed to build a road from certain cities to connect with each other at a given place, and that the charges for the transportation should be regulated by both companies; an injunction was granted to restrain one company from changing gauge so as to break up the connection, The court remarks, “It is further alleged that under the contract the re- spective companies, by acting together in fixing the rates for the trans- portation of passengers and freight, conveyed a part of their franchise which they had no right todo. There is no part of the contract which, in this respect, affects the franchise of either company. The companies may agree, as individuals may agree, to certain rates of transportion which may be considered mutually advantageous, Neither company has parted with its corporate powers; each acts for itself and under its own powers in fixing the rates of transportation, and they both agree that the charge shall be uniform throughout the line.” The language of some of the decisions upon the validity of agreements, providing for the division of net profits of corporations, and providing for the formation of quasi-part- nerships, must be admitted to be somewhat loose. The principles, how- ever, upon which the decisions are based, would seem to be capable of being reconciled. For, while it is properly determined that a partnership cannot exist between corporations, because, first, each partner is the agent of the other, and, second, because corporations can only exercise their powers through the regularly constituted officers, mentioned in their charters; yet when the corporate organizations are kept distinct, and the functions of each corporation are performed by its own officers, without the interference of the other corporation, there would appear to be no legal reason, why, upon the consent of stockholders, the net profits of each corporation should not constitute a common fund to be divided be- tween the corporations according ‘to agreement. In determining the legality of all such arrangements, the rule that the franchises and other delegated powers of a corporation cannot be transferred to, or exercised by, another corporation, or an individual, without the sanction of the legislature granting the franchise or delegating the power, must not be overlooked ; and perhaps the rule will eventually be established that part- nerships between companies, which do not amount in any wise to a trans- fer of corporate powers, or interfere with the performance of corporate duties to the public, or which are not in other respects against public policy, will be upheld. See construction of agreement for operation by one company of a road owned by another, and division of receipts, Bloss- burg & Corning R. R. Co, ». Tioga R. R. Co. 1 Abb. Ct. App. Dec. 149. TRAFFIC ARRANGEMENTS. 337 which can be upheld. Others which closely resemble these are illegal, as establishing a partnership between the companies concerned, and consequently producing a transfer of the powers, and a merger pro tanto of each separate company in the constituted whole. Reference has already been made to these agreements, and their illegality expressly laid down in the judgments in the authorities cited in the last few pages, in illustrating the nature of legal conventions of this description. Perhaps the leading case on this point is that of Charlton v7. Newcastle and Carlisle Railway Company,} where the arrangement was held to constitute a part- nership. The heads of the agreement here in question, made between the Newcastle and Carlisle Railway Company and the Northeastern Railway Company, pro- vided shortly that the two railways should be amalga- mated on the principle of each company receiving a proportion of the net receipts, and out of such propor- tion paying their own debts, dividends on share capital, and other special charges ; that the Tolling stock and works belonging to the two companies should become joint property ; that the gross receipts of the two lines should be charged with the total’ working expenses ; and so on. Page-Wood, V. C., said: “It is plain, in this state of things, that the companies are desirous of doing that which the law will not allow them to do; or at all events to go as near to the object which they have in view as the law will allow them,” and he accordingly made an order restraining the companies from acting upon the proposed agreement. In reference to the dis. tinction between arrangements amounting to partner- ship and such as merely provide for a division of the tolls, which may be good, as seen in the last few pages, 15 Jur. N.S. 1097. 22 838 , TRAFFIC ARRANGEMENTS. the vice chancellor observed: “The agreement itself is one of an extremely suspicious character on the face of it, They intend to go a step farther—and that not an unimportant one—than that agreement which has been held valid by the Court of Exchequer Chamber in the case of the South Yorkshire and River Dun Company vw. Great Northern Railway Company.’ They go this step farther: having recited the heads of amalgamation, by which the intention of all parties is that there shall be a clear partnership between the companies so far as the law will allow; and that the total profits of the two companies shall be thrown into one fund, and then the net profits divided between the two companies, which would be clearly illegal, they say: ‘What we will do is this—we will adjust the bargain for tolls which the law allows to meet the scheme as nearly as we can, and we will likewise say the tolls shall be diminished by the one company or the other, so as to make the net profits received by the other company as nearly as possible one-tenth and nine-tenths of the gross profits received by the two. We cannot agree to have a profit-and-loss account; the law will not allow us to do it directly, but so far as we can by the mechanism of tolls, we will arrange to do it; and there shall be a sliding scale of tolls which shall be adjusted to make a profit-and-loss account.’ Finding a contract in this form, and the parties being convicted of an illegal act in the first instance, I am bound to restrain them from doing anything, which will amount to an illegal con- tract for the future.” * 19 Ex. 642, * See as to a contract between two mining and transportation companies, Penn, Coal Co. ». Del. & Hudson Canal Oo. 1 Keyes, 72; 31 N. Y. 91; 3 Abb. Ct. App. Dec. 470; 50 N. Y. 250; 29 Barb. 589; sce 8 Wall. 276; Com. 2, Del. & Hudson Canal Co. 48 Penn. St. 295. ‘TRAFFIC ARRANGEMENTS. 339 V. Corporations may not give up to others their special powers, or the control of their undertak- ing. This has been shown in the last chapter, and the cases there cited, in connection with the authorities here referred to, will sufficiently indicate the present state of the law. Corporations may make all necessary arrangements for cheaply and expeditiously developing or carrying on their particular business; but it is another thing to go beyond this, to enter into contracts, for instance, by which the exclusive control or the ex- elusive right of working the line is handed over to other parties. All such arrangements, whatever their form, however disguised,’ are ultra vires and void. * The leading case is Winch v. Birkenhead &c. Rail- way Company.” Here heads of a proposed agreement were drawn up between the directors of two railway companies, by which one company was to allow the other company for ninety-nine years to work the lines and use the property and plant of the granting com- pany, except certain specified lands and buildings, upon 1 See as to this, Simpson v. Denison, 10 Hare, 61, where an agreement nomi- nally giving running powers was held void, as in. reality amounting to a dele- gation of powers. 25D. G. & Sm. 562; Great North- ern Railway Company v. Eastern Coun- ties Railway Company, 9 Hare, 306; Midland Railway Company v. Great Western Railway Company, L, R. 8 Ch. 841. (See also the oases, ante, pp. 306, 308, 328.) * See ante, p. 327, note. A contract by which one railroad company is to discontinue running on part of its line, and another is to prevent the extension of the road of a third, which would interfere with the business of the first, is void. State v. H. & N. H.R. R. Co. 29 Conn. 538; Hartford & N. H. R. R. Co. », N. Y. &N. H. R. R. Co. 3 Rob, 411. A contract by the owners of a railway, to be made under an act of in- corporation with the owners of a rival railway, not to continue such road beyond a certain point, is void as contravening public policy. Vermont & Mass, R. R. Co. v. Fitchburg R. R. Co. 14 Alten, 462. 340 TRAFFIC ARRANGEMENTS. certain terms of allowance for working expenses and charges, and the maintenance of works and ways, the property and plant to be restored on the termination of the agreement, on profitable terms to the granting company; and provision was made for application to parliament for powers, if needful. On a bill by a share- holder in the granting company, on behalf of himself and all other shareholders in that company except the directors, against that company and the other com- pany, the court decided, first, that the proposed agree- ment was a delegation of some of the statutory powers of one of the companies to the other, which was con- trary to the policy of their acts, and could neither be granted nor accepted without further powers from par. liament ; that it was a contract savoring of illegality, which at the suit of any shareholder this court would restrain; and the court, on motion, restrained the com- pany from perfecting the agreement; secondly, that such an agreement is not distinguishable on principle from a lease, to grant which is clearly not within the - statutory powers of the granting company ; thirdly, that the 87th section of the lands clauses consolidation act merely gives to one company a limited* power to run a portion of its traffic, only when it is necessary for the purposes of its own traffic, over the line of ‘another railway company. As pointed out in the last chapter, by express legis- lative provisions, whether contained in general or special statutes, corporations may be enabled to divest themselves of their own peculiar powers, or to acquire those of others. Such enactments sometimes lead to unforeseen results, by conferring upon corporations in- directly and through adventitious circumstances capaci- ties which they would not otherwise possess. TRAFFIC ARRANGEMENTS, 34f. This is well shown by the case of Rogers v. Oxford &c. Railway Company.’ .By an act of 1846, a railway’ company was authorized to purchase the 8. canal, and was bound to maintain the canal and keep it open for traffic when purchased. This act provided that, as soon as the purchase was completed, the railway com- pany might exercise all the rights, powers, and privi- leges ‘which the canal company might before the sale have exercised in relation to the canal, under any acts relating to the canal which might be in force at the time of the conveyance. The canal company did not, before the sale, take any steps to adopt the powers of 8 & 9 Vict. c. 42, the act “to enable canal companies to become carriers of goods upon their canals.” After the purchase the railway company proceeded, under the 8th section of the last-mentioned act, to take a lease of the tolls of the W. canal. The clerk of the G. canal company, which was likely to be injured by the grant- ing of the lease, took shares in the railway company, and filed a bill, on behalf of himself and the other shareholders, to prevent the acceptance of the lease, as being ultra vires. The court, composed of the Lords Justices Knight-Bruce and Turner, assisted by Erle, J., held, that by the purchase of the S, canal the railway company had become a canal company, so as to be en- titled to avail itself of the powers given to canal com- panies by the 8 & 9 Vict. c. 42, and that the taking of such lease was therefore not ultra vires. 12 D, G & J. 662, Compare (Ireland) Railway Company, 3 Ir. Ch. M’Donnell v, Midland Great Western 578. : 342 TRAFFIC ARRANGEMENTS. VI. In determining whether a given traffic arrange. ment be or be not valid, no attention will be paid to any so-called public interests.* * The American authorities are uniform in holding the contrary doc- trine to that stated in the text. See cases cited ante, pp. 327, 328, note, as to railroad companies being agents of the government for public purposes, and only on such ground entitled to the exercise of eminent domain and to receive municipal aid in their construction. See Chic. Bur. & Q. R.R. Co. ». Att’y Gen. U.-S. Cir, Ct. Iowa, 9 West. Jur. 347, for one of the most recent and forcible expositions of the relations between the public inter- ests and the duties of traffic corporations. The clearness with which the subject is presented will justify the fol- lowing somewhat lengthy quotation from the opinion in R. R. Com’rs 2, P. & O.C. RB. RB. Co. 63 Me. 269: ‘‘ The duty of governments to provide facili- ties for public travel and transportation at the public expense, by means of roads, turnpikes, canals, and other artificial structures, has been recognized and discharged by all civilized governments from the earliest times. Gov- ernments soon learned that such facilities could not be provided by private enterprise alone, and that nothing but the exercise of the right of eminent domain and the power of taxation could satisfy the public necessities in this behalf. In the progress of events, however—as business and population in- creased, and wealth accumulated—it was found that this function of govern- ment might, in many cases, be conveniently and safely performed by private individuals associated together under a grant from the government, the ‘corporation giving the public the right to use the highway built by it'in consideration for the franchise received. Among the instrumentalities thus employed, railroads stand pre-eminent. Indeed, they have come to be a public necessity, scarcely exceeded by the public wants that evoked those ruder means of transit in earlier times. They are open for the pub- lic use without discrimination. To the State’s guaranty of the right of public use are superadded heavy pecuniary liabilities of the corporation in case of a breach of this right. The requirement for the payment of fare does not, by any means, conflict with the right of public use. The fare is the consideration for the service performed, whether done by the State directly or by a corporation under a grant from the State. It is simply a substitute for the tax rendered necessary when the State builds and conducts railroads at the public expense. The corporation, upon the payment of the fare, is under the same obligation to render the required service for the public that the State would be if railroads were free and conducted by State authority. Nor does the ownership of railroads, whether it be in the State or a private corporation, affect the nature of their use, since in either case the function to be exercised and the uses to ee TRAFFIC ARRANGEMENTS 343 It has often been considered that all such arrange- ments as lessen the amount of competition are illegal, ‘be subserved are public. Neither does it make any difference in this respect, that private individuals cannot use their own rolling stock upon railroads. The use is one thing, and the mode of use is another. The use, being public, does not become private from the mode of use; that is exclusively within the discretion of the legislature, and whether the rail- road corporation, the public, or the State have authority under the charter ‘to put on and use rolling stock, the use of the road is nevertheless public. The public character of railroads further appears from the authority granted to them to exercise the right of eminent domain. No such right ‘is ever granted to banking, manufacturing, or insurance corporations; or to academies, colleges, or hospitals established and conducted by private individuals or private corporations. It is solely because the use of rail- roads is public that this distinction is made. So, too, upon the same ground of public use, the legislature may authorize municipal corpora- tions to aid in building railroads, by taking stock in railroad corporations, and paying for the same by municipal taxation—a power denied to all municipalities in respect to purely private corporations. “The conclusion therefore is, that railroads, whether built, owned, and conducted by the State or private corporations, and whether exacting tolls or free, are public highways. Olcott ». Supervisors of Fond du Lac, 16 Wall. 678; Belfast & Moosehead Lake R. R. Co. v. Brooks, 60 Me. 569; Allen v. Jay, 60 Me. 124. In considering the right of the public to the use of railroads, and the public interest resulting from this right, it should not be overlooked that the payment of fares is more than compensated in general by the reduced expense of travel and transportation by this mode over other means of conveyance, in addition to the other advantages, public, private, and local, resulting from the establishment of railroads. This is obvious, from railroads so soon superseding the previously existing modes of intercommunication. This beneficial public interest is intended, among others, to be secured under the franchise granted to railroad ‘cor- porations, and the public have an interest that this result should be at- tained and maintained by them. ‘‘In the circumstances of their origin, and in their powers, uses, and duties, railroad corporations are clearly distinguishable from other merely private corporations; and unless we keep these characteristics in view when we come to determine the rights, powers, and duties of such corpo- rations, and the authority, express, implied, or reserved, of the legislature and court in respect to them, we shall run the hazard of confounding dis- similar distinctions and committing grave errors. What analogy, it may be asked, do manufacturing, mining, and other like corporations, evoked iby no public necessity, exercising no sovereign powers, subserving no pub- 3844 TRAFFIC ARRANGEMENTS. on the ground, without more, that the public is thereby put at a disadvantage. Jt has been said that at least lic uses, and subject to no public duties, bear to railroad corporations, that both should alike have the same legal status? Do not these distin- guishing characteristics make railroad corporations guasz public corpora- tions in respect to the authority of the court and legislature to determine and enforce the public duties enjoined upon them? If not, what redress have the public for a neglect, infringement, or violation of those duties? ‘(The recent decisions of this court, affirming the constitutional power of the legislature to authorize municipal corporations to aid in the con- struction of railroads, and denying its power to authorize such corpora- tions to aid manufacturing and other purely private corporations or par- ties; and also those requiring railroad corporations*to protect the pas- sengers on their road, and making them liable for the negligence and misconduct of their servants in this behalf, as well as that further decision prohibiting railroad corporations from making injurious discriminations. with respect to the persons or corporations entitled to do business over their road, or the business to be done thereon, enunciate principles of great importance for determining the various questions not unlikely to arise in respect to the relations subsisting between railroad corporations and the public, the powers granted and the public duties enjoined under their charters, and the constitutional authority of the court and legislature concerning them. These decisions, it is believed, lay the- foundation for a harmonious superstructure of judicial authority upon a subject replete with apparent intricacies and antagonisms. While the law affords rail- road corporations adequate and complete protection in the exercise of their chartered rights, it also holds them to a strict performance of the public duties enjoined upon them as a consideration for the rights and powers thus granted. In cases of apparent conflict between the rights and pow- ; ers conferred and the duties imposed, the solution may oftentimes be ren- dered easy by regarding the admitted right of public use as the touch- stone of judicial interpretation. Belfast & Moosehead Lake R. R. Co. 2. Inhabitants of Brooks, ante; Allen v. Jay, 60 Me. 124; Goddard »v. Grand Trunk Railway Co. 57 Me. 202; N. E. Express Co. o. M. C. R. R. Co. 57 Me. 194. Railroad charters are contracts made by the legislature in behalf of every person interested in anything to be done under them. In con- sideration of the franchise they receive from the State, railroad corpora- tions agree to perform certain duties toward the public. The power of determining those duties and enforcing their performance is vested in the appropriate tribunals of the State. Without such power, there would be danger that railroad corporations, from the number and extent of their operations, might become the most powerful instruments of oppression in our whole system of administration. Being creatures of the law, en- TRAFFIC ARRANGEMENTS. 345 railway, if not all large, companies, do not exist for their own advantage merely, but that the public has, as trusted with the exercise of sovereign powers to subserve public necessi- ties and uses, they are bound to conduct their affairs in furtherance of the public objects of their creation. The duty of the corporation in respect to the subject under consideration is enjoined in that provision of the charter which requires it ‘to receive at all proper times and places, and convey persons and articles.’ It is contended, in behalf of the corpora- tion, that the power to determine what are ‘proper’ times and places for the purposes stated is discretionary with the directors, and that their de- cision is conclusive and final; and, on the part of the State, it is claimed that the duty thus enjoined upon the corporation is imperative and abso- lute, and that the State has the power, through its appropriate tribunals, to determine whether it hus been performed, and to enforce a perform- ance, if there has been none, or only a partial one. “In determining this question, it should be remembered that the object: of the grant was to secure the construction of a public highway, and that, to be serviceable to the public, such highway must be accessible and avail- able at other places than the termini, and oftener than once a month or once a week, or indefinitely and irregularly. The charter must have a. construction reasonable and consistent with the public objects to be pro- moted under it, and not such a one as tends to impair, defeat, or subvert these objects. By the same section that contains the provision in ques- tion, the corporation is required ‘to have its railroad in good repair, and a sufficient number of suitable engines, carriages and vehicles for the transportation of persons and articles.’ The language of the charter is not that it shall be optional with the corporation what number and kind of engines, carriages and vehicles to furnish; at what times and places to. receive and convey persons and freight, and what state of repair to keep the road in; or that it shall put in such rolling stock as it may deem ‘suitable and sufficient,’ build such depots as it may think ‘ proper,’ and keep the road in such repair as it may pronounce ‘good;’ but the mean- ing of the language is, that the several things required to be done shall respectively be ‘suitable and sufficient,’ ‘proper and good;’ in other words, that they shall, in fact, reasonably be of the description specified. The qualifying words do not change the rights of the parties under the charter. The duty of the corporation and the rights of the public in these respects would have been the same as they now are if the charter had simply required the corporation to keep its road in repair, furnish it with rolling stock, and receive and convey passengers and freight along the line of ite road. Under such provisions of the charter, it would be the duty of the corporation to keep the road reasonably safe, provide such rolling stock, establish such depots, and operate the road in such a 346 TRAFFIC ARRANGEMENTS. it were, a vested interest in their objects and privileges, to the extent of having the right to say that under all circumstances cheapness of locomotion shall be especially sought after. What reliance is to be placed on such as- sertions is to be gathered from the following opinion of Page-Wood, V. C.:* “I see nothing in the alleged in. jury to the public arising from the prevention of com- petition; and find no indication in the course taken by the legislature of an intention to create competition by authorizing various lines. From my own experience in parliamentary committees, I should rather be disposed to say that the legislature wisely inclined to avoid au- thorizing the construction of two lines which would necessarily compete with one another. * * * Ex. cept by fixing a maximum rate of tolls, and as far as practicable a maximum amount of profit, the legislature has imposed no conditions in favor of the traveling public.” * 123. & H.103; 30 L. J. Ch. 828. manner as would afford the public reasonable safety and dispatch in the transaction of business upon the road. The duties enjoined upon the corporation are ministerial duties, to do and perform what the public con- venience and necessity reasonably require in respect to the particulars specified. Nor is it within the discretion of the directors to determine ultimately what these public ministerial duties are, or the manner in which they are to be performed. To hold so, would be to concede to the directors the power to promote the private interests of the corporation, by subverting the public objects to be subserved by the charter. The power, both of determination and enforcement, is necessarily vested in State authority.” * Railroads being part of the public highways, they are open to all, subject to the proper regulations of the corporations owning them as to their use; and such corporations being also transportation companies for the traffic over them, they are common carriers, and therefore come under the law in that capacity also. Therefore, agreements into which railroad companies sometimes enter, not to acquire monopolies themselves, but to TRAFFIC ARRANGEMENTS. BAT grant them to others, such as contracts by which exclusive privileges and monopoly of transportation on their lines, or on particular trains, are given to express companies and the like, are illegal. This subject, how- ever, belongs rather to the law of common carriers than to that of cor- porations strictly, and gives rise to questions of illegality rather than of ultra vires. All common carriers are bound to receive and carry all goods offered for transportation, subject to all the responsibilities incident to their employment, and are liable to an action in case of refusal. New Jersey Steam Nav. Co. 0. Merchants’ Bank, 6 How. 344. In Sandford ». Railroad Co. 24 Penn. St. 378,.it is decided that a railroad cannot give to an express company, by contract, the exclusive privilege of transporting express matter on passenger trains; and the court say: ‘‘The power to regulate the transportation on the road, does not carry with it the right to exclude any particular individuals, or to grant exclusive privileges to others. Competition is the best protection to the public, and it is against the policy of the law to destroy it, by creating a monopoly of any branch of business, It cannot be done except by the clearly expressed will of the legislative power. * * * A regulation, to be valid, must operate on all alike. If it deprives any persons of the benefits of the road, or grants exclusive privileges to others, it is against law and void.” In like manner, a contract between the Maine Central R. R. Co. and the Eastern Express Co., giving to the latter the use of a separate apartment in a car attached to each passenger train, and excluding all other express com- panies from similar privileges, was declared void in New England Express Co, ». Maine Cent. R. R. Co. 57 Me. 188. The court uses the following language: ‘“The very definition of a common carrier excludes the idea of the right to grant monopolies, or to give special and unequal pref- erences. It implies indifference as to whom they may serve, and an equal readiness to serve all who may apply, and in the order of their applica- tion. The defendants derive their chartered rights from the State. They owe an equal duty to each citizen. They are allowed to impose a toll, but it is not to be so imposed as specially to benefit one and injure au- other. They cannot, having the means of transporting all, select from those who may apply, some whom they will, and reject others whom they can, but will not, carry. They cannot rightfully confer a monopoly upon individuals or corporations. They may regulate transportation, but the right to regulate gives no authority to refuse, without cause, to trans- port certain individuals and their baggage or goods, and to grant ex- clusive privileges of transportation to iothers. The State gives them a charter for no su€h purpose. Such is the common law on the subject.” ‘*T have insisted that a common carrier was to be regarded, to some extent at least, as clothed with a public capacity, and I now maintain that even if this theory should be rejected and thrown out of the argument, still the defendants must be considered as invested with that attribute. In my opinion, a railroad company, constituted under statutory authority, is not ae 348 TRAFFIC ARRANGEMENTS. only, by force of its inherent nature, a common carrier, as was held in the case of Palmer v. Grand Junction Railway, 4 M. & W. 749, but it becomes an agent of the public in consequence of the powers conferred uponit. A company of this kind is invested with important prerogative franchises, among which are the rights to build and use a railway, and to charge and take tolls and fares. These prerogatives are grants from the government, and public utility is the consideration for them. Although in the hands of a private corporation, they are still sovereign franchises, and must be used: and treated as such, they must be held in trust for the general good. If they had remained under the control of the State, it could not be pre- tended that, in the exercise of them, it would have been legitimate to favor one citizen at the expense of another. If a State should build and operate a railroad, the exclusion of everything like favoritism, with respect to its use, would seem to be an obligation that could not be disre- garded without violating natural equity and fundamental principles; and it seems to me impossible to concede that when such -rights as these are handed over, on public considerations, to a company of individuals, such rights lose their essential characteristics. I think they are unalterably parts of the supreme authority, and in whatsoever hands they may be found they must be considered as such. In the use of such franchises, all citizens have an equal interest and equal rights, and all must, under the same circumstances, be treated alike. It cannot be supposed that it was the legislative intention, when such privileges were given, that they were to be used as private property, at the discretion of the recipient; but, to the contrary of this, I think an implied condition attaches to such grants, that they are to be held as @ quasi public trust, for the benefit, at jeast to a considerable degree, of the entire community. In their very nature and constitution, as I view this question, these companies become, in certain respects, public agents, and the consequence is, they must, in the exercise of their calling, observe to all men a perfect impartiality.” Beasley, CO. J., in Messenger v. Pennsylvania R. R. Co. '7 Vroom, 406. See also McDuffee v. Raiload, 52 N. H. 480; Beekman 2. Sar. & Sch. R. R. Co. 8 Paige, 45; Erie R. W. Co. ». Union Loc. & Ex. Co. 6 Vroom, 240; Rogers L. & M. Works v. Erie R. W. Co. 5 C. E. Green, 8379; Camblos ». Phil. & Reading R. R. Co. 4 Brews. 563; Shipper v. Penn. R. R. Co. 47 Penn. St. 338; Cumberland Valley R, R. Co. Appeal, 62 Penn. St. 218; Audenreid v. Phila. & Reading R. R. Co. 68 Penn. St. 370; Chicago, B. & Q. RB. R. Co. o. Parks, 18 Ill. 460; Galena & Chi. R. R. Co. ». Rae, 18 Til. 488; Vincent ». Chicago & Alton R. R. Co. 49 Ill. 88; Chicago & N. W. R. BR. Co. v. People, 56 Il. 365; Eclipse Towboat Co. », Pontchar- train R. R. Co, 24 La, An. 1; People v. Chicago & Alton R. R. Co. 5 Chi- cago Legal News, 486; Gilbert’s Railway Law in Illinois, p. 253. Railroads may, doubtless, discriminate between the amount of fare where a ticket is purchased and where it is paid on the train. Jeffersonville R. R. Co. ». Rogers, 38 Ind. 116. Still they would have no right to discriminate TRAFFIC ARRANGEMENTS. 349 between persons, and sell tickets to some and refuse others, without just cause. Indianapolis &c. R. R. Co. v. Rinard, 46 Ind. 293. An agreement granting to a coal company all the facilities of navigation which a canal will afford, not exceeding one-half of its whole capacity, is not invalid, ag creating monopoly, unless it appear that the public is injured, or that a function has been exercised which is exclusive of the public right. Com- monwealth v. Del. & Hud. Canal Co. & Penn. Coal Co. 43 Penn. St. 295. In Fitchburg R. R. Co. v. Gage, 12 Gray, 398, a qualification of the gen- eral doctrine against discrimination is given as follows: ‘‘The principle derived from the common law is very plain and simple. It requires equal justice to all. But the equality which is to be observed in relation to the public and to every individual, consists in the restricted right to charge, in each particular.case of service, a reasonable compensation and no more. * * * If, for special reasons, in isolated cases, the carrier sees fit to stipulate for the carriage of goods or merchandise of any class for individuals, for a certain time, or in certain quantities, for less compensation than what is the usual, necessary and reasonable rate, he may undoubtedly do so without thereby entitling all other persons and parties to the same advantage or relief.” CHAPTER III. THE EXERCISE OF THE POWERS OF A CORPORATION BY THE CORPORATION ITSELF. SECTION I. MEETINGS OF THE MEMBERS OF A CORPORATION. Txovex a corporation is distinct from the individuals . composing it, yet, being intangible, it can transact its business and manifest its wishes only by and through these individuals. Consequently meetings of the mem- bers have to be held from time to time for the various purposes connected with the corporation. At all meet- ings every member has a right, apart from provision ex- press or implied to the contrary, to be present. Notice must therefore, in some way or other, be given to each person entitled to be present, and the omission of such notice to any one, though he may have given a general dispensation of notice, and though also the omission be accidental,’ will invalidate the proceedings at the meeting.”* Though all members have primarily a right ? Rex v. Langhorn, 4 A. & E. 538. whether it is necessary to ea notice of * Rex v. Langhorn, udi supra ; Rex an adjourned meeting to those who at- v. Chetwynd, 7 B. & C. 695; see Moore tended the original one, see Wills ». v. Hammond, 6 B, & C. 456. As to Murray, 4 Ex, 843. *It is not only a plain dictate of reason, but a general rule of law, that no power or function entrusted to a body consisting of a number of persons, can be legally exercised, without notice to all the members com- posing the body. People v, Batchelor, 22 N. Y. 128; People’s Ins. Co. 2. Westcott, 14 Gray, 440; State o. Ferguson, 2 Vroom, 107; see also cases MEETINGS OF THE MEMBERS, 35t to receive notice and to attend, yet the constating in- struments or custom,’ or the by-laws of the corporation,? may restrict the number having this right; but restrictive by-laws which are repugnant to the constating instru- ments, or otherwise illegal, will be invalid? On the other hand, a corporation may make and en- force ‘by-laws for compelling, by means of pecuniary penalties, the attendance of members at corporate meetings.* But if all the persons entitled to be present at any meeting are actually present thereat, whether with or without notice, and do not object to the same on the ground of informality, the want of notice will be excused, and they will be unable afterwards to repudiate the proceedings of such meeting.© Even persons not present, and who did not receive notice, may by subse- 3 Sea Rex, v. Attwood, 4 B, & Ad. *Tobaeco Pipe Makers’ Company v. 481; N. & M. 286. Woodroffe, 7B. & O. 838. ? Rex v. Westwood, 7 Bing. 1; 4 B. ° Rex v. Chetwynd, 7 B. & C. 695; & C, 781; Rex v. Bird, 13 East, 367; re British Sugar Refining Company, ex Rex v. Durham, 1 Burr. 127. parte Faris, 3 K. & J. 408; 26 L. J. Ch. 8’ Tucker v. Rex, 2 Bro. P. C. 304; 369. Hoblyn v, Rex, 2 Bro. P. C. 329. cited in the other notes on this section. The absence of a member from home will not excuse the want of notice. Jackson ». Hampden, 20 Me. 87. On the other hand, the mental imbecility of a member, rendering him incapable of receiving notice, will not invalidate the proceedings, Stebbins v. Merritt, 10 Cush: 27. The pledgee of stock is not such an owner as to be entitled to notice. McDaniels v. Flower Brook Mfg. Co. 22 Vt. 274. In some cases the proper notice is presumed, in the absence of proof to the contrary. Thus, where, by the records, a meeting of di- rectors was held and a quorum was present, notice to the others is pre- sumed. Sargent v. Webster, 13 Met. 497; Lane ». Brainerd, 30 Conn. 565; see, also, Middlesex Husbandmen »v. Davis, 3 Met. 133. Moreover, the validity of the acts of directors cannot be questioned collaterally on the ground of irregularity of notice. Chamberlain v. Painesville &c. R. R.qCo. 15 Ohio St. 225; see, also, Edgarly ». Emerson, 3 Fost. 555; and Dispatch Line of Packets vo. Bellamy Mfg. Co. 12 N. H. 205. As to municipal corporations, see Dillon on Mun. Corp. §§ 200-225. 352 EXERCISE OF POWERS BY CORPORATION. quent acquiescence in the resolutions passed or other business transacted at any meeting, be bound by the same, if éntra vires, and be unable to object, to the want of notice.’ * The requisites of the notice so required to be given vary extremely. Generally its essential parts will be set forth by the constating instruments; with ‘joint stock companies this will invariably be the case, but custom, more especially with municipal and eleemosy-. nary corporations, will sometimes determine these requi- sites wholly or in part. Special circumstances or arrangements apart, the notice should contain, first, the date and time, and secondly, the place of meeting, unless there be some standing rule or established cus- tom, known to all the members, which fixes these,’ and even then it will be more advisable to issue a proper notice to remind forgetful members; and thirdly, the business to be considered. However, the transaction of business at a meeting foreign to the objects specified in the notice will not make the whole meeting irregular.’ + ?Turqudnd v. Marshall, L. R. 4 Ch. 2 See Rex v. Hill, 4 B. & C. 426. 376; Smalleombe v. Evans, L. R. 3 H. 3 Re British Sugar Refining Com- L. 249. See also Phosphate of Lime pany, ubi supra; Graham v, Van Die- Company v, Green, L. R. 7 C. P. 43, men’s Land Company, 1 H. & N, 541; where the .matters acquiesced were ap- 26 L. J. Ex. 73; re Irrigation Company parently ultra vires. of France, Fox’s Case, L. R. 6 Ch. 176. e * The want or irregularity of notice is waived by the presence and consent of all who have a right to attend a meeting. Angell & Ames on Corp. § 495; Stebbins v. Merritt, 10 Cush. 27; People 2. Peck, 11 Wend. 604; Jones v. Milton T. Co. 7 Ind. 547. But if one person is absent, or refuses his consent, the proceedings are invalid. People’s Ins. Co. 2. Westcott, 14 Gray, 440. Notice may be waived by the recognition of the authority of an agent appointed at the meeting in question. Bryant 2. Goodman, 5 Pick. 228. t The requisites of notice are in this country the same in general, as those stated in the text: 1. Time, unless a regular time is fixed in the charter or in some by- MEETINGS OF THE MEMBERS. 353 The length of time which notices must be issued previous to meetings is usually fixed by the constating instruments. In companies governed by 8 & 9 Vict. c. 16, it must be fourteen days while the companies act, 1872, requires at least seven days? * 1 Sec. 71 & sec. 138. 725 & 26 Vict. c. 89, sec. 52, and Table A, clauses 95-97. law, of which every member is presumed to have notice. Angell & Ames on Corp. § 488; People v. Batchelor, 22'N. Y. 128. In Atlantic Ins. Co. v. Sanders, 36 N. H. 252, it is said that if the time has been fixed by usage, a tacit understanding of the members, or in any other way, it is enough to obviate the necessity of notice. 2. Place, unless that is in like manner established. Angell & Ames, § 496; Jones v. Milton & Rush. T. Co. 7 Ind. 547. .8, The business to be transacted, except in case of stated general meetings for the transaction of all business, and meetings regularly held for a particular object. Sampson v. Bowdoinham Steam Mill Corp. 36 Me. 78; Warner v0. Mower, 11 Vt. 385; Merritt o. Farris, 22 Ill. 303; see also note on ordinary and extraordinary meetings, post, p. 354. 4, The notice must be personal, unless otherwise provided by charter ora by-law. Stevens ». Eden Meeting-House Soc. 12 Vt. 688; Wiggin 2. Free Will Baptist Church, 8 Met. 301; Stow v. Wyse, 7 Conn. 214; Savings Bank ». Davis, 8 Conn. 191; Taylor o. Griswold, 2 Green, 222. 5. The summons must de issued by one who has authority. Angell & Ames on Corp. § 491; Evans v. Osgood, 18 Me. 213; Stevens v. Eden Meeting-House Soc. 12 Vt. 688 ; Bethany 0. Sperry, 10 Conn. 200. Where the corporation has no officer by whom a meeting can be called, its powers are suspended till a new charter is granted, unless the charter or the general law provides some remedy. Goulding »v. Clark, 34 N. H. 148. But a by-law providing that a meeting shall be called by the president, on application by a certain number of members, does not preclude the directors from calling without such application. Citizens’ Mut. Fire Ins, Co. v. Sortwell, 8 Allen, 217; see also Chamberlain v. Painesville &c. R. R. Co. 15 Ohio St. 225. In some cases no notice whatever is necessary, on the ground that the members are notified in all the particulars by the charter or by-laws of the corporation. Warner ». Mower, 11 Vt. 385. So, too, the terms of the charter may, of course, be such as to remove the necessity of any one or more of the ordinary requisites. *When the charter does not provide the length of time, before the meeting, requisite for notice, the general law of corporations is to be fol- 23 854 EXERCISE OF POWERS BY CORPORATION. Meetings may be adjourned, but nothing may be transacted at any adjourned meeting save the unfinished business of the former meeting.’ * Meetings are of two kinds, ordinary or general, and extraordinary or special. The former are held period- ically at appointed times, and for the consideration of matters in general. The latter are called upon emer- gencies, and for the transaction of particular business. Extraordinary meetings being thus summoned unex- pectedly, the notice relating to them ought to specify very carefully and exactly the occasion of the summons, and all the business proposed to be transacted thereat, so as to call the attention of each member in an especial manner to the circumstances.’ + But beyond this, and 1 Reg. v. Grimshaw, 10 Q. B. 747. ? See Re Bridport Old Brewery Com- ; pany, L. R. 2 Ch. 191. lowed; and, in the absence of any such general law, a reasonable time is required, or the usual time, if a custom has prevailed. Wiggin ». Free- will Baptist Soc. 8 Metc. 301; In re Long Island R. R. Co. 19 Wend. 87; Angell & Ames on Corp. § 491. * Business which may be transacted at any meeting may also. be at an adjournment of such meeting; but no other business can be done without special notice.’ Smith v. Law, 21 N. Y. 296; People v. Batchelor, 22 N. Y. 128; Farrar o. Perley, 7 Me. 404; Schoff v. Bloomfield, 8 Vt. 472. In Warner ». Mower, 11 Vt. 385, Redfield, J., says: “It is too well settled to require comment, that all corporations, whether municipal or private, may transact any business at an adjourned meeting which they could have done at the original meeting. Whether the meeting is con-. tinued without interruption for many days, or, by adjournment, from ‘day to day, or from time to time, many days intervening, it is evident it must be considered the same meeting, without any loss or accumulation of powers.” + In regard to the distinction between ordinary and extraordinary meetings, it is to be observed, that these terms are used at different times with different meanings. Sometimes the distinction has regard to the time or place, and at other times to the business to be transacted. This is also true as to the terms general and special, or stated and special, meetings. It is evident that a meeting may be ordinary in one particular MEETINGS OF THE MEMBERS. 355 the further fact that the proceedings of an extraordinary meeting are usually not final, but require confirmation at some subsequent meeting,’ there is little difference in the requirements of both kinds of meetings, and the notice to be previous to either, and the formalities to be observed will be very similar, if not actually iden- tical. ‘See Dean v. Bennett, L.R. 6 Ch. 489; Clinch v, Financial Corporation, L. R. 5 Eq, 450. and extraordinary in another. The general rule is, that in whatever respects the meeting is extraordinary, as to that, notice must be given, although, as to other particulars, ordinary in their character, no notice is required, Thus, a meeting which is regular or ordinary as regards time, but extraordinary in the business to be done, requires special notice of its object. Zabriskie » C. C.& C. R. R. Co. 23 How. 381; Sampson »v. Bowdoinham Steam Mill Corp. 36 Me. 78; People’s Ins. Co. v. Westcott, 14 Gray, 440; Atlantic Delaine Co. ». Mason, 5 R. I. 463. And on the other hand, notice of a meeting, special or extraordinary in point of time, need -not state the object when it is for the transaction of ordinary business. Savings Bank ». Davis, 8 Conn. 191. A member is not presumed to know all which takes place at a regular meeting, although he is bound by the action of the majority in matters coming within the scope of such meet- ing. Notice of a special meeting given at a regular or general meeting is therefore no notice to one who is absent. People v. Batchelor, 22 N. Y. 128. In Warner 2. Mower, 11 Vt. 385, Redfield, J., says: “It is to be borne in mind, too, that a manifest distinction obtains between general stated meetings of a corporation and special meetings. I know that stated meetings may, nevertheless, be special, ¢. ¢., limited to particular business. But stated meetings of a corporation are usually general, 7. ¢., for the transaction of all business within the corporate powers. Unless the ob- ject of such meeting is restricted by express provision of the by-laws, it would ordinarily be understood to be general; and so every corporator would be bound to understand it. But if the object of the meeting be limited by the by-laws, it is then a special meeting, and no other business could lawfully be transacted unless special notice was given. Where the meeting is stated and general, no notice is required, either of the time or place of holding the meeting, or of the business to be transacted.” See also Redfield on Railways, ch. IV, sec. 4. As to meetings held out of the State, see Appendix. 356 EXERCISE OF POWERS BY CORPORATION. Upon this portion of the subject other observations will be made subsequently in part III, chapter V, section 4, in considering the meetings of directors. SECTION II. THE NECESSITY FOR SEALING.* Under the strict common law all the contracts of corporations must be attested by the fixing of their seal. * The doctrine of the common law as to the necessity of sealing, is universally abandoned in the United States. The rules prevalent here on the subject of the modes m which a corporation may contract, could not be more correctly expressed than by the language of the statute of 8 & 9 Vict. c. 16; see post, p. 386. The tendency of modern decisions is to as- similate the powers, duties and responsibilities of corporations to the pow- ers, duties and responsibilities of individuals. It would follow, therefore, that wherever, by law, private persons must contract by writing under seal, there corporations must contract by sealed instrument. Wherever, by law, private persons must contract by writing signed by the parties. . to be charged therewith, there some body or authorized agent of the cor- poration by vote or other writing, must make the contract, in order that it may be binding on the corporation. Wherever, by law, private persons would be bound by a parol contract, there a parol contract made by the officers or agents of the corporation, acting within the apparent scope of their authority, and purporting to be in behalf of the corporation, will be held obligatory on the corporate body. There is, however, an exception from these general rules, which may be here referred to: ‘‘The common law rule with regard to natural persons, that an agent, to bind his princi- pal by deed, must be empowered by deed himself, cannot in the nature of things be applied to corporations aggregate.” Angell & Ames, § 224; cit- ing Hopkins v. Gallatin T. Co. 4 Humph. 403; Beckwith v. Windsor Manuf. Co. 14 Conn. 594; Howe v. Keeler, 27 Conn. 588; Burn 2. Mc- Donald, 3 Gratt. 215; see post, p. 365, note. A few extracts from the earlier decisions in the Supreme Court of the United States must suffice as authority for the general propositions laid down. For cases supporting them, see 1 Redfield on Railways, § 118, 148; Angell & Ames on Corp. chs. VII and VIII; Dillon on Mun. Corp. § 130. ‘*The technical doctrine that a corporation could not contract except under its seal, or, in other words, could not make a promise, if it ever had been fully settled, must have been productive of great mischiefs, In- THE NECESSITY FOR SEALING. ' 357 ‘They being invisible—and as Coke adds (10 Rep. 32), without a soul—cannot manifest their intentions by any ‘deed, as soon as the doctrine was established that its regularly ap- pointed agent could contract in their name without seal, it was im- possible to support it; for otherwise the party who trusted such con- tract would be without remedy against the corporation. Accordingly, it would seem to be a sound rule of law, that wherever a corporation is act- ing within the scope of the legitimate purposes of its institution, all parol contracts made by its authorized agents are express promises of the ‘corporation ; and all duties imposed on them by law, and all benefits con- ferred at their request, raise implied promises, for the enforcement of which an action may well lie. And it seems to the court, that adjudged cases fully support the position.” Bank of Columbia ». Patterson, 7 Cranch, 299; citing Gray ». Portland Bank, 8 Mass. 364; Worcester T. Corp. ». Willard, 5 Mass. 80; Gilmore v. Pope, 5 Mass. 491; Andover & Medford T. Corp. v. Gould, 6 Mass. 40; see Bank of Metropolis o. Guttschlick, 14 Pet. 10. The Bank of U.S. v. Dandridge, 12 Wheat. 64, came up on writ of error to the Circuit Court of the United States for the district of Virginia, of which C. J. Marshall was the circuit judge. Mr. J. Story, in delivering the prevailing opinion, reversing the judgment of the court be- low, says: ‘In ancient times, it was held that corporations aggregate could do nothing but by deed under their common seal. But this princi- ple must always have been understood with many qualifications, and seems inapplicable to acts and votes passed by such corporations. at cor- porate meetings. It was probably, in its origin, applied to aggregate corporations at the common law, and limited to such solemn proceedings as were usually evidenced under seal, and to be done by those persons who had the custody of the common seal, and had authority to bind the corporation thereby, as their permanent official agents. Be this as it may, the rule has been broken in upon, in a vast variety of cases in modern times, and cannot now, as a general proposition, be supported. And it is now firmly established both in England and America, that a corporation may be bound by a promise, express or implied, resulting from the acts of its authorized agent, although such authority be only by virtue of a cor- porate vote unaccompanied with the corporate seal.” The question un- der consideration by the court did not depend upon the point, whether the acts of a corporation might be proved otherwise than by some written document; but the court consider it as illustrative upon the point then in judgment. Marshall, C. J., in his dissenting opinion, while admitting that a corporation can express its assent by vote, insists, that such vote must be evidenced by a written record. On the question, whether a corporation can speak directly in any way but by writing, he says: ‘‘Can such a be- ing speak, or act otherwise than in writing? Being destitute of the 358 EXERCISE OF POWERS BY CORPORATION. personal act or oral discourse. They, therefore, act and speak only by their common seal. For though the par- natural organs of man, being distinct from all its members, can it com municate its resolutions or declare its will, without the aid of some ade- quate substitute for those organs? If the answer to ‘this question must be in the negative, what is that substitute? I can imagine no other than writing. The will to be announced is the aggregate will. The voice which utters it must be the aggregate voice. Human organs belong only to individuals. The words they utter are the words of individuals. These individuals must speak collectively to speak corporately, and must use a collective voice. They have no such voice, and must communicate this collective will in some other mode. That other mode, as it seems to me, must be by writing. A corporation will generally act by its agents; but those agents have no self-existing power. It must be created by law, or communicated by the body-itself. This can be done only by writing. If, then, corporations were novelties, and we were required now to devise the means by which they should transact their affairs, or communicate their will, we should, I think, from a consideration of their nature, of their capacities and disabilities, be compelled to say, that where other means were not provided by statute, such will must be expressed in writ- ing.” After a review of authorities, he concludes that, “ According to the decisions of the courts of England, and of this court, a corporation, unless it be in matters to which the maxim de minimis non curat lex ap- plies, can act or speak, and, of course, contract, only by writing. This principle, which seems to be an essential ingredient of its very being, has been maintained by all the judges who have ever discussed the subject. Upon this principle, and the authority of these cases, I have supposed that a corporation cannot receive and assent to a deed of any description, unless this assent be expressed regularly in writing. It ought to be en- tered on the books of the corporation.” The opinion closes. with the fol- lowing remark: ‘‘I have stated the view which was taken by the Circuit Court of this case. I have only to add, that the law is now settled other- wise, perhaps to the advancement of public convenience. I acquiesce, as I ought, in the decision which has been made, though I could not concur init.’ ‘The ancient doctrine, that a corporation can act in matters of contract only under its seal, has been departed from by modern decisions.” Chesapeake & Ohio Canal Co, ». Knapp, 9 Pet. 541. Whenever a corporation has power to deal through agents, the necessity ° of the seal is diminished, and it may be bound by agreements into which it could not have entered directly without a seal. And, it is to be ob- served, that a corporation whose affairs are, by the charter, to be managed by a board of directors, does almost all its business by agents. The di- rectors are its agents. In Bank of U. 8. ». Dandridge, Judge Story says: THE NECESSITY FOR SEALING. 359: ticular members may express their private consent to any act by words or signing their names, yet this does not bind the corporation; it is the fixing of the seal, and that only, which unites the several assents of the individuals who compose the community, and makes one joint assent of the whole. As expressed by Rolfe, B,, in Mayor &e. of Ludlow v. Charlton; “The seal is required as authenticating the concurrence of the whole body corporate. If the legislature, in creating a body corporate, invest any mémber of it, either expressly or impliedly, with authority to bind the whole body by his mere signature or otherwise, then, undoubtedly, the adding of a seal would be matter purely of form, and not of substance. Every one becoming a member’ of such a corporation knows that he is liable to be bound in his corporate character by such an act, and persons dealing with the corporation know that by such an act the body will be bound. But.in other cases the seal 16M. & W. 815. ‘Tt is most manifest that the corporation is altogether a distinct body from the directors, possessing all the general powers and attributes of an aggregate corporation, and entitled to direct and superintend the manage- ment of its own property, and the government of the institution, and to enact by-laws for this purpose. So far as the act delegates authority to the directors, the latter possess it and may exercise it, not as consti- tuting the corporation itself, but as its express statute agents to act in the ordinary business of the institution. The directors are created a board, and not a corporate body.” Accordingly, it was held in Fleck- ner v. Bank of U. 8. 8 Wheat. 338, that ‘‘ whatever may be the original correctness of this doctrine (that corporations can act only by their seal) as applied to corporations existing by the common Jaw, in respect even to which it has been certainly broken in upon in modern times, it has no application to corporations created by statute, whose charters contemplate the business to be transacted exclusively by a special body or board of directors. And the acts of such body, evidenced by a written vote, are as completely binding upon the corporation, and as complete authority to their agents, as the most solemn acts done under the corporate seal.” 360 ‘EXERCISE OF POWERS BY CORPORATION. is the only authentic evidence of what the corporation has done or agreed to do. The resolution of a meet- ing, however numerously attended, is, after all, not the act of the whole body. Every member knows he is bound by what is done under the corporate:seal, and by nothing else. It is a great mistake, therefore, to speak of the necessity of a seal as a relic of ignorant times. It is no such thing; either a seal, or some sub- stitute for a seal, which by law shall be taken as con- clusively evidencing the sense’of the whole body cor. porate, is a necessity inherent to the very nature of a corporation.” * The rigid application of this rule has necessarily entailed not a little moral injustice, as in the case just cited. Two other notorious instances are Arnold v. Mayor of Poole, and Diggle v. London and Blackwall Railway Company.’ In the former case, the plaintiff, an attorney, had been appointed by the defendants to conduct their suits and to perform other legal business ‘for them, but his appointment not having been under the common seal, it was held that he could not recover his bill of costs. In the latter case, the plaintiff had, in accordance with an agreement not under seal, entered into with the defendants, executed certain works and improvements upon their line. He was dismissed be- fore the completion of the work, and on action brought it was held he could not recover for the services ren- dered. 14M. & Gr. 860, and 5 Ex, 442, respectively. * This language is repeated with approval by Pollock, B., in Mayor of Kidderminster ». Hardwick, L. R. 9 Exch. 24. t+ See Mumford », Hawkins, 5 Den. 855; Western Bank », Gilstrap, 45 Mo. 419. % THE NECESSITY FOR SEALING. 361 Moreover, owing to the vast increase in modern times in the number of trading corporations, it has been found advisable, if not absolutely necessary, to qualify the rule, and to hold many contracts made by or with corporations valid though not under seal. These ex- ceptions are now to be examined,* but it must be pre- mised that under no circumstances will any exception be allowed to prevail against the express directions of the legislature. Whenever a statute makes sealing an ~~~ essential condition for the validity of a contract, this formality must be observed. Thus in Frend v. Den- nett’ the plaintiff sued the clerk of the local board of health of the non-corporate district of Worthing for work done in pursuance of a contract entered into with them, such contract not being under seal. The 85th section of 11 & 12 Vict. c. 63, provides that all contracts above £10 shall in case of non-corporate districts be under the seal of the board, &c. Consequently the verdict entered for the plaintiff at Nisi Prius was set aside by the court in bane. This being borne in mind, the following seem to be the chief cases in which the absence of a seal will be excused. a. Matters of trivial and every-day Occurrence. From earliest times it has been admitted that to enforce the rigid rule in the insignificant affairs of daily life would be needless, if not utterly impracticable.t 1971. J.C. P. 314. Compare Cun- ningham v. Local &c, Wolverhampton, 26 L. J. M. C. 38. * Compare exceptions to the general rule in England as stated by Best, C. J., in East London Waterworks v. Bailey, 4 Bing. 283; see L. R. 3 C. P. 468; L. R. 4. P. 617. + “De minimis non curat lea.” Marshall, C. J., in Bank of U.S. 2. Dandridge, 12 Wheat. 64. 362 EXERCISE OF POWERS BY CORPORATION. This appears from the judgment in Horn ». Ivy,’ in 21 Car. II, and the references to the Year Books therein con- tained. “Admitting all this for the defendant, yet it was said the plea was naught. First, because he justi- fied by a command from a corporation (the Governors and Society of the Trade to the Canaries), and did not allege it to be by deed. And it was agreed that a cor- poration might employ one in ordinary services with- out a deed, as to be butler, 18 Ed. IV, 8, or the like. But one could not appear in an assize as a bailiff to a corporation without deed, 12 H. VII, 27. Neither can they license one to take their trees without deed, nor send one to make a claim to land, 9 Ed. IV, 39. They cannot make themselves disseizors by their assent with- out deed, or command one to enter for a condition broken, 7 H. VII, 9.” So in Manby w. Long e¢ al.,? for taking cattle damage feasant, defendants made connu- sance as bailiffs for the corporation of Christ’s Hospital, and, on demurrer, held that “the connusance was good without mentioning their precept, or that it was in writing, for their precept need not be in writing for such matters as this.” . cd b. Cases of Utility amounting to Necessity. From cases of every-day occurrence, where it is ab- solutely necessary that the formality of sealing should be dispensed with, we proceed to those cases whose ?1 Ventr. 47. See Randle v, Deane south Je seal del corporation, 1 Sid. et al, (2 Lut. 1496), 12 Will. III, C. B., to an action of trespass for beating the horses and servants of plaintiff, defend- ants justified as being the servants of the mayor, aldermen, and burgesses of B, Plaintiff demurred: “que les defs justifie come servants al un corporation, et pur ceo doient monstre un authority 441;” but the plea was overruled. “ Car le difference est enter un corpora- tion que ad un teste, et per consequence poet faire un personal command, et un corporation aggregate que n’ad un teste. 16 H.VII, 26. Et vid aux pur ceo, 1 Lev. 107.” *3 Lev. 107. THE NECESSITY FOR SEALING. 363. utility differs but little from necessity. It is now fully established that when the constitution and end of a corporation require that certain contracts should be made and work done, and such contracts have been formed by agents lawfully authorized, and work has been performed and materials supplied in pursuance of the same, under such circumstances the corporation will be liable to an action, if not upon the special con- tract, at least on the common counts. “T am disposed to think that wherever the purposes. for which a corporation is created render it necessary that work should be done, or goods supplied to carry such purposes into effect, as in the case of the guardians of a poor law union, and orders are given at a board regularly constituted, and having general authority to make contracts for works or goods necessary for the purposes for which the corporation was created, and the work is done or, goods supplied and accepted by the corporation, and the whole consideration for pay- ment executed, the corporation cannot keep the goods or the benefit, and refuse to pay on the ground that though the members of the corporation who ordered the goods or the work were competent to make a con- tract and bind the rest, the formality of a deed or of affixing the seal was wanting, and then say no action lies, we are not competent to make a parol contract, and we avail ourselves of our disability.” These are the words of Wightman, J., in Clarke v. Cuckfield Union; in which case the plaintiff, having put up water-closets at a workhouse in pursuance of an oral order given him by the guardians, was held entitled to recover for the same. In the following cases similar claims were allowed: 191 LJ. Q. B. 349. 364 EXERCISE OF POWERS BY CORPORATION. Sanders v. Guardians of St. Neot’s Union,’ for iron gates, the order given being merely oral; De Grave v, Mayor &ec. of Monmouth,’ for weights and measures sent to the mayor at his request, afterwards examined in the town-hall by the full corporate body, and accepted and used by them; Beverley v. Lincoln Gaslight &c. Com- pany, for gas meters supplied to the defendants; Nicholson v. Bradfield Union,’ for coals supplied at various times by the plaintiff to the defendants for their workhouse, under an agreement between the plaintiff and the guardians, signed by the former, but not under the seal of the latter. In the following they were disallowed: Paine ». Guardians of Strand Union,’ for making a plan of one of the parishes of the union; Lamprell v. Bellericay Union,® for making alterations in and additions to a workhouse, such being directed by parol, though the contract to build the workhouse was itself under seal; Homersham v. Wolverhampton Waterworks Company,’ also for variations made in pursuance of orders given by the defendants’ engineer while carrying out a con- tract duly sealed. It will, however, be noticed, in reference to the first of these three cases, that the making a plan for some particular parish was not necessary to the union gener- ally, nor incidental to the purposes for which the guard. jans were incorporated; and as to the two latter, that they were claims for extra work performed while com- pleting a contract under seal, and that if it were neces- sary that the primary contract should be by deed, the 18 Q. B. 810. Bing. 75; Church v. Imperial Gaslight 740. & P. 111. &c, Company, 6 Ad. & E, 846. , "6 Ad. & E. 829. Compare London “L, RB, 1 Q. B. 620. Gaslight &c, Company v. Nicholls, 2 C. °8Q. B. 326; 15 L, J. M,C. 89. & P. 365; Mayor of Stafford v, Till, 4 ° 3 Ex, 288; 18 L. J. Ex. 282. 76 Ex. 187; 20 L. J. Ex, 193, THE NECESSITY FOR SEALING. 365 same reasons would require the collateral engagements to be similarly authorized. Still, it must be admitted that the authorities are conflicting; but in the latest, as appears above, Clarke v. Cuckfield Union was followed, as being founded on justice and convenience. We have already seen that common servants may be appointed by parol, at least by such corporations as have a head.* This has of late been extended to em- * The rule is well settled in America, that in general, whatever may be the purpose of the agency, a valid appointment of an agent by a corpora- tion may be made without affixing the corporate seal. Bank of Columbia v. Patterson, 7 Cranch, 299. See Angell & Ames, § 283, citing Merchants’ Bank of Alexandria ». Bank of Columbia, 5 Wheat. 326; Owings v. Speed, 5 Wheat. 424; Osborn v. Bank of U. 8. 9 Wheat. 738; Bank of Columbia o. Patterson, 7 Cranch, 299; Warren v. Ocean Ins. Co. 16 Me. 439; Methodist. Chapel Co, v. Herrick, 25 Me. 354; Badger , Bank of Cumberland, 26 Me. 428; Tundy v. Farrar, 32 Me. 225; Haven ». New Hampshire Asy- lum, 13 N. H. 532; Goodwin ». Union Screw Co. 34 N. H. 378; Andover Turn. Co. v. Hay, 7 Mass. 602; Essex Turn. Co. ». Collins, 8 Mass. 292; Hayden v. Middlesex T. Co. 10 Mass. 397; Narragansett Bank ». Atlantic Silk Co. 8 Metc. 282; Wright o. Lankton, 10 Pick. 290; Thayer ». Mid- dlesex Ins. Co. 10 Pick. 326; Topping v. Bickford, 4 Allen, 120; Savings. Bank v. Davis, 8 Conn. 191; Stamford Bank ». Benedict, 15 Conn. 445; Dunn ». St. Andrew’s Church, 14 Johns. 118; Powell ». Newburg, 19 Johns. 284; Randall o. Van Vechten, 19 Johns. 60; Perkins », Washington Ins. Co. 4 Cow. 645; Clarke 7. Benton Manufacturing Co. 15 Wend. 256; Inhab. of Mendham ». Losey, 1 Penning. 347; Inhab. of Saddle River o. Colfax, 1 Hals. 115; Baptist Church v, Mulford, 8 Hals. 182; Chestnut Hill Turn. Co. ». Rutter,49.&R.6; Wolf »v. Goddard, 9 Watts, 544; Elysville Manf. Co. ». Okisco Co. 1 Md. Ch. 392; Union Bank Maryland »v. Ridgeley, 1 Harris & G. 424; Kennedy ». Balt. Ins, Co. 3 Harris & J. 367; Northern Cent. R. R. Co. v. Bastian, 15 Md, 494; Buncombe Turnp. Co. ». McCarson, 1 D. & B. 306 ; Bates v. Bank of State ‘of Alabama, 2 Ala. 461; Everett 0. United States, 6 Por. 166; St. Andrew’s Bay Land Co. v. Mitchell, 4 Fla. 192; Lathrop: ». Com. Bank, 8 Dana, 114; Richardson v. St. John Ins. Co, 5 Blackf. 146; Legrand ». Hampden Sidney Coll. 5 Munf. 324; Gamsin 0. Combs, 7 J. J. Marsh. 85; City of Detroit 0. Jackson, 1 Doug. (Mich.) 106. In Dispatch Line of Packets v. Bellamy Manf. Co. 12 N. H. 205, the court say: “The weight of authority in this country seems to be in favor of the position, that private corporations, or boards of directors through 366 EXERCISE OF POWERS BY CORPORATION. ployees of a higher grade, the principle being not so much the urgency or the triviality, but the utility of such appointments. Thus in Haigh v. North Bierly Union an accountant employed by the guardians to examine into and audit their accounts was allowed to recover for his services, though the engagement, by parol only, was under somewhat unusual and special circum. stances. So in Totterdell v. Fareham Brick &c. Co., where two of the directors of a registered company had parolly engaged the plaintiff as their foreman, he was held entitled to recover from the company for his wages, It is true that there are two decisions by the Court of Exchequer to the contrary: Cope v. Thames Haven &c. Company, and Smart v. West Ham Union,’ where officers appointed by parol—in the former a general agent, in the latter a collector of poor’s rates—could not recover for their services. But both these cases, as also Lamprell v. Bellericay Union and Homersham 2, Wolverhampton Water Works Company,‘ were deter- mined, while Sir James Parke was the senior baron, and though the greatest respect must be paid to the im- mense attainments of that learned judge, yet his deep acquaintance with “black-letter law,” while it greatly biased his colleagues, was itself the chief reason why 198 L. J. Q. B. 62. South of Ireland Colliery Company 2. 7L, R. 1 C. P. 674; Browning v. Waddle, L. R. 4 GC. P. 617. Great Mining Central Company, 5 H. & 318 L. J. Ex. 345, and 241, J. Ex. N. 856; 29 L, J. Ex. 399. Compare 201, respectively. * Ubi supra, p, 364. which their business is transacted, may appoint an agent for the convey- ance of real estate, by vote, without a power or instrument under the cor- porate seal. If the formality of an instrument under seal, conferring the power upon the agent who is to make the conveyance, should be required, it would add nothing to the authenticity of the conveyance, if the indi- vidual who affixes the seal to the power derive his authority from a mere vote of the corporation.” See ante, p. 66, and note. THE NECESSITY FOR SEALING. 367 he could not bring himself to be a party to freeing modern contracts from the trammels imposed upon them by past ages. After Baron Parke had been raised to the peerage, another case came before the exchequer, Bateman v. Mayor d&c. of Aston-under-Lyne,) where a contract had been made not under seal, and work done in ‘pursuance thereof, and in which the court decided in favor of the plaintiff, thereby impliedly overruling their former judgments, since there was a doubt whether the contract between the plaintiff and the defendants was not actually ultra vires of the latter. However, it would seem that this rule extends to those cases only where the urgency or utility of the ap- pointment demands that the seal should be dispensed with. Accordingly, in the latest decision—Austin 2. Guardians of Bethnal Green*—it has been held that a person elected by a corporate body clerk to the master of a workhouse, but not engaged by a formal contract under seal, could not sue the corporation for wrongful dismissal.* ce. Contracts entered into by Trading Corporations. + 4 . e s e The doctrine is now fully established that a trading 18H. & N. 323; 271. J. Ex.458, ? W.N. 1874, p. 14. *The English cases cited by our author, illustrate the ‘‘ hesitation among the English courts and text writers to accept the acknowledged rule.of the American courts, that a corporation may as well contract by mere words, without writing, or by implication of law, or by vote, or by writing without seal, as a natural person; in short, that in the case of a contract by a corporation, a seal is of no more necessity or significance than in the case of a contract by a natural person.” Redfield on Rail- ” ways, § 148. + ‘*The assertion, that a corporation alone speaks by its corporate seal,. is not true, even in respect of political corporations. Although at first it 368 EXERCISE OF POWERS BY CORPORATION. corporation may make binding contracts in furtherance of the purposes of their incorporation without using their seal, provided such contracts do not relate to mat- ters of a special and unusual nature, This principle, suggested in Broughton v. Manchester Water Works Company,! and recognized by the judgment in the Cop. per Miners’ Company v. Fox,’ was completely confirmed by the unanimous decision of the Court of Queen’s Bench in Henderson v. Australian Royal Mail Steam Navigation Company.? Here. the directors of the de- fendant company had employed the plaintiff to bring home a ship, and to pay him certain money for the same. The agreement was not under seal, but plaintiff was 13 3B. d& Ald. 1. where a trading company is created by 716 Q. B. 229, per Campbell, C. J.: charter, while acting within the scope “Tf the contract had been shown to be of the charter, it may enter into the in any way incidental or auxiliary to commercial contracts usual in such a carrying on the business of copper business in the usual manner.” miners, the contract would have been 55 EB. & B. 409; 24 L, J. QB. 322, binding, though not under seal;. for was adopted, the doctrine was only of short duration. * * * As to corporations created for commercial purposes, and transacting their busi- ness by a board of directors, the above doctrine, if it ever existed, was annulled more than a century since.” Savings Bank v. Davis, 8 Conn. 191. It is now firmly established, both in England and in America, that a corporation may be bound by a promise, express or implied, resulting from the acts of its authorized agents, although such authority be only by virtue of a corporate vote, unaccompanied with the corporate seal. Bank of U. 8. ». Dandridge, 12 Wheat. 64. ‘‘In general, throughout the United States, it is well settled that the acts of a corporation, evidenced by vote, written or unwritten, are as completely binding upon it, and are as complete authority to its agents as the most solemn acts done under the corporate seal.” Angell & Ames on Corps. § 287; citing Bank of U. 8. ». Dandridge, 12 Wheat. 68; Brady ». Mayor, 1 Barb. 584; St. Mary’s Ch. ». Cagger, 6 Barb. 576; Bank of Columbia 2. Patterson, 7 Cranch, 305; New York’ R. R. Co. 0. New York, 1 Hilt. 567; Merrick v, Burlington P. R. Co. 11 Ia. 75; Buckley ». Briggs, 80 Mo. 452; Mechanics’ Bank v. Bank of Columbia, 5 Wheat. 826; Fleck- ner ». U.S. Bank, 8 Wheat. 357; American Ins, Co. v Oakley, 9 Paige, 496, and cases decided by courts of nearly every one of the United States. THE NECESSITY FOR SEALING. 369 held entitled to recover. As to Mayor &c. of Ludlow v. Charlton, and Arnold v. Mayor é&e. of Poole, Wight- man, J., said that they “ proceed on a principle framed at a time when there were few corporations except municipal corporations, and applicable to these corpora- tions,” evidently implying that the principle does not apply to corporations of a different description. So in Australian Royal Mail &c. Company v. Mar- zetti,’ which came before the Court of Exchequer two days after the decision in Henderson v. Australian dc. Company, the learned barons unanimously abandoned the old rule, which they had strictly enforced in the Mayor &c. of Ludlow v. Charlton, Arnold v. Mayor &c. of Poole, and Diggle v. London and Blackwall Railway Company, and admitted the newer one. The defendant had entered into a contract, not. under the company’s seal, to supply their ships with ale. The ale was delivered and paid for, but turned out bad, and the company sued for recovery of what they had paid, | and judgment was given for them. Per Pollock, C. B.: “It.is now perfectly established by a series of authori- ties that a corporation may, with respect to those mat- ters for which they are expressly created, deal without seal.”” It has also been confirmed by the unanimous decision of the Court of Common Pleas in South of Ireland Colliery Company v. Waddle? where an action was held maintainable against an engineer who refused to complete a contract he had entered into, not under seal, with the plaintiffs, a joint stock company, for the erection of a pumping engine and machinery. Per Bovill, C: J.: “A company can only carry on business ? Ante, pp. 359, 360. court, L. R. 4 ©. P. 617. This case 211 Ex, 228; 24 L, J. Ex, 278, overruled a well known opposing au- 5L, BR. 380, P. 463; on appeal con- thority, viz., East London Water Works firmed unanimously by a very strong v. Bailey, 4 Bing. 283, 24 370 EXERCISE OF POWERS BY CORPORATION, by agents, managers, and others, and if the contracts. made by these persons are contracts which relate to ob- jects and purposes of the company, and are not incon- sistent with the rules and regulations which govern their acts, they are valid and binding upon the com- pany, though not under seal. It has been urged that the exceptions to the general rule are still limited to matters of frequent occurrence and small importance. The authorities, however, do not sustain that argument.” Henderson v. Australian &c. Company has been followed in Reuter v. Electric Telegraph Company,’ in which Campbell, C. J., said: “ No reliance can be placed upon the objection that the defendants are a corpora- tion, and that the agreement on which they are sued is not under seal. They are a corporation for carrying on a particular business, and the services done by the plaintiff were in the direct course of the business which by their charter they were to carry on. We adhere to the decision of this court in Copper Miners’ Company v. sb and Henderson v. Australian Royal Mail Com- pany.” In a still later case, He Contract Corporation, Claim of Ebbw Vale Company, the Master of the Rolls held that a company having power to enter into a contract for the purchase of goods was bound by such contract, although it was not under seal, although the goods were not intended for the use of the company, and although this fact was known to the person with whom the contract was entered into. We may, therefore, now consider the exception that. concerns trading corporations to be established beyond question, but difficulties will arise in determining whether given acts are or are not of ordinary occur- 6B. & B, 841, LR. 8 Eq, 14. THE NECESSITY FOR SEALING. 371 rence in the business of a given corporation. But the exception does not extend to unusual or uncommon acts. Consequently, in one case a railway company were held not liable to an action on a contract not under seal for work done by a party in substituting a new line of railway for the old one;* and in another case a dock company could not sue on asimilar contract -for cleansing and removing the filth and dirt accumu- lating in their docks and basins.’ * d. A Corporation may always sue (semble) and some- times be sued upon an informal executed Contract. + The principle involved in this exception may be thus stated: Though no action will lie against a cor. poration merely on the ground that it has received and adopted the benefit of a contract entered into without due formalities on its own part, yet under certain ex- ceptional circumstances it may be sued on the considera- tion so received, and ¢ contrario it seems that it may always maintain either assumpsit or debt against a per- son who has received from it the benefit of such a contract. As to the first portion of this statement, it was at one time thought that though a corporation could not be sued on a contract whilst it remained executory, they might be so on one which had been executed, but the 1 Diggle v. London and Blackwall * See judgment of Best, C. J., in East sere Company, 5 Ex, 442; 19 L. J. i Waterworks v. Bailey, 4 Bing. 2 London Dock Company v. Sinnott, SE. & B. 347; 27 L. J. Q. B. 129, * There is no necessity, in this country, for an attempt to reconcile par- ticular English cases which appear to be conflicting. The uniform American doctrine is stated ante, p. 356, note. + See ante, p. 41, note, and Appendix. 372 EXERCISE OF POWERS BY CORPORATION. distinction does not now exist; under no circumstances will an action lie upon the contract itself if the contract do not fall within one of the exceptions.’ * 1 See Mayor dc. of Ludlow v. Charl- ton, 6 M. & W. 815; Paine v, Strand Union, 8 Q. B. 326. *Jn the United States a distinction between executed and executory contracts, ultra vires in their character, is supported by authority.. 80 long as the contract remains executory, courts will interfere at the in- stance of stockholders, to prevent the performance of ultra vires agree- ments; but where a contract, within the apparent scope of its powers, has become executed, and the corporation has received the benefit, it will be estopped from setting up mere want of power. Of course, when the corporation undertakes to do an act which is illegal per se as well as ultra vires, no estoppel will arise; for, although, whenever the parties have ex- ecuted a contract for illegal purposes, courts refuse to lend their aid to enable either party to disturb it (see Merritt v. Millard, 4 Keyes, 208), still there never can be an estoppel to prevent the disaffirmance of an ex- ecutory illegal contract. ‘‘ Contracts with corporations, made in excess of their powers, which are purely executory on both sides, and where no wrong will be done if the parties are left in their previous situation, should not be enforced, because such contracts contemplate an unauthor- ized diversion of corporate funds, and therefore a breach of private trust. But the executed dealings of corporations must be allowed to stand, for and against both the parties, when the plainest rules of good faith so re- quire.” Parish o Wheeler, 22 N. Y. 503; see White ». Franklin Bk. 22 Pick. 181; Tracy ». Talmage, 14 N. Y. 162; DeGroff o, Am. Linen © Thread Co. 21 N. Y. 124; Bissell v. M.8.& N. I. R. R. Co. 22 N.Y. 258; Firth v. La Rue, 15 Barb. 322; Gould v. Town of Oneota, 3 Hun, 401; Hazelhurst v. Savannah R. R. Co. 43 Ga. 18; Southern Life Ins. Co. ». Lanier, 5 Fla. 110. “It is said by counsel for complainant, that a corporation is not estopped to say, in its defense, that it had not the power to make a con- tract sought to be enforced against it, for the reason that, if thus estopped, its.powers might be indefinitely enlarged. While the contract remains unexecuted on both sides, this is undoubtedly true, but when, under cover of this principle, a corporation seeks to evade the payment of borrowed money, on the ground that, although it had power to borrow money, it expended the money borrowed in prosecuting a business which it was not authorized to prosecute, it is pressing the doctrine of wltra vires to an extent that can never be tolerated, even though the lender of the money knew that the corporation was transacting a business beyond its chartered powers, and that his money would be used in such business, provided the THE NECESSITY FOR SEALING. 375 But more than once an action has been held main.’ tainable against the corporation to recover payment up business itself was free from any intrinsic immorality or illegality. Neither is it correct to say that the application to corporations of the doc- trine of equitable estoppel, where justice requires it to be applied (as when, under a claim of corporate power, they have received benefits for which they refuse to pay, from a sudden discovery that they had not the powers they had claimed) can be made the means of enabling them in- definitely to extend their powers. If that were true, it would be an insuperable objection to the application of the doctrine, even for the pur-' pose of preventing injustice in individual cases. But it is not true. This doctrine is applied only for the purpose of compelling corporations to be honest, in the simplest and commonest sense of honesty, and after whatever mischief may belong to the performance of an act ultra vires has been accomplished. , But while a contract remains ezecutory, it is per- fectly true that the powers of corporations cannot be extended beyond their proper limits for the purpose of enforcing a contract. Not only so, but on the application of a stockholder, or of any other person authorized to make the application, a court of chancery would interfere and forbid the execution of a contract ultra vires. So, too, if a contract wlira vires is made between a corporation and another person, and, while it is yet wholly unexecuted, the corporation recedes, the other contracting party would probably have no claim for damages. But if such other party pro- ceeds in the performance of the contract, expending his money and his labor in the production of values which the corporation appropriates, we can never hold the corporation excused from payment on the plea that the contract’ was beyond its power. Take, for example, the case of a corpora- tion chartered to build a railway from Chicago to Rock Island. Under such a charter, the company would have no power to build steamboats for the purpose of running a line of such vessels between Rock Island and St. Louis. But suppose the company, notwithstanding the want of power, should make a contract for the building of a vessel, and it is built by the contractor and accepted and used by the railway, could any court permit the corporation, when sued for the value of the vessel, to excuse itself from payment on the ground that, although it has and uses the steamer, it had no authority to do so by its charter? Or, suppose that, instead of haying.a vessel built by a contractor, it employs a superintendent to build it and hires: mechanics by the day, could it escape the payment of their wages on the ground that it had employed them in @ work ultra vires? In cases of such character, courts simply say to corporations, you cannot in this case raise the question of your power to make the contract. It is sufficient that you have made it, and by so doing have placed in your corporate treasury the fruits of others’ labor, and every principle of justice 374 EXERCISE OF POWERS BY CORPORATION. to the extent of the benefit derived. Thus in Lowe v. London and Northwestern Railway Company,’ where 118 Q. B. 632; 21 L.J.Q.B. 361; and Exeter Railway Company, 7 Ex Barber Surgeons of London », Pelson,2 409; 21 L. J. Ex, 117; and Hall », Lev. 252. Compare Finlay v, Bristol Mayor dc. of Swansea, 5 Q. B. 526, forbids that you be permitted to evade payment by an appeal to the limit- ations of your charter. We are aware that cases may be cited in apparent conflict with the principles here announced, but the tendency of recent decisions is in harmony with them. While courts are inclined to main- -tain with vigor the limitations of corporate actions, whenever it is a question of restraining the corporation in advance from passing beyond the boundaries of their charters, they are equally inclined, on the other hand, to enforce against them contracts, though ultra vires, of which they have received the benefit. This is demanded by the plainest principles of justice. 2 Kent, 11 ed. p. 881, note; Zabriskie o. C. C. & C. BR. R. Co. 23 How. U. 8. 881; Bissell ». M. S. & N. I. R. R. Co. 22 N. Y. 258; Cary ». Cleveland & Toledo R. R. Co. 29 Barb. 35; Parish v. Wheeler, 22.N. Y. 494; De Groff », Am. Lin. Th. Co, 21.N. Y. 124; Argenti». San Francisco, 16 Cal. 255; McCluer v. Manchester & L. R. R. 13 Gray, 124; Chapman »v. M. R. & L. R. RB. BR. Co. 6 Ohio, 187; Hall v. Mut. Fire Ins. Co. 82 N. H. 297; Railroad Co. », Howard, 7 Wall. 413. If the complainant in this case had, as a stockholder, asked a court of chancery to enjoin this cor- poration from mining in Colorado, it would have examined the charter, and if it had arrived at the conclusion that such mining was beyond the powers derived from filing the certificate in question, under our statute, would have issued the injunction. But this he did not do. On the con- trary, he has participated in the work, and so long as there was hope of gain he was willing the money should be borrowed by which the work was to be carried forward. The borrowing of the money was not in itself an act ultra vires, nor was the giving of the notes. The money was not borrowed to be used for an illegal or immoral purpose. The lenders have been guilty of no violation of law, nor wrong of any kind. The corpora- tion has received their money and used it for a purpose which, whether ultra vires or not, was unquestionably the sole purpose for which the cor- porators associated themselves together, and for which this complainant became a stockholder. Justice requires the corporation to repay the money it has thus borrowed and-expended. What we have said.applies only to private corporations, organized for pecuniary gain. If, to increase their profits, they embark in enterprises not authorized by their charter, still, as to third persons, and when necessary for the advancement of justice, the stockholders will be presumed to have assented, since it is in their power to restrain their officers when they transgresas the limits of their chartered authority. But municipal corporations stand upon a differ- THE NECESSITY FOR SEALING. 875 the defendants had actually been in possession of land belonging to the plaintiff, the court was of opinion an ‘action for use and occupation would lie against: them. This case was recognized and followed in Pauling v. London and Northwestern Railway Company,! where the defendants were held liable to the plaintiff for sleepers ordered of him by a clerk in the office of their engineer, and used upon their railway. * On the other hand, the liability of the person who has received from a corporation, under an informal contract, the consideration thereof, to pay for the same seems fully established in all circumstances. + 18 Ex, 867; 23 L. J. Ex. 105. ent ground. They are not organized for gain, but for the purpose of government, and dehts illegally contracted by their officers cannot be made binding upon the tax-payers from the presumed assent of the latter.” Lawrence, C. J., in Bradley v. Bullard, 55 Ill. 417. ‘‘ Where the contract is executory, the corporation cannot be held bound unless the contract is made in pursuance of the provisions of its charter; but where the con- tract has been executed and the corporation has enjoyed the benefit of the consideration, an implied assumpsit arises against it. It will be presumed, for the purposes of justice, that the authority exercised by the officers of the corporation was properly delegated to them, and that contracts made by them without authority have been ratified.” Gas Co. 0, San Francisco, 9 Cal. 453. * Moss v. Rossie Mining Co. 5 Hill, 137; Peterson v. Mayor of New ‘York, 17 N. Y. 449; Hooker v. Eagle Bank, 30-N. Y. 83; McCutcheon v. Steamboat Co. 13 Penn. St. 13. + Chester Glass Co. ». Dewey, 16 Mass. 102; Parish ». Wheeler, 22 N. Y. 495; Palmer v. Lawrence, 3 Sand. 8. C. 170; Steam Nav. Co. v. Weed, 17 Barb. 878; Mott v. U. 8. Trust Co. 19 Barb. 568. On the general rule that a party taking the benefit of a contract is bound to fulfill it on his part, Abbott v. Hermon, 7 Greenl. 118; Risby ». Ab. Soc. 15 Me. 306 ; Davis v. Bradford, 24 Me. 349; Hatch v. Purcell, 7 Fost. 544; Wilson ». School Dist, 32 N. Hamp. 118; Pratt v. Swanton, 15 Vt. 147; Chaplin o. Hill, 24 Vt. 628; Phelps ». Townsend, 8 Pick. 392; Loper v. Brookline, 18 Pick. 343; Thomas », Dickinson, 12 N. Y. 364; Curtis v. Leavitt, 15 N. Y. 47; Bonesteel ». The Mayor, 22 N, Y. 162; Johnson v. Hathorn, 3 Keyes, 126; Hague ». City of Philadelphia, 48 Penn. St. 527; City of 376 EXERCISE OF POWERS BY CORPORATION, In the Fishmongers’ Company v. Robertson,’ Tindal, C. J., in delivering the judgment of the court, said: “ We agree in the general rule of law [4. ¢, as. to neces.- sity for a seal] as above stated, and that the case now under consideration does not fall within any of those exceptions which are so well known as to require no enumeration; but whatever may be the consequences where the agreement is entirely ewecutory on the part. of the corporation, yet if the contract, instead of being executory, is executed on their part—if the. persons: who are parties to the contract with the corporation hawe received the benefit of the consideration moving from the corporation—in that case we think, both upon principle and upon decided authorities, the other parties are bound by the contract, and liable to be sued by the corporation. * * * Independently, however, of the reasonableness of such construction, there appears au- thority in law to support such a position. In the case of the Barber Surgeons of London v. Pelson *—assump- sit for forfeiture under a by-law—where the objection was expressly taken that a promise cannot be made to a corporation aggregate without deed, the court held that the action will lie, and that the objection had been overruled in Mayor d&e. of London . Goree® Again, in Mayor &e. of London v. Hunt,‘ assumpsit was held to be maintainable by a corporation for tolls. In Mayor 15M. & G. 181, 192. 2 2 Lev. 252, *1 Vent. 298, The declaration here was in indebitatus assumpsit “upon the custom of London, that every one who exposes foreign goods to sale, which had been entered in the custom house, shall pay so much for showing of them.” After verdict, it was alleged in arrest of judgment, that no assumpsit lay for- such a duty, for there ought to bea contract express or implied to maintain an assumpsit. But the court held the declaration was good. 48 Lev. 37. Baltimore », Reynolds, 20 Md. 1; Commercial Bk. 2. Nolan, 7 How.. (Miss.) 508; Couvin », Wallace, 17 Iowa, 384; Reichard », Warrem County, 81 Iowa, 881; Zoltman 2, San Francisco, 20 Cal. 96. THE NECESSITY FOR SEALING. 377 &e. of Stafford v. Till? use and occupation was held to be maintainable by a corporation aggregate, though there was no demise under seal, the tenant having oc- cupied and paid rent; and the same point was ruled in the case of Dean and Chapter of Rochester v. Pierce.” * In Australian Royal Mail Steam Navigation Com- pany v. Marzetti,’ Martin, B., approved of this doctrine, as did Byles, J., in South of Ireland Colliery Company v. Waddle,‘ and the liability of persons so dealing with and obtaining advantages from corporations has been frequently confirmed and enforced.® In the Ecclesias- tical Commissioners v. Merral, this was extended by holding that the defendant—though not liable to an ac- tion directly upon the contract, which was void, not being by deed—had received the consideration, as far as. he had received it, upon the terms of the contract, and was therefore liable for non-fulfillment of the same. The defendant had entered upon and paid rent for cor- porate property under a demise for a term made on behalf of the corporation, but not under their seal. One of the terms was to repair, and he was held liable for not so repairing. e. When Corporations can be deemed to have recognized the Validity of informal Contracts.* As will be shown fully hereafter, corporations may ratify engagements of many descriptions entered into 14 Bing. 77. Stafford v, Till, 4 Bing. 76; Denton »v. 21 Camp. 466. East Anglian Railway Company, 3 C. 5 Ubi supra, p. 369. & K. 16; Doed. Pennington v, Taniere, ‘ Ubi supra, p. 369. -18 L, J. Q, B. 49; Compare Marshall v. 5 Mayor &c. London v. Hunt, 3 Lev. Corporation of Queensborough, 1 Sim. 87; Dean de. Rochester v. Pierce, 1 & St. 520; Wilmot v, Corporation of Camp. 466; Trinity House v. Clark, 4 Coventry, 1 Y. & C, 518. M. & Sel. 288; Mayor &c. Carmarthen °L, R, 4 Ex, 168; Wood v. Tate, 2 v, Lewis, 6 Car. & P. 608; Mayor de. B. & P.N. R. 247. * See on general subject of ratification, post, Part III, ch. VI; also 373 EXERCISE OF POWERS BY CORPORATION. b themselves or upon their behalf. Within certain limits it would also seem that corporations by acting ante, p. 249, note; Angell & Ames on Corp. § 804. The evidence of rati- fication must be of as high a nature as would have been required to show prior authority. Whenever a seal is necessary to give authority, the rati- fication likewise needs a seal. If a written vote of the corporation is needed, the ratification must be by written vote. So that, while a cor- poration may ratify, by implication from its corporate acts, such doings of its agents as might have been authorized by parol, or by direction of its managing officers; yet, in those matters in which it is limited to certain forms, ratification by a corporation is not governed by the same rules as in case of individuals not so restricted. See Story on Agency, § 242; and cases cited. In Dispatch Line of Packets v. Bellamy Mfg. Co. 12 N. H. 205, it is said: ‘A ratification of an act done by one assuming to be an agent, relates back, and is equivalent to a prior authority. When there- fore the adoption of any particular form or mode is necessary to confer the authority in the first instance, there can be no valid ratification except in the same manner. If a sealed power were not necessary to this, asa conveyance of the real estate, but a written vote would have been suffi- cient, because a corporation may constitute an attorney by vote for such purpose, then such vote at least must be held necessary to a ratification.” With this limitation, a corporation may ratify the act of an agent so as to cure a defect in the form of his appointment. See Fleckner 2. U. 8. Bank, 8 Wheat. 388. ‘‘ As regards individuals, the principle is familiar, that if ‘one with a full knowledge of the facts, ratifies the doings of another who has assumed to act in his name and behalf, he will be bound thereby as fully as if he had originally conferred authority upon him in the premises. This ratification may be by express assent, or by acts or conduct of the principal, inconsistent with any other supposition than that he intended to adopt and own the act done in his name. I am of opinion that the principle is as applicable to corporations as to individuals. Chancellor Kent says, the doctrine that corporations can be bound, by implied con- tracts, to be deduced by inference from corporate acts, without either a vote or deed or writing, is generally established in this country with great clearness and solidity of argument. In applying it to a particular case, care must be taken that other principles of the law are not violated. For instance, no sort of ratification can make good an act without the scope of the corporate authority. So where the charter or a statute binding upon the corporation, has committed a class of acts to particular officers or agents, other than the general governing body, or where it has prescribed certain formalities as conditions to the performance of any description of corporate business, the proper functionaries must act, and the designated forms must be observed, and generally no act of recognition can supply a defect in these respects.” Peterson ». Mayor of N. Y. 17 N. Y. 449. THE NECESSITY FOR SEALING. - 879 _ upon, without expressly “ratifying,” a contract—not necessarily relating to a subject essential to their exist- ence—which does not bind them for want of sealing, may so far adopt it as to render themselves liable to an action either for use and enjoyment or upon the com. mon counts, the nature and extent of their liability being estimated by a reference to the terms of the in- valid agreement. It may perhaps be considered that the corporation has thereby actually ratified the agree- ment in question, but it would probably be the simpler and more reasonable explanation to say that the corpo- ration by so acting is estopped from subsequently repu- diating and denying the transaction.* Whatever view be taken, contracts so adopted become binding on both parties, and are enforceable by and against the corpora- * A corporation may be estopped from denying its liability for acts of its agents which were not formally authorized. Estoppel, however, oper- ates before the fact sought to be charged to the corporation, through rep- resentations trusted and subsequently acted upon. A corporation, like an individual, may be bound by the appearance of authority which it gives to its agents, and prevented from setting up informality, where the thing done is within the apparent scope of its powers. Ratification, on the other hand, operates on a past transaction, and effects nothing beyond dating back the utterance of the principal to a time previous to the act assumed to be performed by an agent. For example, if the cashier of a bank acts openly as such, with the knowledge and assent of directors, who have the power of appointment, his acts would bind the corporation, though his appointment could not be established by a previous written vote. See Story on Agency (8th ed.), § 52, citing Bank of U. 8. v. Dan- dridge, 12 Wheat. 64; Clark ». Corporation of Washington, 12 Wheat. 40; Fleckner v. Bank of U. 8. 8 Wheat. 338; Bank of the Metropolis o. Guttschlick, 14 Pet. 19; Flint ». Chilton Co. 12 N. H. 480; Goodwin v. Union Screw Co. 34 N. H. 380; Essex Turnpike Co. 7. Collins, 8 Mass. 299: Danforth ». Schoharie & Duane T. Co. 12 Johns. 227. But neither ratification nor estoppel will be held to bar a corporation from resisting alleged liability, unless the party claiming it is a bona fide third person, or if the act involved is expressly or by necessary implication prohibited by its charter. See ante, p. 42, note; Downing ». Mt. Washington Co. 40 N. H. 230; McCullough ». Moss, 5 Denio, 567. 380 EXERCISE OF POWERS BY CORPORATION. tion. When a corporation will be so estopped does not . clearly appear. Filing a bill to enforce the contract is sufficient, and so is the suing at law to judgment, and probably some other facts. This is the correlative of the last exception, but is not so extensive in its operation. The former extends to all cases where the defendant has obtained the benefit of the contract; this to some only. Both have reference to executed considerations only, though it has been thought that they apply to executory cases also. In the Fishmongers’ Company v. Robertson,* Tindal, C. J., laid down: “Even if the contract put in suit by the corporation had been on their part executory only, not executed, we feel little doubt but that their suing upon the contract would amount to an admission on the record by them.that such contract was duly entered into on their part, so as to be obligatory on themselves, and that such admission on the record would estop them from setting up as an objection in a cross action that it was not sealed with their common seal.” This dictum has, however, been so positively dissented from in subse- quent cases,’ that we must consider it to be overruled, and that the mere institution by a corporation of pro- ceedings at law in respect of an informal contract does not render it binding. Here the question may be noticed, as to whether an agreement entered into with a corporation, not under seal, is binding upon the other contracting party. Seal- ing is undoubtedly required, not for the protection of the corporation, but of those with whom it is contract- ing. It is therefore fairly arguable that the seal is not 5M. & G. 181, 192, B. 229; 20 L. J.Q. B, 174, and by Kel- * By Campbell, C. J., in Copper Mi- ly,C. B., in Mayor of Kidderminster v. ners’ Company of England v. Fox, 16 Q. Hardwick, L. R. 9 Ex, 18, 21. THE NECESSITY FOR SEALING. 881 an essential part of the contract per se, which may exist without it, but is: an essential part of the proof of the contract when sought to be enforced against the corpo- ration.* The construction put upon the fourth section of the statute of frauds is exactly analogous. The written agreement satisfying that statute need be signed by the party charged therewith—that is, the party against whom the action is brought only As was pointed out by Tindal, C. J., in Laythoarp 0. Bryant: . “Tt is said that cutlass the defendant signs, there is a want of mutuality. Whose fault is that? The defend. ant might have required the vendor's signature to the contract, but the object of the statute was to secure the defendants.” Now apply this reasoning to our present 12 Bing. N. C, 735; 3 Scott, 238. * “The obligation is mutual, where both parties are required by the agreement to do something; the agreement of the one being a considera- tion for that of the other. It makes no difference in this respect whether the obligation of the one is secured by bond and that of the other not thus secured ; nor that, when the cause comes on for hearing, the plaintiff’s part of the agreement has not actually been performed, if its fulfillment is tendered and can be secured by the same decree which compels specific performance by the defendant; and especially if the defendant has sus- tained no damage, or none which cannot be compensated by the decree. In such, case the agreement sought to be enforced will be regarded as mut- ual, and the tie reciprocal.” Ewing ». Gordon, 49 N. H. 444. ‘‘It is no legal, unyielding obstacle to the court’s making a decree, that the con- tract is signed only by one of the parties. In that sound legal discretion by which a court of equity exercises this branch of its jurisdiction, it fre- quently does refuse to decree a specific performance of a contract which is not mutually binding on both parties; not, however, because it is a set- tled principle that the court will not enforce such a contract, but because that want of mutuality often constitutes an equitable ground for such re- fusal, as if the party not signing the agreement, and therefore not legally bound, takes advantage of his position, and delays its fulfillment till it is ascertained whether the bargain is advantageous to him.” Young v. Paul, 2 Stockt. 401. See Ives v. Hazard, 4 R. 1.14; N.Y.&N. H.R. R. Co. 2, Pixley, 19 Barb. 428; L’Amoreux v. Gould, 7 N. Y. 349; Canal Co. v. R. R. Co. 4G. & J.1; McMillan v. M. 8. & N. LR. R. Co. 16 Mich, 79, 382 EXERCISE OF POWERS BY CORPORATION. subject. The common law says: “No action shall be brought upon any contract entered into with a corpora- tion unless the agreement upon which such action shall be brought shall be under the common seal of the cor- poration ;” but it does not say that it must be under the seal of the other party also. Consequently, follow- ing the interpretation given to the statute of frauds, it would result that it neither, in the absence of sealing, voids the contract on behalf of the corporation when plaintiffs,| nor requires, on the part of the defendant to bind him, any additional formality than the consent re- quired in all contracts. It is, however, now fully established that as the corporation will not, so neither will the other side be bound by an agreement not sealed, if that agreement does not fall within one of the excepted, cases. In Mayor &e. of Kidderminster v. Hardwick,? the defend- ant was the highest bidder at an auction for the letting of certain of the municipal ‘tolls, and was declared by the auctioneer the purchaser thereof. He duly signed ° the draft contract, paid a month’s rent in advance, but did not ultimately fulfill all the conditions, whereupon the plaintiffs, in pursuance of a provision to that effect, resold the tolls at a loss, and sued him for the differ- ence. It was determined that the contract was one which ought to have been under seal, or signed on their behalf by some one appointed under seal, and that they could not recover.* Compare Smith v. Neale, 2 ©. B, 7L. R. 9 Ex, 18, N.S. 67; North Staffordshire Railway Company v. Peek, 10 H. Lds, 473. * In this case the defendant had received no benefit, and had not en- tered on the enjoyment of the fruits of the sale. Pollock, B., remarks, that he could perhaps have recovered back the deposit. The court showed evident reluctance in arriving at the judgment pronounced. THE NECESSITY FOR SEALING. 383. The ground taken by the court was that there was no mutuality. Usually, however, not to say invariably, mutuality means mutuality of consent, and not of obli- gation, and seldom, if ever, has a person been disabled at law? on the ground that he himself is under no obli- gation, or that the other side cannot sue him.? * f. Cases of Part Performance. It is well known that the Court of Chancery, will under certain circumstances order specific performance of a contract when acts have been done and expense incurred under and in reference so it, although such contract is not actually valid at law, from the absence of some formality, usually writing as required by the 14th and 17th sections of the statute of frauds.+ It will similarly decree specific performance against a cor- poration when the formality wanting is the seal.’ In Wilson v. West Hartlepool Harbor &e¢. Com- pany,‘ an officer of the defendants had proposed terms for the sale by the company of some of its land; the It is often different in chancery; see Flight v. Bolland, 4 Russ. 298. ? See the many circumstances under which one party to a contract required to be in writing by the statute of frauds can sue the other party, al- though he himself cannot be sued, not having signed the same. 5 Karl of Lindsey v. Great Northern Railway Company, 22 L. J. Ch. 995; Laird v. Birkenhead Railway Company, John. 500; 29 L. J. Ch. 218; Steevens’ Hospital v. Dyas, 15 Ir. Ch. "408; Lon- don & Birmingham. Railway Company v. Winter, 1 Cr. & Ph, 57; Maxwell v. Dulwich College, 7 Sim. 222, 42D.G.J. & Sm. 475; 34 L. J. Ch. 241; see Crampton ». Varna Railway Company, L. R. 7 Ch. 562, and Leo- minster Canal Company ». Shrewsbury &c. Railway Company, 3 K. & J. 654; 26 L. J. Ch. 764, * See Browne on Statute of Frauds, § 366; Old Colony R. R. Co. 2. Evans, 6 Gray, 25. t Story Eq. Juris. §§ 759, e¢ seg.; Willard Eq. Juris. p. 282; Chitty on Contracts, 11 Am. ed. 1450-1457; Lester v. Foxcroft, 1 Leading Cases in Equity, 2d ed. 625; Neale ». Neale, 9 Wall. 1; Peckham ». Barber, 8 R. 1.17; Freeman 2. Freeman, 43 N. Y. 34; Trenton Water Power Co. 2. Chambers, 1 Stockt. 471. ; 384 EXERCISE OF POWERS BY CORPORATION, plaintiff accepted the terms unconditionally, and took possession, and with the apparent connivance of the di- rectors, put it to various uses. On the subsequent repudiation of the contract by the company, on the ground that no valid contract was ever made by the company, a decree for specific performance was made by the master of the rolls, and this decree was affirmed on appeal. Per Turner, L. J.: “It was, however, argued for the defendants that these acts of part performance do not alter the case. It was contended on their part that companies are not bound by acts of part per- formance, and that the acts which have been done in this case furnish no equity against the defendants, be- cause they are acts to the prejudice of the defendants only, and not of the plaintiff; but I cannot accede to either of these arguments. Neither of them is, in my opinion, consistent with the principle upon which this court proceeds in cases of part performance. The court proceeds in such cases on the ground of fraud; and can- not hold that acts, which if done by an individual would amount to a fraud, ought not to be so considered if dene by acompany. * * * Apart, therefore, from any question as to the terms of the agreement, and. as to the statutory provisions with respect to contracts with companies, I can see no grounds on which a spe cific performance of this contract could have been refused by the court.” Part performance must be something done under a contract and with reference to the contract. Acts of other kinds done by the plaintiff proprio motu, or not in reliance upon the contract, will be no ground for the court’s interference in his favor, and he will be left to obtain redress by a common law action for damages. Ifa corporation lies by and allows a person to erect THE NECESSITY FOR SEALING. 385 works, and in other ways to go to expense upon the faith of an informal agreement made with them, or of the interpretation which he has put upon a disputed agreement, the Court of Chancery will, a fortiori, upon the double ground of acquiescence* and part perfor- mance, order them to carry out their side of the agree- ment. Crook v. Corporation of Seaford’ is a case in point. Here a municipal corporation passed a resolu- tion in January, 1860, agreeing to let to the plaintiff the flat part of the beach opposite to the plaintiff's field for 300 years, at a nominal rent. The plaintiff claimed all the beach comprised between lines drawn in prolongation of the sides of his field, and he built a wall and terrace along the part so claimed. In 1864 the corporation gave the plaintiff notice to quit, and after much negotiation, in 1869, brought an action of ejectment against the plaintiff, who thereupon filed a bill in ‘this suit. for specific performance. The Lord Chancellor, affirming the decision of Stuart, V. C., held that though the agreement was not under seal, the cor- poration was bound by acquiescence, and must perform the agreement to grant a lease.t 1 LR. 6 Ch, 551. * The facts that the vice president of a railway company had been for years in the habit of appointing local agents to look after its timbered lands; that these had sold stumpage and timber thereon; that the com- pany had brought suit on one of these contracts of sale and obtained judgment, the amount of which was paid to the local agent; that the latter was accustomed each year to make a full report in writing to said vice president, and pay the moneys in his hands into the treasury of the company, would authorize a jury to find that the company knew and ac- quiesced in the authority thus exercised, and was bound by such a con- tract of sale made by its local agent. Chic. & N. W. R. R. Co. ». James, 24 Wis. 888; see Curtis ». Leavitt, 15 N. Y. 49, 188, 249. + Specific performance of a contract to build a railroad will not be en- 25 5 886 EXERCISE OF POWERS BY CORPORATION. g. Statutory Hnactments. The legislature has, by express provision in various general acts, relaxed the stringency of the old rule. Thus the companies clauses act, 8 & 9 Vict. c. 16,* after enabling by section 95 the directors to appoint committees, enacts (section 97) that: “With respect to any contract which, if made between private per- sons, would be by law required to be in writing, and under seal, suck committee or the directors may make such contract on behalf of the company in writing, and under the common seal of the company, and. in the same manner may vary or discharge the same. “ With respect to any contract which, if made between private persons, would be by law required to be in writing, and signed by the parties to be charged therewith, then such committee or the directors may make such contract on behalf of the company in writing, signed by such committee, or any two of them, or any two of the directors, and in the same manner may vary or discharge the same. “With respect to any contract which, if made between private persons would by law be valid although made by parol only, and (not) reduced into writing, such committee or the directors may make such contract on behalf of the company by parol only, with- out writing, and in the same manner may vary or discharge the same. “« And all contracts made according to the provisions herein con- tained shall be effectual in law, and shall be binding upon the com- pany and their successors, and all other parties thereto, their heirs, executors, or administrators, as the case may be; and on any default in the execution of any such contract, either by the company or any other party thereto, such actions or suits may be brought, either by or against the company, as might be brought had the same contracts been made between private persons only.” A provision in the same words contained in section 41 of 19 & 20 Vict. c. 47, the joint stock companies forced in equity. Ross ». Union Pacific Rw. Co. Wool. 27; Fallon v. Railroad Co. 1 Dillon Rep. 121. * Goddefroi & Shorit, p. 89. * THE NECESSITY FOR SEALING. 387 act of 1856, was omitted from the companies act of 1862, but it has been inserted in the amending act of 1867, the 80 & 31 Vict. c 131.* So 23 & 24 Vict. c 125 (the metropolis gas act, 1860), provides by section 20 that “every contract of the gas company entered into in accordance with this act shall without seal be binding on them, if the contract be signed by at least two of their directors, or by their secretary or other officer by the authority of at least two of their directors.” + 1 Compare 7 & 8 Vict. c. 110,344, Browne, 12 C. B, 723; 22 L. J.C. P.49 and British Empire dc. Company v. see also Prince », Prince, L. R, 1 Eq. 490! * Sec. 37; Buckley on the Law and Practice under the Companies Acts, 2d ed. 481. This act in regard to parol contracts provides that the contract may be made by parol, ‘on behalf of the company, by any per- son acting under the express or implied authority of the company.” As to what companies have the benefit of these acts, see Buckley, p. 350; Act. of 1862, part VIIL . + A corporation, unless restricted by charter, may use what seal it will. Porter o. Androscoggin & Ken. R. R. Co. 37 Me. 349; Flint v. Clinton Co. 12 N. H. 432; Tenney v. Lumber Co. 43 N. H. 343; Warner v. Mower, 11 Vt. 885; Bank of Middlebury v. Rutland & W. R. R. Co. 30 Vt. 171; Mill-dam Foundry ». Hovey, 21 Pick. 417; Stebbins o. Merritt, 10 Cush. 27; South Baptist Soc. v. Clapp, 18 Barb. 35; Ransom 2. Stonington Bank, 2 Beas. 212; Susquehanna Bridge v. General Ins. Co. 3 Md. Ch, 305; Charleston ». Morehead, 2 Rich. 450; Phillips v. Coffee, 17 ll. 154. Though a corpo- ration have adopted a particular seal, yet they will be bound by a deed otherwise sufficient, which is sealed with any seal. Tenney v. East War- ren Lumber Co. 43 N. H. 348; Porter ». Androscoggin & Kennebec R. R. Co. 37 Me. 349; Hutchins v. Byrnes, 9 Gray, 367; Haven ». Adams, 4 Allen, 80; Sherman v. Fitch, 98 Mass. 59; Mann v. Pentz, 3 Sandf. Ch. 271, 280. Itissaid that the fact of the seal used being the seal of the company may appear otherwise than from the device of the seal. Bank of Middlebury v. Rutland R. R. Co. 30 Vt. 172. Corporate seal does not prove itself. Jackson v. Pratt, 10 Johns. 381; Mann ». Pentz, 2 Sandf. Ch. 271; Forster v. Shaw, 7 8. & R. 155; Leasun ». Hillegas, 7 8. & R. 313; Den o. Vreeland, 2 Halst. 352; Dennett o. Drehens, 4 Yerg. 7; Far- mers’ Trans. Co. v. McCullough, 25 Penn. St. 303; Charleston ». More- head, 2 Rich. 450. The seal of a corporation is prima facie evidence of the assent of the corporation. Reed ». Bradley, 17 Ill. 821. To an “ in- 388 EXERCISE OF POWERS BY CORPORATION. SECTION III. OTHER FORMALITIES. The employment of the common seal is indispensa- ble, with the above exceptions, to the validity of all corporate acts. But this is the only formality that is imposed by the common law. What, if any, others will be requisite must be determined by a reference to the instruments creating the corporation. It is competent for either the legislature or the individuals seeking to be incorporated to add whatever formalities may be deemed advisable to secure the due carrying out of the corporate proceedings; but these can be found only in the constating instruments of each ‘particular corpora- denture” between a corporation and an individual, the parties “ set their hands,” no reference in terms being made to the seals, which were mere bits: of paper attached to the instrument by wafers, and set against each signa- ture. Neither of the seals had any impression indicative of the common seal of a corporation. Held, that this was the deed as well of the corpo- ration as of the individual, Mill-dam Foundry v. Hovey, 21 Pick. 417. If an instrument is executed by an authorized agent, the seal will be pre- sumed to be the corporate seal. Woodman », York & Cumberland R. R. Co. 50 Me. 549; Damon o. Granby, 2 Pick. 845; Stebbens v. Merritt, 10 Cush. 27; see Mill-dam Foundry v. Hovey, 21 Pick. 417%; Bates ». Boston : &N. Y.C.R. R. Co. 10 Allen, 251; Bowen »v. Irish Pres. Cong. 6 Bosw. 263. As to who may affix seal, see Koehler v. Black R. Falls Iron Co. 2 Black, 715; Bank of U. 8. v. Dandridge, 12 Wheat. 68; Eureka Co. ». Bailey Co. 11 Wall. 458; Howe o. Keeler, 27 Conn. 5388; Hoyt o. Thompson, 5.N. Y. 820; Berks & Dauphin T. R. v. Meyers, 6 8. & R.12; Susquehanna’ B'dge & B’k Co. v. Gen. Ins. Co. 3 Md. 805; Hopkins v. Gallatin T. Co. 4 Humph. 403; Levering v, Mayor, 7 Humph. (Tenn.) 553; St. Louis Pub. : Schools v. Risley, 28 Mo. 415; Choquette ». Barada, Id, 491; Benedict ». Denton, Walk. (Mich.) 836. Corporate seal imports a consideration. Sturtevant . City of Alton, 8 McLean, 3938. And makes the instrument’ a speciality. Porter ». Androscoggin & Kennebec R, R. Co. 87 Me. 349; Clark 2, Farmers’ W. Mfg. Co. 15 Wend. 256; Benoist , Inhab. of Caron delet, 8 Mo. 250. OTHER FORMALITIES, 389 tion. Some of them—viz., those relating to the meet- ings of the general body of members—have been in part considered in the first section of this chapter, and they are again treated of in connection with the formali- ties required to be observed by corporate officials in Chapter V, of this part. CHAPTER IV. THE POWERS OF DIRECTORS AND OTHER SIMILAR OFFI- CIALS. SECTION I. THE EXACT POSITION FILLED BY DIRECTORS AND OTHER SIMILAR PERSONS. Tuer constitution of every corporation determines the extent to which individual members can interfere in its management. Where no special provision has been made, then each corporator has a right to be no- tified of meetings for the transaction of business, though it sufficed if the major part actually present concurred. The power of managing and controlling the corporate affairs has, however, usually been confined to a small portion of the whole body, the presence of all being required on very special occasions only, when acts had to be done vitally affecting the interests of the corpora- tion—the surrender of its charter and the like. * * While the directors of a corporation must be regarded as agents, the relation of agency in their case is in certain respects peculiar. The board is the agent of the corporation strictly, and not of the stockholders. The powers of these statute agents are given by the charter, the nature of their office is determined at the creation of the corporation, and it does not or- dinarily lie in the power of the stockholders either to limit the authority of the board or to superintend their exercise of it. They may say, at the appointed times, who shall fill the offices, but the functions appertaining to those offices are determined entirely by the charter. The division of the powers of the corporation being made by the charter creating it, may, of course, be varied by the legislature, which can, if it please, give more au- thority to the stockholders and less to the directors, and the constating POSITION FILLED BY DIRECTORS. 391 Such an arrangement is, indeed, absolutel y necessary ‘instruments must therefore, in all cases, be examined. But as a matter of fact, in almost all the private corporations in this country, little power is left with the stockholders, save the right to elect directors and to have a voice in regard to any fundamental change. The administration of the affairs of a corporation, except where expressly provided otherwise, is committed to the board of directors. In Dana ». Bank of United States, 5 W. & 8, -247, the act of incorporation directs that a board of di- rectors be elected and organized ‘‘for the management of the affairs of the said corporation.” The court says that ‘‘the president and directors, though elected by the stockholders, are constituted the agents of the cor- ‘poration, not of the stockholders, and derive all their authority from the act or charter. (Per Marshall, OC. J., in Bank of United States v. Dan- dridge, 12 Wheat. 113.) The managemertt and direction of the affairs of the institution are committed to them by the express terms of the act of incorporation. They are thereby made the representatives of it, and they alone have the power to manage its concerns, and are left without control to exercise their own best discretion in doing so. The stockholders there- fore have no absolute right to interfere directly with, and to exercise any immediate control over, the directors in the management of. its affairs.” And in Dayton & Cin. R. R. Co. ». Hatch, 1 Disn. 84, the following lan- ‘guage is used: ‘‘It might well be doubted whether a general meeting of the stockholders of the plaintiff could be legally held for any other pur- pose than the selection of a board of directors. Such a meeting, as to any other purpose or object, could only-be, in its character, advisory to the board of directors. It would have no power to take under its charge, or put under the charge of others, the affairs of the company. The presi- dent and directors of such a corporation as the plaintiff, have been said to be the agents of the stockholders; but this expression must be understood ‘in view of, and must be limited to, the subject under consideration. In anything like a general or universal sense, it will be readily seen that it cannot be true. Indeed, so far as third persons, and especially the gov- ernment or creating power of the corporation, are concerned, the presi- dent and directors, and the stockholders may rather be considered as the members and limbs, each acting within its appropriate sphere, of that artificial being, or entity, to which the name and powers of the corpora- tion have been assigned by the law of its creation. When, therefore, a question arises, by whom the conferred powers are to be exercised, it will be determined rather by the law of the creation of the company, showing in each case on whom the governing or controlling power has been conferred, than by any consideration of the rights and in- ‘terests of those concerned in the corporation, as among themselves.” In Conro v. Port Henry Iron Co. 12 Barb. 27, a lease is declared void 392 DIRECTORS AND OTHER SIMILAR OFFICIALS. in the case of canal, railway, and other similar corpora- because made by the authority of the stockholders instead of the direct- ors. The court say: “It is quite obvious from the charter, that the com-. pany could do no act except through its directors. When the charter: prescribes the mode of its action, its injunctions must be rigidly pursued. * * * he stockholders in this case had no power to make a lease, or do any other administrative act in the management of the affairs of the corporation. If a lease could be nfade at all, it could be executed only in pursuance of the act of the directors, who are the body appointed by the charter for the management of its affairs. It is no answer that individual stockholders who were present at the meeting, when the lease was ordered, were also directors, They did not meet or act as directors, but as stock- holders.” See also Fleckner v. U. 8. Bank, 8 Wheat. 338; Whitwell, Bond & Co. v. Warner, 20 Vt. 425; Com. ». Trustees of St. Mary’s Church, 68. & R. 508; Ridgway v. Farmers’ Bank of Bucks Co. 12 8. & R. 256;. Bank of Kentucky v. Schuylkill Bank, 1 Pars. Sel. Cas. 180; State of La. v. Bank of La. 6 La. 745. If the general power of making by-laws is left. by the charter to the corporation at large, the power of the board of di- rectors may be circumscribed by them. Salem Bank v. Gloucester Bank, 17 Mass. 29. The powers of directors are defined either by the express language of, or by necessary implication from, the charter. The questions arising upon. this subject will therefore be those of interpretation or construction. But whatever powers do not vest either expressly or by necessary implication: in the board of directors, or are not exercised by it, must reside in the whole body of the corporation, and, on this principle, it was held in in re Wheeler, 2 Abb. Pr. Rep. N. §. 361, which was an election case where the inspectors refused to act, that in emergencies and contingencies, in which the forms of procedure prescribed by the charter fail to accomplish the purposes contemplated, the stockholders have the right to exercise the powers required, in order to preserve the corporate existence. The power to change fundamentally the character or extent of a corporation is not contained in the power vested in the board of directors to manage the business or affairs of the company. This is a right of individual stock- holders, and can only be exercised with the consent of each stockholder, or upon compensation being made to the dissentients. See ante, pp. 79, 88, 90,. notes. .‘‘ A change so organic and fundamental as that of increasing. the capital stock of a corporation beyond the limit fixed in the charter cannot be made by the directors alone, unless expressly authorized thereto. The general power to perform all corporate acts refers to the ordinary business transactions of the corporation, and does not extend to a reconstruction of the body itself, or to an enlargement of its capital stock. * * * Changes in the purpose and object of an association, or in the extent of POSITION FILLED BY DIRECTORS. 393 tions,* consisting of hundreds, or perhaps thousands, its constituency or membership, involving the amount of its capital stock, are necessarily fundamental in their character, and cannot, on general principles, be made without the express or implied consent of the mem- bers. The reason is obvious. First, as it respects the purpose and object. This may be said to be the final cause of the association, for the sake of which it was brought into existence. To change this without the consent of the associates would be to commit them to an enterprise which they never embraced, and would be manifestly unjust. Secondly, as it respects the constituency, or capital and membership. This is the next most im- portant and fundamental point in the constitution of a body corporate. To change it without the consent of the stockholders would be to make them members of an association in which they never consented to become such. It would change the relative influence, control, and profit of each member, If the directors alone could do it, they could always perpetuate their own power. Their agency does not extend to such an act, unless so expressed in the charter, or subsequent*enabling act; and such subsequent act would not bind the stockholders without their acceptance of it, or as- sent to it in some form.” Railway Co. v. Allerton, 18 Wall. 233. Buton the other hand, it is held that the somewhat similar power of accepting an amendment of the charter does rest in the directors. See Dayton & Cin. R. R. Co. ». Hatch, 1 Disn. 84. The amendment there was to allow subscription in real estate to be received bythe company. The court say: “‘Upon examining the charter of the plaintiffs, there would be some dif- ‘ficulty in determining by what power, and in what mode, the amend- ment could be accepted, if not by the directors of the company. That both the special charter of the plaintiff and the general railroad law contemplated that all corporate acts, including an assent. to such an amendment as the one authorized, should be done by the board of directors, appears to me to be clear. The legislature has, in some cases, in respect to some matters, authorized action on the part of stockholders, and directed their assent to be obtained. Such provisions will be found in the general railroad law, and they are on points vitally affecting the interests of the stockholders. These provisions appear to show, strongly, that without them, such changes might be made, under authority of the legislature, by the directors alone. It is admitted in all the authorities that the acceptance of an amendment to its charter is a power incident to a corporation; and if, from the organization of the company, there be no other active or governing body but its board of directors, then, I conceive, with that board must rest the right to exercise the powers of the corporation, and, among them, the power to accept an amendment of its charter.” * ‘There isa great difference between the powers of the trustees of 394 DIRECTORS AND OTHER SIMILAR OFFICIALS. of members; and accordingly the acts and charters creating the same provide for the appointment of man. agers—styled directors—with powers more or less lim. ited. These directors are the agents, and the only primary agents, of the corporation. Are they general or special agents?* Have they or have they not all the an eleemosynary corporation, with visitorial powers, like a college or a hospital, and those of a private moneyed corporation, like a bank or rail- road, The latter are composed of shareholders, each of whom is a mem- ber of the company, who make the by-laws and all lawful regulations, elect directors for a limited period, and themselves compose the corpora- tion. Amendments to the charter, not in violation of its objects, may be accepted by the shareholders, but the trustees have no general powers, are simply agents, and are under their control. The law of visitation, as ap- plied to charities, has no application to them. But in eleemosynary cor- porations there are no stockholders; and regulations that in ordinary cor- porations are made by them, and disputes that are submitted to the courts, are made and decided by those intrusted with visitorial power. * * * In this country the visitorial power over schools and colleges, together with all other powers and rights belonging to them, are usually vested in boards of curators or trustees, established by the charter creating the cor- poration, who must be governed by the provisions of the charter as em- bodying the statutes of the founder. The power of these boards is great, but by no means absolute.” State», Adams, 44 Mo. 570. *The gist of this discussion is the determination of the question, Are third parties bound to notice the restrictions and limitations upon the power of the directors, contained in the charter and by-laws of the corporation ? The terms ‘‘special agent”? and “general agent” are not such as to add to the clearness of the discussion. They are terms which cannot be accurately defined. That.their relative meanings are change- able finds illustration in the conclusion of the author, that the complex word “special general” is needed to describe the nature of the agency. Judge Comstock says, in Mech. Bank v. N. Y. & N. H. R. BR. Co. 8 Kern, 632: “ There are in the books many loose expressions concerning the dis- tinction between a general and special agency. The distinction itself is highly unsatisfactory, and will be found quite insufficient to solve a great variety of cases. It is not profitable to dwel! upon that distinction. Un- derlying the whole subject, there is this fundamental proposition, that a principal is bound only by the authorized acts of his agent. This au- thority may be proved by the instrument which creates it; and beyond the terms of the instrument, or of the verbal commission, it may be shown that the principal has held the agent out to the world, in other instances, POSITION FILLED BY DIRECTORS. 395 powers of the body which they represent? In other words, will their contracts, when not ultra vires of the as having an authority which will embrace the particular act in question. I know of no other mode in which a controverted power can be estab- lished.” Similarly Mr. Parsons, in his work on Contracts, Vol. I, p. 44, says: ‘‘Of late years, courts seem more disposed. to regard this distinc- tion, and the rules founded upon it, as altogether subordinate to that prin- ciple which may be called the foundation of the law of agency; namely, that a principal is responsible, either when he has given to an agent suffi- cient authority, or, when he justifies a party dealing with his agent, in believing that he has given to this agent this authority.” See, also, Farmers’ & Mech. Bank ». Butchers’ & Drovers’ Bank, 16 N. Y. 125; Chitty on Contracts (11th Am. ed.), 284; Story on Agency, § 1%. In Adriance v. Roome, 52 Barb. 399, it is said that “ officers of a cor- poration dre special and not general agents; consequently they have no power to bind the corporation except within the limits prescribed by charter and by-laws. * * * The principle that persons dealing with the officers of a corporation are charged with notice of the authority conferred upon them, and of the limitations and restrictions upon it contained in the charter and by-laws, is too well established to require to be supported by a citation of authorities, and we cannot assent to the proposition that there is any grant of power in the name by which the officer is designated, especially when the authority given is specified in the by-laws.” See, also, Wild ». Bank of Passamaquoddy, 3 Mason, 505; State ». Commercial Bank, 6 Sm. & M. 218. The directors of a bank are but its authorized agents, and can incur no obligation binding on the corporation, except while acting in the mode prescribed by, and within the limits of, the charter. If they exceed the authority granted by the charter, their principal is not bound by their unauthorized act. Bank of Ky. ». Schuylkill Bank, 1 Pars. Sel. Cases, 180. ‘‘The president is at most the agent of the company, created under a special legislative act defining the rights and privileges of the body, and.the manner in which they should be enjoyed. This the plaintiff is to be regarded as knowing. For all persons dealing with the officers or agents of corporations, are bound to know that they act either under its charter or by-laws, or the usages which may be shown to exist, defining the extent of their authority. They must, in doubtful cases, acquaint themselves with the extent of that authority, or otherwise submit to the consequences resulting from their omission to do that.” Per Daniels, J., in Risley v. Ind. B. & W. R. R. Co. 1 Hun, 202; citing Angell & Ames, §§ 291, 297; North River Bank v. Aymar, 3 Hill, 262; Mechanics’ Bank ». ‘ New York & New Haven R. R. Co. 13 N. Y. 599; McCullough 2. Moss, 5 _Den. 567; Adriance v. Roome, 52 Barb. 399; Dabney ». Stevens, 40 How. Pr. 396 DIRECTORS AND OTHER SIMILAR OFFICIALS, corporation, bind the corporation as regards persons dealing with them in dona fide ignorance of the limita. tion (if any) placed upon their authority, or is it in- Rep. 341; see Salem Bk. v. Gloucester Bk. 17 Mass. 1; Lowell Savings Bk. 0. Winchester, 8 Allen, 109. There is, however, a distinction between the provisions of charters, which parties are bound to know, and of by-laws, of which actual notice must be brought home to third parties. # Persons dealing with a manufacturing and trading corporation, are not bound by the specifically enumerated powers of its officers, as expressed in its by-laws; but as against third persons, such officers shall be taken to have the authority which their designations ordinarily imply, although certain special and enumerated powers, not excluding others, are con- ferred upon such officers by the by-laws. Fay . Noble, 12 Cush. 1. ‘*Tt has been urged in argument, that the principles which are applied to contracts made by agents for another, upon an authority implied from former employment of the same agent for similar purposes, would be justly applicable to the defendants in the case before us. But there is a material difference. The individual stockholder commits no authority: to its officers but that which is given by the charter of incorporation and by a vote of a major part in interest of the individuals acting in a corporate form. No sanction of any act, beyond the authority so de- rived, can be implied by the repetition of such act. For the company as such, or the individuals composing it, might not, and generally would not, know of any transactions of this singular nature. They may reason- ably trust that the duty of each will be faithfully performed.” Wyman v. Hallowell and Augusta Bank, 14 Mass. 58. In Salem Bank 2, Gloucester Bank, supra, Parker, J., commenting on this distinction, says: ‘‘And there is reason for this distinction; for in the first case (that of individuals only) the extent of the authority is known only between the principal and the agent; whereas, in the latter (in re- gard to agents of a corporation), the authority is created by statute, or is matter of record in the books of the corporation, to which all may have access who have occasion to deal with the officers.” He further says: ‘Tn certain things the directors of a bank have all the authority of the corporation vested in them by a vote; and, in respect to such things, the engagement, express or implied, of the body of the directors will bind the corporation, But in matters not intrusted to them, their undertaking or assent cannot be binding upon any but themselves. Directors are not authorized to pay money for a bank which it does not owe; and, there- fore, no act of theirs, tending to create an obligation to that effect, can be operative.” Followed in State ». Commercial Bank of Manchester, 6 Sm. & M. 237. POSITION FILLED BY DIRECTORS. 397 cumbent on such persons to ascertain the extent of their authority ? This is a most important point. It is totally dis- tinct from, though often confounded with, the question of ultra vires. If we consider the responsibility of cor- porators as analogous to that of partners,* the answer is easy and evident—directors are general agents em- powered to carry on all such business as fairly falls within due scope of the company’s operations. But there are strong objections to such a conclusion. The check that is present in a partnership, 7. ¢, the per- sonal liability of each member, is almost wanting in a joint stock company, where the directors are liable up to their shares only, which may be very few or even none. The weight of authority at present seems to be in favor of holding directors to be special agents. In Ernest v. Nicholls,‘ Lord Wensleydale said: “ All per- sons must take notice of the deed (7. ¢, of settlement), and the provisions of the act (¢. ¢, 7 & 8 Vict. c. 110). If they do not choose to acquaint themselves with the power of the directors, it is their own fault; and if they give credit to any unauthorized persons, they must be contented to look to them only, and not the com- pany at large. The stipulations of the deed which re- strict and regulate their authority are obligatory on those who deal with the company; and the directors can make no contract so as to bind the whole company of shareholders, for whose protection the rules are made, unless they are strictly complied with. The contract binds the person making it, but no one else.” So in Smith v. Hull Glass Company,’ Jervis, C. J., 16 H. Lds, 419, 711 C. B. 897, 926-7; compare per * See Angell & Ames on Corp. §§ 41, 591. 398 DIRECTORS AND OTHER SIMILAR OFFICIALS, ° laid down: “Joint stock companies, it is now admitted, are not to be treated as ordinary partnerships; they are only bound by contracts made by the directors within the scope of their authority. The public have no right to complain. They know that the company is acting under the sanction and direction of an act of parliament and of a deed of settlement; and they have a ready access to that deed.”* Similarly, per Mauld, J.: “To some extent no doubt these joint stock companies differ from ordinary partnerships. The statute 7 & 8 Vict. c. 110, required the deed of settlement to be regis- tered, and that defines the purposes for which the com- pany is incorporated, and the powers of the directors; and all persons who contract with the directors must be taken to be cognizant of the extent of the authority conferred upon them.” Again, Lord Justice Giffard ex- pressed himself to the same effect in /e County Life Assurance Company :* “The law, as I take it to be, de- duced from the authorities, is this: in the first place, a stranger must be supposed to have read the articles of association, but nothing more; and if he knows noth- ing to the contrary, he is justified in assuming that as against the company all matters of internal manage- ment have been duly arranged.” This question must probably now be considered settled. The directors of a corporation are its special agents, so far as their authority is limited by the char- Bovill arguendo, in Hambro’v. Hull de, a deed of settlement, to which the pub- Insurance Company, 3 H. & N. 789,795. lic have access”? See also Agar ». ‘(A joint stock company differs from a Atheneum Life Insurance Society, 3 C. private partnership in this respect, that B. N.S, 725; and Atheneum Life As- the directors are not persons having a surance Society v. Pooley, 3 D. G. & J. eneral authority as partners, but hav- 294, ing certain powers which are defined by *L. R. 5 Ch, 288; 89 L, J. Ch, 471. * Angell & Ames on Corp. § 299; Salem Bank ». Gloucester Bank, 17 Mass, 1. POSITION FILLED BY DIRECTORS. 399 ter, act of parliament, deed of settlement, or articles of association. But it is only so far. To the instruments just named the public have access—they have not tothe books and memoranda of private partnerships—and it is their own fault if they do not take the trouble to consult them.* But the authority of directors may be, and indeed often is, limited still further by the resolutions of the share- holders; and very generally certain formalities are re- quired for its due exercise. Such precautions are very necessary, but to require outsiders to be under all cir- cumstances acquainted with them would be, as Lord Justice Giffard, in the case last cited pointed out, im- posing restrictions hostile to the due carrying on of the business.t It has accordingly been many times. decided, that. though directors are in one sense special agents, yet that they havd a general authority to do all such acts. as are indispensable for the proper performance of the engagements of the corporation, and that the absence. of some unessential formality will not vitiate the trans- action as against third parties who have acted dona fide. This, however, is a subject which will be treated of in the following chapter. 1 See especially Smith v. Hull Glass paper Association, 8 C. B. 849; 19 Company, 19 L. J.C. P. 123; 8C.B. LJ. CP. 114. 668; Thompson »v. Wesleyan News- * See Lester 7. Webb, 1 Allen, 34; Torrey ». Dustin Monument Asso. 5 Allen, 32; Beers v. Phoenix Glass Co. 14 Barb. 358; Allen ». Citizens” Steam Nav. Co. 22 Cal. 28; Alabama R. R. Co. o. Kidd, 29 Ala. N.S. 221. + On the contrary, parties dealing with trading companies, have a right to infer that all formalities have been had which are requisite to authorize directors to act, where their authority is not limited by the constating instruments. See Royal British Bank v, Turquand, 5 E. & B. 248. 400 DIRECTORS AND OTHER SIMILAR OFFICIALS. The Fiduciary Position of Directors. Directors come within the designation of persons filling a fiduciary relationship.* They are not trustees * ‘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 common and general interests of the corporation, and not for his own private interests. He falls, therefore, within the just 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 disability, either partial or complete, upon the party intrusted to deal, in his own behalf, in respect to any matter involved in such confidence. Nor is it possible to limit the duty of a director of a corporation, in this respect, to the time while he is acting as a director under any special delegation of power, or is in at- tendance at meetings of the board. He cannot, while director, divest himself of the knowledge which he has acquired in confidence of cor- porate affairs, or of the value of corporate property, nor be allowed to use it to his own advantage.” The director was also a plaintiff in a judg- ment against the corporation, and the court held he had a clear right to sell, upon execution on his judgment, the personal property of the cor- poration which was liable to sale on execution. The court does not pass on the point whether he might purchase at such sale, but intimates the opinion that he might, subject to the right of the company to demand aresale. Hoyle v. Plattsburgh & Montreal R. R. Co. 54 N. Y. 814. “The directors are the trustees or managing partners, and the stockholders are the cestwis que trust, and have a joint interest in all the property and effects of the corporation.” Koehler v, Black River Falls Company, 2 Black, 715. As establishing the rule that directors occupy a fiduciary position to- wards stockholders and creditors of the corporation, refer to Drury 2. Cross, 7 Wall. 302; R. R. Co. » Howard, 7 Wall. 892; Jackson ». Lude- ling, 21 Wall. 616; Koehler ». Black River Falls Co. 2 Black, 715; Wood v. Dummer, 3 Mason, 309; Heath v. Erie Rw. Co. 8 Blatch. 8347; European &c. Rw. Co. v. Poor, 59 Me. 277; Richards v, New Hampshire Ins. Co, 48 N. H. 263; Fuller », Dame, 18 Pick. 472; Peabody v. Flint, 6 Allen, 52; Hodges v. N. E. Screw Co. 1 R. I. 812; Butts v. Woods, 37 N. Y. 817; 8. c. 88 Barb, 181; Coleman ». Second Ave. R. R. Co. 88 N. Y. 201; Og- den v. Murray, 39 N.Y. 207; Bliss ». Matteson, 45 N. Y. 22; 8. c, 52 Barb. 348; Scott vr. DePeyster, 1 Edw. Ch. 518; Conro ». Port Henry Tron Co, 12 Barb, 64; Cumberland Coal Co. o. Sherman, 30 Barb. 553; see case between the same parties, 25 Md. 117; Fremont v. Stone, 42 Barb, 169; Buffalo &c. R. R. Co. o, Lampson, 47 Barb. 538; Blatchford o, Ross, POSITION FILLED BY DIRECTORS. 401 taking the term in its strict and technical meaning, 7. ¢., persons having the legal title to property the beneficial 5 Abb. Pr. N. 8. 438; Davison o. Seymour, 1 Bosw. 88; Risley v. Ind. B. & W.R. R. Co. 1 Hun, 202; Gray v. N. Y¥. & Virginia 8. 8. Co. 3 Hun, 383; Redmond ». Dickerson, 1 Stockt. 507; Hoffman Steam Coal Co. 2. Cumberland Coal Co. 16, Md. 456; Cov. & Lex. R. R. Co. 2. Winslow: (Ky. Ct. App. 1878); Zinn’s Cases on Trusts, 466; Cov. & Lex. R. R. Co. ». Bowler, 9 Bush, 468; United Society of Shakers », Underwood, 9 Bush, 617; Goodin v. Whitewater Canal Co. 18 Ohio St. 169; Port o. Russell, 36 Ind. 60; Buell , Buckingham, 16 Ia. 284; San Francisco & N. Pac. R. R. Co. v. Bee, 48 Cal. 398; Flint & Pere Marquette R. R. Co. v. Dewey, 14 Mich. 477; Halev. The Bridge Co, 8 Kan. 466; Messina o. Goldthwaite, 34 Tex. 135. This rule will not prevent directors or officers, who are also creditors, from protecting themselves from loss, by the same means open to other creditors. In Buell v, Buckingham, 16 Ia. 284, the president of the company, constituting with two other directors a full quorum, and being the only stockholders at the time, sold property of the company to the president, in consideration of a past indebtedness, and of an agree- ment to pay other specified debts of the corporation. A judgment cred- itor of the corporation, having levied upon the property thus sold, was en- joined from proceeding under his levy. Dillon, J., holds: ‘Being an an officer of thé corporation did not deprive Buell of the right to enter into competition with other creditors, and run a race of vigilance with them, availing himself in the contest, of his superior knowledge, and of the advantage of his position, to obtain security for or payment of his * debt. The act of Buell was not legally or constructively fraudulent, in consequence of his being an officer or member of the corporation.” To same effect, Whitewell ». Warner, 20 Vt. 425; Sargent o. Webster, 13 Met. 497; Hayward ». Pilgrim Soc. 21 Pick. 270; Smith ». Lansing, 22 N. Y. 526; Stratton vo. Allen, 1 C. E. Green, 229; Gordon ». Preston, 1 Watts, 385; Central R. R. Co. ». Claghorn, 1 Speer Eq. 545; City of St. Louis v. Alexander, 23 Mo. 483; see Hoyle v. Plattsburgh & Mon. R. R. Co. 64.N. Y. 814; Murray 2. Vanderbilt, 89 Barb. 140; Van Hook ». Som- erset Mfg. Co.-1 Halst. Ch. 187, 633; Merrick o. Peru Coal Oo. 61 Ill. 472, Se amortgage given to secure bonds of a company is valid, though one of the officers is the trustee to whom the mortgage is made. In Ellis ». Boston, Hart. & Erie R. R. Co. 107 Mass. 1, where the validity of a mortgage to secure bonds of a railway company was involved, the court, say: ‘‘ The question has been suggested whether E. F. & H. were compe- tent to act as trustees for the bondholders, they being at the time officers of the corporation. This fact cannot affect their capacity to hold and pass the title, which is the only question now before us; for the individ- uals who are officers are distinct from the corporation itself, and may 26 402 DIRECTORS AND OTHER SIMILAR OFFICIALS. ownership of which belongs to others, for the property of a public company is vested in the company itself; but they are so far trustees for the company that they cannot derive, directly or indirectly, out of their posi- tion any profits or other advantage save with the knowl. edge and concurrence, expressly or impliedly given, of the company. They are not absolutely precluded from making contracts with the company, or being interested in contracts made between the company and third par- ties; but in order that any such arrangement may stand, as between the company and the director con- cerned, there must be full and complete disclosure by the latter of the extent and nature of his interest in the matters in question.’ * 1York and North Midland Railway 26; 31 L. J. Ch. 369; Imperial Mercan- Company v. Hudson, 16 Beav. 485; tile Credit Association v, Coleman, L. Bank of London »v. Tyrrell, 10 H. Lds, R. 6 H. Lds. 189. make contracts with it, make conveyances to it, and receive conveyances from it; and, in general, all persons are competent to be trustees.” A mortgagee, though an officer of the corporation, may purchase at a fore- * closure sale the property covered by it. Olcott o. Tioga R. R. Co. 27 N. Y. 867; South Baptist Church ». Clapp, 18 Barb. 35. * Directors cannot be interested either directly or indirectly in con- tracts made with the corporation. Such contracts are voidable at the instance of the company or of the shareholders, and this rule applies to cases where the majority of the directors in one corporation contract with another corporation in which they are also directors. See cases cited ante, in notes under this section; also Polar Star Lodge ». Polar Star Lodge, 16 La. Ann. 76; Paine v. Lake Erie & Louisville R. R. Co. 81 Ind. 283; Abbott » Am. Hard Rubber Co. 33 Barb. 578; St. James’ Ch. ». Church of the Redeemer, 45 Barb. 856; San Diego v, San Diego & L. A. R. R. Co. 44 Cal. 106. Contracts made with directors or officers of a railroad corporation in- dividually to induce them to establish depots or otherwise construct their works to promote private interests, are against public policy, as tending to sacrifice public rights and interests of stockholders. See Pacific R. R- Co. v. Seeley, 45 Mo. 212; Bestor ». Wathen, 60 Ill. 188; Linder ». Car- penter, 62 Ill. 309; Taylor», Cedar Rapids R. R. Co. 25 Iowa; 871; re Union Pacific R. R. Co. 1 Cent. Law J. 582. POSITION FILLED BY DIRECTORS. 403. In order that a director may retain any advantage which he may have obtained at the expense of the com- “It is the duty of the directors of a corporation to act for the best in- terests of such corporation. If a director be a party to a contract entered into with himself, his duty as an officer is in conflict with his interests as an individual. This is equally so whether he enters into the contract in its inception or subsequently acquires an interest in it. The general rule is, that directors cannot legitimately acquire an interest adverse to the cor- poration, and that if they purchase any claim against the company it is in trust for the company.” Appleton, C. J., in European & N. Amer. Rwy. Co. v. Poor, 59 Me. 270. Ashhurst’s Appeal, 60 Penn. St. 291, was a bill filed by a minority of stockholders to set aside a sale of the property of an insolvent corporation to certain creditors, some of whom were also directors. Strong, J., de- livering judgment at Nisi Prius (affirmed on appeal), says: ‘‘I come, then, to consider the facts that the purchasers were the same persons as those who, as directors sold, and as stockholders authorized the sale. It is often said, and truly, that the same persons cannot be both buyers and sellers in one transaction. They were not strictly in this. All the pur- chasers were not directors who made the sale. But I make no account of that. Still, why may not directors of a corporation sell to themselves ? Each director has an interest distinct and antagonistic to his interest as amere man. There is identity of person but not of interest. There must be many things which directors can do for their individual benefit, which are binding upon a corporation of which they are directors. If they have advanced money, I cannot doubt they may pay themselves with the cor- porate funds. If they have become liable as sureties for the corporation, they may provide for their indemnity. And though ordinarily the law frowns upon contracts made by them in their representative character with themselves as private persons, such contracts are not necessarily void. They are carefully watched, and their fairness must be shown. But I repeat the question, why may not directors sell to themselves in any case ? It is because of the danger that the interests of stockholders may suffer if such sales be permitted, for want of antagonism between the parties to the contract. . But such sales are supported in equity where the fiduciary relations of the purchasers has ceased before the purchase, where the pur- chase was made with full consent of the stockholders, or where stock- holders have, by their acquiescence, debarred themselves from questioning the transaction. I do not, however, deem it necessary,to decide that the sale in this case was absolutely indefeasible. The utmost the complain- ants claim is, that it was voidable. Certainly, nothing more can be claimed. Let it be, then, that it might have been set aside at the in- stance of the corporation, or even of a stockholder, as against the policy 404 DIRECTORS AND OTHER SIMILAR OFFICIALS. pany, there must have been upon his part such a com. munication to his co-directors, or the shareholders at large, as will enable them to make a perfect and exact estimate of the profits accruing or likely to accrue to the director in question.* of the law, and constructively fraudulent. Still it was valid in equity, as well as in law, unless one or the other chose to avoid it; and in all cases in which an attempt is made to fasten a constructive trust upon a pur- chaser, the attempt must fail, unless made in a reasonable time. Acqui- escence is presumed from delay. Lapse of time, indeed, is no bar to the assertion of a direct trust, but not so when the trust is constructive.” In Fuller ». Dame, 18 Pick, 472, this principle was carried to the ex- treme limit of holding void a contract made with a member of a corpora- tion, though not a director or officer, for the payment of a pecuniary consideration, upon a depot being located in a specified place, the court holding, that the corporation was in some sense agent for the public, that the interests of the company and the public interests were identical, and that all its members were required to exercise their best and unbiased judgment upon the question of the fitness of the location, without being influenced by distinct and extraneous interests. The controlling question is one of bona fides, and this must be left to the jury to pass upon. Stark Bank v. U. 8. Pottery Co. 34 Vt. 144. In Simons ». Vulcan Oil Co. 61 Penn. St. 202, parties purchased oil land, and shortly afterwards, with others, formed a corporation, to whom the land was conveyed at an advance. It was held, that an action could be maintained in the name of the company for the difference between the price paid by the defendants and that paid to them by the company; and that the defendants could have been allowed to retain the profits only in case they had in the prospectus issued by them described the exact sum paid for the land, and refused to sell, except at the advanced price. See McElhenny’s Appeal, Zdid. 188; Chester». Dickerson, 54 N. Y. 1; Getty », Devlin, Jdid. 403. * Although the corporation and the individual shareholders may, after knowledge of a voidable transaction with an officer, by laches, be deemed to have acquiesced in it and thus be debarred from attacking it; yet where the act is forbidden by statute, neither the directors nor stock- holders can waive the provisions of the statute. ‘*It is true that a party may waive a statutory proceeding for his own benefit, as, for instance, notice made preliminary to an ejectment (8 N. Y. 197); but I have yet to find a case where directors, or even'the stockholders of a corporation may waive the provisions of a prohibitory statute, enacted for good reasons, ea- pressly forbidding the directors of = company from participating in the POSITION FILLED BY DIRECTORS. 405 It has also been laid down that greater and more careful attention to their duties, and greater and more watchful supervision over the interests of their employ- ers, will be exacted from them than from persons placed in analogous positions. “The company have a right to the service of their directors, whom they remunerate by considerable payments; they have a right to their entire services; they have a right to the voice of every director, and to the advice of every director in giving his opinion upon matters which are brought before the ° board for consideration,* and that the general rule that no trustee can derive any benefit from dealing with those funds of which he is a trustee, applies with still greater force to the state of things in which the interest of the trustee deprives the company of the benefit of his advice and assistance.”* But this language would seem too stringent, and if not, at least it is quite certain that provided all the attendant circumstances are made known, companies and their directors may validly enter > Per Lord Chancellor Hatherley, L. R. 6 Ch. 567. benefits of a contract for building their road.” Allen, J., in Barton ». Plank-road Co. 17 Barb. 397. In Flint & Pere Marquette R. R. Co. v. Dewey, 14 Mich. 477, Chris- tiancy, J., in commenting upon a contract made with a company, in which two of the directors were interested, remarks: ‘‘ Certainly nothing short of a ratification by the board, after a full explanation and knowl- edge of their interest and of all the circumstances, could render such a contract binding upon the company. And I think it at least questionable whether a ratification by the board with such knowledge could render it valid, while D. & H. remained influential members of the board, especially if they took any part in such ratification. * The stockholders and creditors of a corporation are entitled not only to the votes of directors in the board, but to their influence and argument in the discussion which leads to the passage of resolutions before it. Per Grover, J., in Ogden v. Murray, 39 N. Y. 202. 406 DIRECTORS AND OTHER SIMILAR OFFICIALS. into stipulations permitting the latter to have private and personal interests in the companies’ contracts. Nor can directors benefit or favor any particular shareholder or class of shareholders.* Every authority possessed by them—e. g., to forfeit shares—“ is a power and discretion in the directors, who are trustees for the benefit of all the shareholders, which is to be exercised for the benefit of all; and it is the duty of the directors to direct a forfeiture when it is for the benefit of all the shareholders, and to abstain from doing so when it is not for their benefit.* Directors are bound to display in the conduct of their company’s affairs at least ordinary common sense and prudence, and they will be liable to recoup to the company losses which have occurred, not merely from their fraud and willful malfeasance, but also from their negligence and imprudence.+ The courts, however, deal ? Per the Master of the Rolls,in Har- ris v. North Devon Railway Company, 20 Beay. 384. * “Directors of a corporation, in reference to the corporate property, act in the relation of trustees. The stockholders are the cestuis que trust. The directors can make no disposition of the corporate property which shall not inure to the equal benefit of all the stockholders. If they attempt to divide, they must so divide that each shall receive his proportionate share. They cannot agree for, and bind the stockholders to any other division.” Hale +. The Bridge Co. 8 Kans. 466; see Percy 0. Millaudon, 3 La. 864; Jones », Terre Haute R. R. Co. 29 Barb. 359; Barton ». Port Jackson & N. F. Plank-road Co. 17 Barb. 397. + ‘‘Every director present at a board, is responsible for any act of it for which he votes, or which he does not oppose, and in the latter case, for all the injurious consequences of the act, which he does not fairly labor toavert. Every absent director is equally responsible in case of extreme neglect in his attendance at the board, or in case, after the act comes, or must have come to his knowledge, had he used due diligence, he does not labor to avert its injurious consequences.” Per Martin, J., in Percy v. Millaudon, 3 La. Rep. 364. In United Society ». Underwood, 9 Busb, 617, directors were held liable for misappropriation by a bank of special POSITION FILLED BY DIRECTORS. 407 liberally with them; and though chancery exacts from them a more rigorous attention to: their duties than is required at law, and often holds them responsible for constructive fraud in circumstances where no liability would be imposed at law, yet not even chancery requires of them more than that they should display dona fides, act to the best of their judgment, and not knowingly go beyond their powers. “The best of their judgment” will be estimated by comparison with the judgment of ordinary business men. Therefore where directors did not, in accordance with a clause in that behalf contained in the articles, cause the business to be stopped in good time, they were decreed to pay the losses thereby re- sulting.’ * 1 Western Bank of Scotland». Bairds, end, Gurney & Company v. Gurney, L. cited L. R. 4 Ch. 381; Turquand v-Mar- R. 4 Ch. 701, shall, L. R. 4 Ch. 876; compare Over- ‘deposits, where they ought or could have known of the wrong being done. Directors may be made to account for fraud or abuses of trust. But when they are only unwise, or merely extravagant or improvident, or slightly negligent, or merely misjudge in the performance of their duties, the only remedy of the stockholders is to elect other persons directors in their places. Ramsey v. Erie Railway Co. 7 Abb. Pr. N. S. 156; see also Belmont ». Erie Railway Co. 52 Barb. 637; Howe ». Deuel, 43 Barb. 504; Sears v. Hotchkiss, 25 Conn. 171. * “Tt is by no means a wellsettled point, what is the precise relation which directors sustain to stockholders. They are undoubtedly said by 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. They can only be regarded as mandatory persons who have gratuitously undertaken to perform certain duties, and who are 4herefore bound to apply ordinary skill and diligence, but no more. In- deed, as the directors are themselves stockholders, interested as well as all others that the affairs and business of the corporation should be suc- cessful, when we ascertain and determine that they have not sought to make any profit not common to all the stockholders, we raise a strong presumption that they have brought to the administration their best judg- ment and skill. Ought they to be held responsible for mistakes of judg- 408 DIRECTORS AND OTHER SIMILAR OFFICIALS. Not only may not directors make actual profits out of the company’s business, but also they must employ ment or want of skill and knowledge? They have been requested by their co-stockholders to take their positions, and they have given their services without compensation. We are dealing now with their responsibility to- stockholders, not to outside parties, creditors and depositors. Upon a close examination of all the reported cases, although there are many dicte not easily reconcilable, yet I have found no judgment or decree which has held directors to account, except when they have themselves been. personally guilty of some fraud on the corporation, or have known and. connived at some fraud in others, or where such fraud might have been prevented had they given ordinary attention to their duties. I do not mean to say by any means that their responsibility is limited to these cases, and that there may not exist such a case of negligence or of acts: clearly ultra vires, as would make perfectly honest directors personally liable.” After citing numerous authorities the judge proceeds: “ These: citations, which might be multiplied, establish, as it seems to me, that while directors are personally responsible to the stockholders for any losses resulting from fraud, embezzlement, or willful misconduct, or breach of trust, for their own benefit and not for the benefit of the stock- holders, for gross inattention and negligence by which such fraud has been perpetrated by agents, officers or co-directors; 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 confided to the managing body.” In regard to the question, whether the directors should, be held responsible for any of their acts as ultra vires, the court say that “conceding that the directors did violate the charter, it was a question upon which with all due care they might have made an honest mistake; -and, moreover, it appears that they acted throughout by the advice of their counsel. It is well settled that trustees will be protected from re-- sponsibility under such circumstances.” Sharswood, J., in Sperry’s Ap- peal, 71 Penn. St. 11. "In Scott ». De Peyster, 1 Edw. Ch. 513, the: rule is laid down, that directors are not to be held personally liable as between themselves and a stockholder, unless there has been negligence or fraud; that they are answerable not only for their own fraud and gross negligence, but also for all the faults which are contrary to the care re- quired of them; that they are looked upon as bailees of the property, and as they are persons generally having an interest in the stock, they are not. bailees who are to derive no benefit from their undertaking, and therefore to be held responsible for slight neglect, but they act in relation to a bailment beneficial to both parties, the stockholders and themselves; and the rule then is, they must answer for ordinary neglect—that is, the POWERS POSSESSED BY DIRECTORS. 409 their powers rigidly and strictly for the furtherance of the company’s objects, even though thereby they inflict loss or inconvenience upon themselves. Thus where the directors, having power to receive payment of calls in advance, paid into the bank the amount remaining un- called on their own shares, and on the same day ap- propriated this money in payment of their fees, for which there were at the time, as they knew, no other available assets, the court determined that there had been no bona fide payment in anticipation of calls, and that the directors, being bound to exercise the powers given to them for the benefit of the company generally, and not with a view to their own private interests only, were not relieved from liability upon their shares.’ * SECTION II. POWERS POSSESSED BY DIRECTORS AND OTHER SIMILAR PERSONS. Express Powers of Directors. Such then is the position of directors and other similar officials. They are at once the general and yet the special.agents of the corporation—special because they have only the authority defined and pointed out + Re European Central Railway Com- compare Gilbert’s Case, L, R. 5 Ch. 559. pany, Syke’s Case, L. R. 13 Eq. 255; omission of that care which every man of common prudence takes of: his. own concerns,” See Gobold ». Mobile Bank, 11 Ala. 191; Smith », Pratt- ville Man. Co. 29 Ala. 503; Christ Ch. o. Barksdale, 1 Strob. Eq. 197; Williams v. Gregg, 2 Strub. Eq. 816; Gratz v. Redd, 4 B. Mon. 178; Lex- ington R. R. Co. ». Bridges, 7 B. Mon. 559; Bank ». St. John, 25 Ala. N. 8. 566; Bayless v. Orvie, 1 Freem. Miss. Ch. 174; Pontchartrain R. R. Co. v. Paulding, 11 La. 41; Hodges 0. New England Screw Co. 1 R. I. 312. * See Hiles », Parish, 1 McCarter, 380; Knowlton v. Congress Spring Oo. 57 N. Y. 518. 410 DIRECTORS AND OTHER SIMILAR OFFICIALS. by the instruments of incorporation, but general in so far that they have this extent of authority, and that it cannot be limited or circumscribed by the internal regu. lations of the corporations, Trustees too they are in some respects, though not in all, but always trustees of the authority and powers so possessed bythem. These powers will be given either expressly by the constating instruments, or impliedly by the operation of law as necessary incidents of their position. In reference to the former, few observations need be made. What they actually are will be gathered from the language employed, not- unseldom somewhat obscure and contradictory. They cannot be contrary to statutory enactments or to public policy; and if any acts of par- liament—for instance, the companies acts—contem- plate, even though they do not verbally provide, that associations coming within their purview, or the mem- bers thereof, shall have certain rights, or discharge cer- tain functions only, all provisions or by-laws derogatory thereto will be simply void. It must also not be forgotten, that in respect of limited liability companies, the memorandum: indi- cates primarily the purposes of the company, and con- sequently limits in a general though definite manner its Scope and powers.’ Implied Powers of Directors. The implication of powers is a much more difficult matter. The directors of public companies are the special general agents of their companies. The execu- ‘See per Giffard, L.J., in reGen- tion, Feiling’s Case, L, R. 2 Ch. 714, eral Company for the Promotion of and 728, 729. Credit, L. R. 5 Ch. 863, 877; and per 7 See re New Zealand Banking Cor- Cairns, L. J.,in ve Financial Corpora- poration, Sewell’s Case, L. R. 8 Ch. 181. POWERS POSSESSED BY DIRECTORS. 411 tive portion of most other associations—the mayor and councilmen of municipal bodies,* the trustees of friendly societies, the governors of charities, the members of local government boards, and the like—stand towards those whom they represent in a relation similar in its essential aspects, though varying somewhat with the varying objects in view. To this relationship the prin- ciples of agency are with some degree of qualification applicable. What is the effect of this qualification?’ What is the exact extent of the authority ee by these special general agents ? The reply is that no universal rules, valid ata bind- ing under all circumstances, can be laid down for determining the one or the other, but that regard must be had to the nature of the business and the customary methods of transacting it, and account be taken of .at- tendant facts. One principle, however, will always hold, viz., that whatever is beyond the power of the corporation is, a fortiori, beyond that of the directors, and therefore in considering the legal effect of any proceeding done, en- tered upon, or ratified by them, we must first consider whether sucht proceeding could have been done, entered — upon, or ratified by the corporation itself. If not so, then evidently, in accordance with the most elementary of the principles flowing from the doctrine of ultra vires, such proceeding will be simply void as far as the corporation is concerned. But the converse of this is not to be affirmed. Directors will have not all but only some of the powers impliedly belonging to the corporation.t They will * Dillon on Mun. Corps. §§ 376, 384; San Diego 28D. & L. A. R. R. Co. 44 Cal. 106. + The board of directors ordinarily may do any act, in “fhe general 412 DIRECTORS AND OTHER SIMILAR OFFICIALS. have none which are denied them either expressly by the instruments or resolutions constituting them, or impliedly by necessary deduction therefrom. They will have none which are not required to enable them properly and expeditiously to accomplish their duties, and to carry on economically and success- fully the affairs of their constituents.* The above observations must be carefully borne in mind in connection with the remainder of this chapter. The powers of a corporation must at once limit and in part determine those of its directors. The former have been considered; consequently, in treating of the latter, reference will necessarily be often made to matters already dealt with in reference to corporations themselves, and repetition may occasionally be the result.t range of the business of the company, which the company can do, unless. restrained by the charter and by-laws. Whitewell v. Warner, 20 Vt. 425; Bank of Middlebury v. Rut. & W. R. R. Co. 30 Vt. 159; and this au- thority extends to contracting debts, and pledging or conveying real or personal estate in payment or as security. Augusta Bank ». Hamblet, 35 Me. 491; Dispatch Line of Packets v, Bellamy Mfg. Co. 12 N. H. 225; Bank of Middlebury 0. Edgerton, 30 Vt. 182; Miller o. Rutland & Wash. R. R. Co. 36 Vt. 452; Burrill ». Nahant Bank, 2 Met? 163; Sargent ». Webster, 13 Met. 497; Hoyt v. Thompson, 19 N. Y. 207; Gordon ». Pres- ton, 1 Watts, 385. * Directors have no power to apply to the legislature for enlargement of corporate powers (Marlborough Mfg. Co. ». Smith, 2 Conn. 579), nor to alienate corporate property essentially necessary for the transaction of the company’s business (Rollins v. Clay, 33 Me. 182), nor to destroy the corporate existence, or give away its funds, or deprive it of any of its means to accomplish the full purpose for which it was chartered. Burke ®. Smith, 16 Wall. 895; Penobscot & Ken. R. R. Co. 0. Dunn, 39 Me. 587; Bedford R. R. Co. 0. Bowser, 48 Penn. St. 29. As to the power of directors to transfer all property to one of the creditors, or to a trustee, for the purpose of closing up its affairs, see Sargent 0. Webster, 13 Met. 497; Dana vo. Bank of U.8.5 W. & 8. 247; Bank Com’rs v. Bank of Brest, Harring. Ch. 106; Union Bank 2. Ellicott, 6 G. & J. 363. + The authorities are not in agreement as to whether the directors of a ‘POWERS POSSESSED BY DIRECTORS. 413 (a) Implied Powers relating to the Corporate Business, and the General Management thereof. On this point it is impossible to lay down anything but the vaguest generalities. The aims and objects of corporation, being agents, are to be governed by the maxim delegatus non potest delegare. The case of Gillis v. Bailey, 21 N. H. 149, after an elab- orate review of cases, holds that directors cannot, without express authority, delegate the power to do any act involving discretion, waiving the ques- tion in regard to mere ministerial acts. The court say, in conclusion: ‘The power to lease involved the exercise of judgment and discretion. According to the uniform current of the authorities, it would seem quite clear, that an agent cannot delegate to another any portion of his power requiring the exercise of discretion or judgment, unless, in the power conferred upon the agent is involved the power of substitution by the agent, in express terms, or at least by necessary implication. But no such power of substitution was conferred upon the directors in the present case. The by-laws, to be sure, allowed ‘the exercise of a general superintend- ence and control by the directors, or a majority of them, over the affairs of the corporation.’ But this did not include the right to confer au- ,thority upon others to exercise the same power. Here was clearly no express power of substitution given to the directors, and there was nothing in the nature of the authority to be exercised which could ren- der the aid of others necessary. No power of substitution is therefore to be implied. The power was conferred upon the directors, and upon them alone, by the terms of the by-laws, ‘to sell lands and tenements, &c., be- longing to the corporation, upon such terms and conditions as they may deem advantageous to the corporation.’ The exercise of this power is put expressly upon the discretion of the directors. From this language, no power of substitution can be implied. The directors, then, were the agents of the corporation, upon whom the power to lease the lands of the corporation was conferred; and no power, either express or implied, is found to delegate that authority to others; and the power to be exercised, involved necessarily the exercise of judgment and discretion.” The power of attorney was therefore declared void. In Burrill v. Nahant Bank, 2 Met. 163, however, a different view is taken. It is said: ‘A board of directors of the banks of Massachusetts is a body recognized by law. By the by-laws of these corporations, and by a usage, so general and uniform asto be regarded as part of the law of the land, they have the general super- intendence and active management of all the concerns of the bank, and constitute, to all purposes of dealing with others, the corporation. We think they do not exercise a delegated authority, in the sense in which 414 DIRECTORS AND OTHER SIMILAR OFFICIALS. corporations are co-extensive with human needs and inclinations; consequently the methods of attaining those objects will be infinitely various, as must also be the powers given for the attainment of the same. Di- rectors, being the special general agents of: their princi- pals, will have most if not all the powers of management possessed by their principals as to binding them to third parties, except so far as the constating instruments restrain them.* But the general powers of manage- ment thus belonging to directors will, of course, not authorize their engaging in any transactions foreign to the proper and ordinary business of the company ; for the latter could not by directly engaging in such trans- actions render itself liable to persons dealing with them, so manifestly it cannot incur liability when it acts through the medium of others. Most of the cases already cited in Part JI, Chapter 3, are illustrations of this! Such general powers will, however, be construed liberally, and with due consideration for the best in- terests of the company. This well appears from the 2 See especially Ernest v. Nicholls, 6 H. 1.401; Atheneum Life Assurance Society v. Pooley, 3 D. G. & J. 294, the rule applies to agents and attorneys, who exercise the powers especially conferred on them and no others. We think, therefore, that a board of directors may delegate authority to a committee of their own number, to alienate or mortguge real estate.” See Com’rs v. Bank of Buffalo, 6 Paige, 497; Western Bank ¢. Gilstrap, 45 Mo. 419; Percy v. Millaudon, 3 La. 568. Where directors have power to appoint agents, the authority of those agents does not necessarily cease with the termination of that board. Anderson ». Longden, 1 Wheat. 85; Exeter Bk. v. Rogers, 7 N. H. 88; Brown v. Co, of Somerset, 11 Mass. 221;° Northampton Bk, ». Pepoon, 11 Mass. 288; Dedham Bk. ». Chickering, 3 Pick. 335; Union Bank ». Ridgly, 1 Har. & G. 431; Thompson ». Young, 2 Ohio, 334, Di- rectors have power to authorize one of their number to assign any securi- ties belonging to the company. See Stevens v. Hill, 29 Me. 133; Spear v. Ladd, 11 Mass, 94; Northampton Bank v. Pepoon, 11 Mass. 288. * See ante, p. 394, note. POWERS POSSESSED BY DIRECTORS. 415 case of Wilson v. Miers,’ where the directors of a steam- ship company endued with the powers, inter alia, of “selling and letting to hire, and chartering of the ves- sels,” and of “the general conduct and management of the business of the company,” were held authorized to sell all the vessels belonging to the company, and con- sequently a contract entered into by them for that pur- pose was adjudged to be binding. (6) Implied Powers as regards the Monetary Affairs . of the Corporation. * It has been shown that the amount of the capital, if any, of a corporation, and its division into shares, if 710 C, B. N.S. 348; 8 L. T.N. S.- G. & Sm. 768; Gregory v. Patchett, 33 780. The facts are given fully, ante, pp. Beav. 597. 102, 103; compare Clay v. Rufford, 5 D. * Evidence of powers habitually exercised by a cashier of a bank, with its knowledge and acquiescence, defines and establishes, as to the public, those powers, provided that they be such as the directors of the bank may, without violation of its charter, confer on such cashier; and where the authority of the agent is left to be inferred by the public from powers usually exercised by the agent, it is enough if the transaction in question involves precisely the same general powers, though applied to a new sub- ject-matter. Merchants’ Bank v. State Bank, 10 Wall. 604, As to powers of cashiers and liability of banks therefor, see Fleckner ». Bank United States, 8 Wheat. 338; Minor v. Mechanics’ Bank, 1 Pet. 46; Bank United States » Dunn, 6 Pet. 51; United States ». Bank of Columbus, 21 How. 356; Baldwin v. Bank of Newburg, 1 Wall. 234; Badger , Bank of Cum- berland, 26 Me. 428; Mussey v. Eagle Bank, 9 Metc. 306; Farmers’ Bank v. Butchers’ Bank, 4 Duer, 219; 8, c. 16 N. Y. 125; Cooke ». State Bank, 52 N. Y. 96; Bank of Penn. v. Reed, 1 W. & 8. 101; Ridgway v, Farm- ers’ Bank, 12 8. & R. 256; Merchants’ Bank v. Marine Bank, 3 Gill, 96; Sturges ». Bank of Circleville, 11 Ohio St. 153; Robinson 0. Beale, 20 Geo. 275; Ryan v. Dunlap, 17 Ill. 40; State » Commercial Bank, 14 Miss. 218; Morse on Banking, 137, et seg. ‘‘The casbier of a bank is, virtute officit, generally intrusted with the notes, securities, and other funds of the bank, and is held out to the world by the bank as its general agent in the negotiation, management, and dis- 416 DIRECTORS AND OTHER SIMILAR OFFICIALS. so divided, are usually—and if the corporation come within the companies acts are necessarily—fixed at the constitution of the same. But statutory provisions apart, it is competent for any corporation to invest its governing body with the authority to add to, reduce, or otherwise modify its capital or its division.* This is sometimes done,' and perhaps it may be considered one of the common Jaw incidents of the governing section of such corporations as exist at common law. But without such express authority, directors have no im. plied power to vary the capital, or to determine when or how it shall be raised.+ - Both the companies act of 1862*4 and the compa- nies clauses consolidation act* | contemplate the making of calls by the directors, but neither act distinctly con- fers upon them the power so to do, which therefore has to be given them, as it generally is, by an article in the constating instruments, or by resolution of the share- holders. 1 Ambergate Railway Company v. 2See 25 & 26 Vict. c. 89, Table A, Mitchell, 4 Ex. 540, art. 4 & 26, 58 & 9 Vict. c. 16, s, 27. posal of them. Prima facie, therefore, he must be deemed to have au- thority to transfer and indorse negotiable securities, held by the bank, for its use and in its behalf. No special authority for this purpose is neces- sary to be proved. If any bank chooses to depart from this general course of business, it is certainly at liberty to do so; but in such case it is in- cumbent on the bank to show that it has interposed a restriction, and that such restriction is known to those with whom it is in the habit of doing business.” Wild». Bank of Passamaquoddy, 3 Mason, 505. See, however, State 7. Commercial Bank, 6 Sm. & Mar. 287. The directors of a bank have a right to sell and transfer a promissory note discounted and owned by it. Planters’ Bank v. Sharp, 6 How. 801; Marvine v. Hymers, 12 N. Y. 223. : * See notes to p. 112, ante. : t See Railroad Co. ». Allerton, cited ante p. 892, note. ¢ Buckley’s companies act (2d ed.), pp. 878, 409. || Goddefroi & Shortt, p. 28. POWERS POSSESSED BY DIRECTORS. ALT With certain exceptions, corporations have no im- plied power to accept a surrender of, or to cancel, shares. A fortiori, directors have no such implied power. * The leading decisions are Stanhope’s Case and Munt’s Case. In the former the deed of settlement declared that in all cases not provided for, it shall be lawful for the directors to act in such manner as should appear to them best calculated to promote the interest and wel-. fare of the company. Disputes arose between.the di- rectors, and ultimately one of them, Stanhope, retired upon the terms that his shares should be canceled; but he was nevertheless, ten years later, held a contributory.! In the latter + the facts were very similar, Mr. Munt having been a director, and upon differences arising at the board, having retired in pursuance of an agreement entered into with his co-directors, that his shares should be transferred to the company. The Lords Justices, however, affirming the judgment of the Master of the 13D, G. & Sm. 198. Compare Wol- threat to forfeit, and yet the share- laston’s Case, 4 D.G, & J. 437, where holder was held not a contributory. at most there was only an unexecuted * ‘Directors of a railroad company 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.” Bedford R. KR. Co. o. Bowser, 48 Penn. St. 29.- In Burke v. Smith, 16 Wall. 395, Strong, J., says: ‘‘It has been settled by very numerous decisions that the directors of a company are incompetent to release an original subscriber to its capital, or to make any arrangement with him by which the. company, its creditors, or the State shall lose any of the benefits of his subscription. Every such arrangement ’is regarded in equity not merely as ultra vires, but as a fraud upon other stockholders, upon the public, and upon the creditors of the company.” See ante, note p. 107. See also Alford ». Miller, 82 Conn. 543; Bank ». St. John, 25 Ala. N. 8. 566; Percy 0. Millaudon, 3 La. 336; Jones v. Terre Haute & Rich. R. R. Co. 57 N. Y. 196. : t+ See Howe v, Deuel, 43 Barb. 508. 27 418 DIRECTORS AND OTHER SIMILAR OFFICIALS. Rolls, held him a contributory, and that, although the shares so surrendered by him had been subsequently retransferred by the company." The principle here involved has subsequently been repeatedly affirmed, and enforced with considerable strictness. This is well shown by the decision in Rich- mond’s Case,” one of the numerous cases growing out of the winding up of the Atheneum Life Assurance Society. One of the directors proposed to his co-direct- ors, that for the benefit of the company each of them should take a certain number of shares to be held in trust for the company; and to set the example, he signed the deed of settlement for 2,000 shares. No note of the proposal was entered on the minutes, nor were the shares handed over to him. No other director fol- lowed his example; but subsequently, he being still a director, his name was returned to the stamp office for the shares. Afterwards, having ceased to be a director, and having reason to know that the company was in failing circumstances, he procured his shares to be can- celed by the directors. Held, upon the terms of the company’s deed of settlement, that this was ultra vires of the directors, they having no power to cancel or diminish the capital, but only to forfeit shares for the benefit of the company ; and was a fraud on the part of - the shareholder, who was accordingly held to be a con- tributory in respect of those shares. This is, perhaps, a somewhat hard decision, but it only illustrates the care with which directors must keep within their admitted powers. Similarly the authority to permit the surrendering of shares must be expressly vested in directors, and will 722 Beay. 55. Compare Knight's one informalities, the forfeiture Case, L, R. 2 Ch. 821, where, notwith- was hel perfect. 24K. & J. 305, POWERS POSSESSED BY DIRECTORS. 419 not be raised by implication from the nature of the business; .and it can be applied only strictly for the purposes for which intended. Thus, where they had power to accept a surrender of shares, but the company was expressly prohibited from dealing in shares, it was determined that a deed of release and indemnity, by which the directors discharged a person who had sub- scribed the memorandum of association for 500 shares, from all liability in respect of 250 of these shares not allotted to ‘him, was a dealing in shares, and therefore illegal and void. Similarly, directors cannot relieve a person from a contract to take shares, and who has not yet taken them.’ On the other hand, directors will have such a power, not only when it is expressly given them, but also when necessarily implicated in the language used in appoint- ing them. Thus, authority to enter into any contract, “and afterwards to release and discharge, or modify and vary, the terms of any such contract or agreement,” * and “to enter into, alter, rescind, or abandon contracts in such manner as they shall think fit,”* coupled with power to deal in shares, has been held sufficient to enable them to accept a surrender of shares, and other- wise to relieve from the liability in respect thereof. But general powers of management do not enable directors to issue paid up shares, or make contracts with shareholders for the taking up of shares or the payment of calls thereon in an unusual and anomalous manner— 1 Re United Service Company, Hall’s Snell’s Case, L. R. 5 Ch, 22; and ue ae faa Company, Adams’ ee Crapo’ One. a a & Sm. 13 Eq. 474; but compare 177. eae: P ‘ Thomas's Case, L. R. 13 Eq. 487. 420 DIRECTORS AND OTHER SIMILAR OFFICIALS. e.g. by the shareholder supplying goods in lieu of pay- ment.’ * The authority to forfeit shares, like that to cancel them or accept a surrender, exists, as to both corpora- tions and their managing bodies, only when actually given’+ The companies act of 1862 itself contem-. plates that directors can forfeit, but does not itself positively enact that they can do so, and therefore this must be provided. for by the articles of association. The companies clauses consolidation act,* expressly en- ables the directors of companies falling within it, under certain circumstances, and upon certain conditions, to forfeit shares. This power, it need scarcely be added, is like every other power, a trust to be exercised bona fide for the benefit of the whole corporation and of the general body of members, and not in the favor or to the detri- ment of some one or more.® Borrowing is one of those powers which directors may have, either as expressly given or as implied from the nature of the business.| When expressly given it ? Re Richmond Hill Hotel Company, ® See 25 & 26 Vict.'c. 89; Table A, Pellatt's Case, L. R, 2 Ch. 527; see also cl. 17 & 19.4 ante, pp. 158, 154, and the cases there 48 & 9 Vict. c. 16, ss. 29-85, cited. ® See Richmond’s Case and Painter's ° Re Agriculturists’ Cattle Insurance Case,4 K. & J. 805; Sweny v: Smith, Ey Stanhope’s Case, L. R.1 Ch. L. RB. : Eq. 324. 161. * See ante, p. 158. + The power of forfeiture for non-payment of calls depends upon the charter or some general law. As to remedy, see ante, p. 152, note. {See Buckley’s Companies Acts, pp. 893-407, where will. be found collected the recent cases on the forfeiture of shares, and an interesting chart exhibiting the conflicting opinions of the judges in the cases grow- ing out of the Agriculturists’ Cattle Insurance Company. | See Curtis o. Leavitt, 15 N. Y. 9; Lawrence v. Gebhard, 41 Barb. 575; Angell & Ames on Corp. § 297. POWERS POSSESSED BY DIRECTORS. 421 may be so in so many words; or by necessary deduction from general powers of management conferred upon them.’ The authority may be to borrow by way of loan simply;* or by mortgaging the funds and other property of the company, whether the existing assets only ** or the future assets as well, that is to say, book ‘debts accruing, though not yet due,’ but not calls here- after to be made, which cannot validly be pledged ;* or by the issue of debentures." (c) Implied powers of Directors as regards Legal Proceedings. One of the chief points in connection with the au- thority of the managing body of a corporation to bind it by conducting or concurring in legal proceedings on its behalf, is that of. notice or admission. Notice to an agent is notice to his principal,t consequently notice to * Bryon v, Metropolitan Saloon Om- nibus Company, 8 D. G. & J. 123; Scott v. Colburn, 26 Beav. 276; Stan- ley’s Case, 33 L. J. Ch. 535. “ Re Sankey Brook Coal Company, No, 1, L. R. 9 Eq. 721; No. 2, L. R. 10 Eq. 381. * Bloomer v, Union Coal and Iron * Australian Steam Clipper Com- pany v. Mounsey, 4 K. & J.733; Gibbs and West's Case, L. R. 10 Eq, 312. *See Strand Music Hall Company, 8D. G. J. & Sm. 147. Company, L, R. 16 Eq, 383. * See Stanleys’s Case, and re Sankey Brook Coal Company, No. 2, ubi supra, ” As to which and the assets charged thereby, see ante, pp. 128-180, * The directors of a railway corporation are competent to exercise the power of the corporation to convey or mortgage the lands of the company, and may mortgage property to secure debts which they are authorized to contract, even without any express authority from the corporation to do so. Hendee ». Pinkerton, 14 Allen, 381. Where the agent of a manu- facturing corporation was authorized by a vote of the directors to raise money for his own use, as pay for services, upon the credit of the com- pany, and to give a “company note” therefor, it was held that the direct- ors had not exceeded their authority. Tripp v. Swanzey Paper Co. 13 Pick. 291; see also Ridgway ». Farmers’ Bank of Bucks Co. 128. & R. 256. On-the power of corporations to borrow, make notes, mortgage, etc., see ante, pp. 115, 121, 123, 128, notes. + See Story on Agency, § 140, and Angell and Ames on Corporations, § 805; Bank of U. 8. 2. Davis, 2 Hill, 351. 422 DIRECTORS AND OTHER SIMILAR OFFICIALS, one partner is notice to all those then actually belong- ing to the firm." The exception to this rule will be found on investigation to be apparent, not real, and to be due to the fact that under the circumstances the partner affected with the notice was not in truth the agent of the firm.’ This rule holds in the case of an acting director, or of any other duly authorized agent of a company.‘* 1Collinson v. Lister, 7 De G.M.& Company, L. R. 2 Ch. 617; and Wor- G. 634. cester Corn Exchange Company, 3 De 2 See Bignold », Waterhouse,1 M. G. M. & G. 180. & S. 255 ; ex parte Heaton, Buck, 386. * Re Solvency Mutual Guaranty So-- * See Peruvian Railway Company v. ciety, Hawthorne’s Case, 31 L. J. Ch, Thames and Mersey Marine Insurance 625 ; Thompson v. Spiers, 18 Sim. 469, * “The knowledge of an agent in matters pertaining to his agency, and within the scope of his authority, is the knowledge of the principal. This principle is peculiarly applicable to corporations, which must trans-. act their business through agents.”’ Perry v. Simpson Waterproof Mfg. Co. 37 Conn. 520; see also Cumberland Coal Co. v. Sherman, 80 Barb. 553; Smith v. Board of Water Commissioners, 88 Conn. 208; and see cases cited in Angell and Ames on Corporations, §§ 305, 308. Where a corporation has two agents of equal power and authority, notice to one is. constructive notice to the other, and therefore notice to the corporation. Perry v. Simpson Mfg. Co. 87 Conn. 520. In order to affect a corporation by the knowledge of a fact on the part of one of its directors, it is neces- sary that he should have such knowledge while acting officially in the business of the corporation, unless he is acting at the time under some special authority conferred on him other than what he would possess as. merely one of its directors. Farrell Foundry Co. », Dart, 26 Conn. 376; see Ang. & A. on Corp. §§ 306, 308. Knowledge of a director of a bank, as to the object for which certain bills of exchange were delivered to a party applying to the bank for a discount thereof, such directcr not being present at the meeting of the directors at which such application was. made and such bills discounted, and not having communicated his knowl- edge to any other director or officer of the bank, is not to be regarded as. notice to the bank. Farmers’ & Citizens’ Bank ». Payne, 25 Conn. 444, Where a director of a bank, authorized on certain conditions to procure’ notes for discount, got a note under pretense of having it discounted, when the conditions were not satisfied, and the maker knew of the con-- ditions, it was held that the director did not act officially, and that the bank, to which the note had been passed by the director in pledge for a loan to himself, was not affected with notice of the circumstances under which POWERS POSSESSED BY DIRECTORS. 423 The notice must be express and to the agents of the the note was given, but could recover on it from the maker. Washington Bank ». Lewis, 22 Pick. 24. A director of a corporation bought lands from it, and united with others in forming a new company. He sub- scribed for almost all of its stock, became one of its officers and directors, and on the next day, in pursuance of an entire plan, conveyed the same lands to the new company in payment of his subscription. The new com- pany was held to be affected with notice of the circumstances impairing his title. Hoffman Steam Coal Co. o. Cumberland Coal & Iron Co. 16 Md. 455. A rule has been laid down by some authorities in regard to notice to a director in the absence of any special agency, which is clearly put by the court in U. 8. Ins. Co. o. Shriver, 8 Md. Ch. 381. “The sound and safe rule on the subject is this: that notice given to a director pri- vately, or Which he acquires from rumor, or through channels open to all alike, and which he does not communicate to his associates at the board, will not bind the institution. But if the notice is given to him officially for the purpose of being communicated, although such notice should not be so communicated, the institution. is bound by it.” The judge there gives his opinion that the weight of authorities sustains this rule. In the case of National Bank ». Norton, 1 Hill 572, this rule appears, but only as a dictum. It is there said, that the director to whom notice is given officially, for communication to the board, “ must necessarily, perhaps, be considered as the agent of the bank to that extent.” In Bank of U. 8. 0. Davis, 2 Hill, 351, a different principle is adopted, which is followed in North River Bank », Aymar, 3 Hill, 262; it is to the effect that, no matter how the knowledge is acquired by a director, if he acts as a member of the board upon the transaction in regard to which he has notice, his knowledge is the knowledge of the board. The judge in U. 8. Ins. Co. ». Shriver, ante, distinctly disapproves of these cases, and refers to Story on Agency, among other authorities (see Story on Ag. § 140 b, and 140 c). The case of Commercial Bank ». Cunningham, 24 Pick. 270, seems also opposed to this principle. In that case one of the directors was also one of those contracting with the corporation. The court, in deciding that his knowledge of matters concerning the contract was not notice to the bank, say: ‘To admit the stockholders or directors of a bank to subject it to liability, or to affect its interests, unless they have authority so to do expressly by its charter, would be attended with the most dangerous con- sequences, and is certainly not sanctioned by any authority.” Notice to an individual corpprator, if he be not constituted by the charter or by- laws an organ of communication betwixt the corporation and those who deal with it, is not notice to it. But knowledge actually imparted to the board by a director at a regular meeting, is notice to the corporation. Bank of Pittsburg v. Whitehead, 7 Watts, 397; Custer v. Tompkins Co. Bank, 9 Penn. St. 27. 424 DIRECTORS AND OTHER SIMILAR OFFICIALS. company as such.* Therefore, where bankers with whom policies of insurance were deposited by the assured as security, gave no notice in writing to the offices, though the secretaries of the insurance compa- nies were casually made aware of the fact of the deposit, and the assured became bankrupt and died, it was held, on a bill being filed by the bankers to realize their se- curity, that the policies remained in the bankrupt’s order and disposition, and that his assignees were entitled to the proceeds, less the premiums paid by the bankers.’ In accordance with this principle, corporations hav- ing common officials are not necessarily affected through these with knowledge of each other’s transactions.t Thus, where company A. borrowed of company B., on the security of a mortgage, money to be devoted to a purpose that was ultra vires of company A., and the person who negotiated the loan was a director in both companies, while the solicitor employed was thé solicitor of both companies, it was nevertheless held that company B. was not affected with notice of the illegality.? But, on the other hand, a mere verbal, and it would seem even casual, notification to the directors or other responsible agents of a corporation, provided only that it be during the actual course of business, is sufficient.’ Similarly a corporation, like an ordinary firm or in- * Edwards ». Martin, L.R,1Eq.121. _' * Re Worcester, ex parte Agra Bank, * Re Marseilles Extension Railway L. R. 8 Ch. 655, Compare ex parte Company, ex parte Credit Foncier of Boulton, 1D. G. & J. 163, and North England, L. R. 7 Ch. 161; re European British Insvrance Company ». Hallett, Bank, L. R. 5 Ch. 358. Compare ve 1 Jur. N.S. 1268. See also British and Contract Corporation, ex parte Ebbw American Telegraph Company v. Albion Vale Company, L, R. 8 Eq. 14; Gray», Bank, L. R. 7 Ex. 119. Lewis, L. R. 8 Eq. 526. . * See previous note, p. 422. +See Fulton Bank », N. Y. & Sharon Canal Co. 4 Paige, 126; Miller %. Mlinois Central R. R. Co. 24 Barb. 312; New Hope & Del. Br. Co. ». Phenix Bk. 3 N. Y. 156. FREE EE POWERS POSSESSED BY DIRECTORS. 425. dividual, is bound by the representations! and the ad- missions* of its directors and other agents, but only while these are acting within their authority, and in due course of business.’ Therefore either the representation or admission must be that of the directors, or a quorum thereof as a body, or if of one director or other agent, some evidence must be given of the authority of such person to bind the company.** * Conybeare v. New Brunswick Rail- way Company, 9 H. L. 711; National Exchange Company v. Drew, 2 Macq, 105; Deposit Life Assurance Company v, Ayscough, 6 E, & B, 763. ? Meux’s Executor’s Case, 2 D. G. M. & Ne 5622; Burnes v. Pennell, 2 H. L. 497. Case, 28 L. J. Ch. 257, where will be found a most exhaustive judgment by the Lord Chancellor. ‘Holt’s Case, 22 Beav. 48; Moody v. Brighton and South Coast Railway Company, 31 L. J. Q. B. 54; re Tring d&e, Railway Company, 3 D.G. & Sm. 10. ° Holt’s Case, 22 Beav. 48; Nicol’s * Palley 0. Ocean Ins. Co. 14 Shep. 141; Franklin Bank v. Cooper, 36 Me. 179; Bank ». Stewartt 37 Me. 519; Lime :Rock Bank ». Hewett, 52 Me. 531; Bank of Grafton ». Woodward, 5 N. H. 301; Pemigewassett “Bk, ». Rogers, 18 N. H. 255; Low ». Conn. & Pass. R. R. Co. 45 N. H. 370; 8. c. 46 N. H. 284; Chelmsford Bk. ». Demorest, 7 Gray, 1; Fogg v. Pew, 10 Gray, 409; McGenness v. Adriatic Mills, 116 Mass. 177; Bank of Hartford v. Hart, 3 Day, 491; Turnpike Co. v. Thorp, 18 Conn. 173; Toll Bridge Co. v. Betsworth, 30 Conn. 380; Osgood o. Manhattan Bk. 3 Cow. 612; Merchant’s Bank ». Spalding, 9 N. Y. 57; First Baptist Church o. Brooklyn Ins. Co. 28 N..Y. 153; Matteson ». N. Y. Cent. R. R. Co. 62 Barb. 364; Insurance Co. ». Woodruff, 2 Dutch. 541; Soper ». Buff. & Roch. &. R. Co. 19 Barb. 310; East River Bk. 0. Hoyt, 41 Barb. 441; Spelman v. Fisher Iron Co. 56 Barb. 151; Harrisburg Bk. ». Tyler, 3 W. & 8, 373; Bank »v. Davis, 6 W. & 5. 285; Smith » North Car. R. R. Co. 68 N.C. 107; Charleston & Sav. R. R. Co. ». Blake, 12 Rich. Law, 634; Crump ». U. 8. Mining Co. 7 Gratt. 352; Hugg ». Zanesville Mfg. Co. Wright (Ohio), 139; Sturges v». Bk. of Circleville, 11 Ohio St. 153; Mitchell 0. Rome R. R. Co. 17 Ga. 574; Toledo, Wab. & W. R. R. Co. ». Fisher, 18 Ind. 258; Keller o. Crawford, 37 Ind. 279; New England Ins. Co. ». Schlettler, 38 Ill. 171; Chicago, B. & Qy. R. R. Co. v. Coleman, 18 Ill. 297; Mich. Central R. R. Co. ». Gougar, 55 Tl. 503; American Express Co. »v. Gilbert, 57 Ill. 468; Farmer’s Bk, 0. Troy, 1 Dougl. (Mich.) 457; Home Machine Co. ». Snow, 32 Ia. 433; Troy Ins. Co. », Carpenter, 4 Wis. 20; Sewanee Mining Co. v. McMahon, 1 Head, 582; Northrop 2. Miss. Ins. Co. 47 Mo. 485. As to declarations and acts of municipal offi- cers, see Dillon on Mun. Corps. §§ 176, 242. ; CHAPTER V. ACTS INTRA VIRES, BUT INFORMAL. SECTION I. FORMALITIES TO THE OBSERVANCE OF WHICH CERTAIN PARTIES ARE UNABLE TO SEE. For its own protection a corporation may and gen- erally does require that the engagements into which it enters, and the acts which it does, shall be accompanied with certain formalities, just as the law requires its con- tracts to be under seal. Such precautions are very necessary as a security not only to the corporation as a whole, but also to the individual members thereof. Without them the former might, by the incompetence or rashness of its agents or by the fraud or sharp deal- ing of third parties, become engaged in improvident or unwise speculations, in which, as the inevitable conse- quence, the latter would also be involved. Without them, too, there would be no certain test of the partici- pation or acquiescence of the corporation in any given transaction. It is an intangible entity—it can acquire rights or incur liability only through the medium of agents—what are the circumstances by which to deter- mine whether persons, pretending to act on behalf of the corporation, are really and legally so acting, and are its agents in that behalf? These circumstances are the FORMALITIES, 497 employment of such persons by the corporation, and the use by such persons of the formalities imposed.* * The directors of a company, as has been shown (ante, pp. 390, 394, note), are general agents for the management of its ordinary affairs. The by-laws and resolutions respecting their general powers, are to be considered in the light of the power of attorney or instructions given to the agent of an individual. In all cases of principal and agent, care must be taken “ carefully to distinguish between the authority given to the agent, and the private instructions given to him as to his mode of executing that au- thority. For, although where a written authority is known to exist, or is, by the very nature of the transaction, presupposed, it is the duty of persons dealing with the agent to make inquiries as to the nature and ex- tent of such authority, and to examine it; yet no such duty exists to make inquiries as to any private letter of instructions from the principal to the agent; for such instructions may well be presumed to be of a secret and confidential nature, and not intended to be divulged to third persons. In like manner, if the written authority apparently justifies the act, it is no objection that the agent has secretly applied his authority to other pur- poses than those for which it was given. Indeed, it may well be doubted whether in these respects there is any solid distinction between the case of a special authority to doa particular act, and a general authority to do all acts in a particular business. Each includes the usual and appro- priate means to accomplish the end. Ineach case, the agent is apparently clothed with full authority to use all such usual and appropriate means, unless upon the face of the instrument, a more restrictive authority is given, or must be inferred to exist. In each case, therefore, as to third persons innocently dealing with his agent, the principal ought equally to be bound by the acts of the agent executing such authority by any of those means, although he may have given to the agent separate, private, and secret instructions of a more limited nature, or the agent may be secretly acting in violation of his duty.” Story on Agency, § 73. While, however, in extraordinary matters at least, a prudent person, when deal- ing with the officers of a company, will require an inspection of the reso- lutions and by-laws, by means of which the authority for their acts is con- ferred, yet in such dealings as are within the apparent scope of the usual powers of such officials, such requirements would be inconvenient, if not impossible, in the transaction of the ordinary business of the corpora- tion, and therefore may safely be omitted. The charter of the com- pany rests on a different basis, and persons dealing with officers are bound by the restrictions contained in it; for any act done against its express provisions, would (subject to the effect of acquiescence, ratifi- cation or estoppel, where such principles could be legally invoked), bind .the party contracting. The resolutions conferring authority or 428 ACTS INTRA VIRES, BUT INFORMAL. These formalities are usually arranged under the three heads of discretionary, directory, and imperative. the by-laws may be in some sense secret or inaccessible to those trans- acting business with the corporation, but the charter being a :public law, is open to the examination of all. In addition to these rules, another is applicable, namely, that the law looks to substance and justice, and not to mere form. ‘ Therefore, the mode of exercise of powers,-so long as it does not substantially affect the rights of the corporation, will not be considered, where the party contracting has acted in good faith and with- out actual knowledge of the lack of formality; and, indeed, where the contract is not executory, even this last element will not be allowed to enter so as to defeat a just claim. Moreover, where agents of cor- porations are acting within the apparent scope of their powers, every presumption will arise as to their acts being authorized by all need- ful formalities by the lawfully constituted corporate body; and where the acts are such as are usually’ performed by like officials, or: where the person performing them has to the knowledge of the corporation done similar acts for a considerable period, and for the benefit of the corporation, it will be bound by such acts, though informal in some regard prescribed by the by-laws, or by resolution. Selden, J., in Bissell 2. M. 8. & N. LR. R. Co. 22 N. Y. 258 (Sept. 1860), observes: ‘There are, in England, a class of corporations organized under general laws, which do not specify the manner in which the objects and purposes of the incorpora- tion are to be effected, but leave this to be arranged by a deed of settlement between the corporators themselves. By this deed, the companies pre- scribe and limit the powers and functions of their various officers, so far as they are left uncontrolled by the statute and the general laws of the kingdom. Now it is plain that there is no analogy between an act which merely transcends the limits of this deed of settlement, and one which violates the provisions of this organic act. The deed of settlement is the private act of the shareholders; and its provisions have respect solely to their private interests. It is a mere power of attorney, and bears no re- semblance to a law enacted with a view to the interests of the public. There is evidently no question of public policy involved, when the ques- tion is, whether the officers have exceeded the authority conferred by this deed.” And he therefore excludes from the doctrine of ultra vires, prop- erly so called, acts which simply exceed the powers conferred by the deed of settlement upon the officers as the agents of the shareholders. ‘‘ The companies act, 1862,” however, now provides for the registration of the “memorandum,” and of the “articles of association” (sec. 17), and that (sec. 174) every person may inspect the documents so registered, and pro- cure copies. Buckley, pp. 15, 845, The same act (sec. 55) provides, that the business of the company shall be managed by the directors, subject to FORMALITIES. 429 Discretionary formalities are, as the term imports, such as the director or other agents may adopt or omit at such regulations as may be prescribed by the company. Mr. Buckley, (p. 427), states the English rule thus: ‘ Although, after much difference of opinion, it must be taken to be settled, that persons dealing with a regis- tered company, are bound to acquaint themselves with the limits imposed by the deed of settlement or articles of association on the authority of the directors (Ernest 0. Nichols, 6 H. L. C. 401, 419; Fountaine vo. Carmar- then Railway Co. L. R. 5 Eq. 316, 822), yet strangers to the company dealing with directors cannot be affected by by-laws, which may under the articles be from time to time made and varied by the directors, unless notice of such by-laws is proved (Royal Bank of India’s Case, L. R. 4 Ch. 252).” . That some of the provisions of the charter and by-laws may well be deemed directory to the officers, and not conditions, without which their acts would be utterly void, will scarcely be disputed. What are to be. deemed such provisions, must depend upon the sound construction of the nature and object of each regulation, and of public convenience, and ap- parent legislative intention. If a regulation be merely directory, then any deviation from it, though it may subject the officers to responsibility both to the government and to the stockholders, cannot be taken advantage of by third persons. Bank of U. 8. x. Dandridge, 12 Wheat. 64; referring to U. 8. «. Kirkpatrick, 9 Wheat. 720, and U. 8. 2, Van Zandt, 11 Wheat. 184. A corporation cannot vary from the object of its creation, and per- sons dealing with a company must take notice of whatever is contained in the law of its organization, but the corporation will be held liable in those cases where it acts within the range of its general authority, but fails to comply with some formality or regulation which it should not have neglected, but which it has chosen to disregard. Zabriskie v. Cleve- land, C. & C. R. BR. Co. 28 How. 381. In Salem Bank 2. Gloucester Bank, 17 Mass, 1, it is said, that the duties of directors and officers “‘ are pointed out by statute, or prescribed in the by-laws which are the pro- mulgated will of the company,” and again, that the authority of the agents of corporations “is created by statute, or is matter of record in the pooks of the corporation, to which all may have access who have occasion to deal with the officers.” See Bank of Augusta vo. Harle, 13 Pet. 587; Pearce v. M. & I. BR. R. Co, 21 How. 441; Union Mutual Fire Ins. Co. ». Keyser, 32 N. H. 313. As to what is merely formal, see Johnson v. Jones, 4 Barb. 869. A provision in a bank charter, conferring upon the direct- ors power to make and prescribe such by-laws, rules and regulations as shall be needful, touching ‘‘the time, manner and terms upon which dis- counts and deposits shall be made,” will be construed as giving to the directors power to make by-laws, &c., to operate and control the internal conduct of the business of the bank, merely, and to restrain and direct 430 ‘ACTS INTRA VIRES, BUT INFORMAL. their option. They are intended to serve merely as evi- dence, and their adoption or omission does not in the least affect the validity of the act to which they relate.’ Directory formalities are intended to protect the corpo- ration against its governing members, but not against its creditors. They differ from discretionary in that the directors can be compelled by the corporation to make use of them in exercising their powers, and may perhaps be liable to the company for any damage occasioned by the omission.’ Such acts may be improper as be- tween the corporation and its directors, and may con- stitute breaches of trust on the part of the latter, but as these formalities are not imperative, their presence or absence does not affect the legality of transactions entered into by persons unaware of the want of them. In treating of directory formalities we must consider them under two distinct heads :— First, in so far as they concern.parties dealing with the corporation ; 1 See Re Royal British Bank, Nicol’s 2 See per Page-Wood, V. C. L. R. 5 Case, 3D. G. & J. 887; 28 L. J. Ch, Eq. 323. 257, i ‘ its own officers and servants in the management of its affairs, and not to affect the public at large, or the rights and interests of third persons. Seneca County Bank v. Lamb, 26 Barb. 595. Wild ». Bank of Passama- quoddy, 3 Mason, 506, holds that a corporation must show a restriction preventing its cashier from doing the ordinary acts of such officer, as trans- ferring and indorsing notes, and thatthe party who has dealt with him had notice thereof. See State ». Commercial Bank, 6 8. & M. 287. Where by- laws are not referred to in the policy of insurance, the insured is not bound to take notice of anything therein. Kingsley 1. New England Ins. Co. 8 Cush. 403. It is to be presumed that acts which an officer of a cor- poration usually and customarily performs in its behalf are authorized by the directors. Fleckner v. Bk. of U. 8. 8 Wheat. 388; Ellwell v. Dodge, 33 Barb. 386. And that directors are acting lawfully in what they do. Knox Co. v. Aspinwall, 21 How. 539; Zabriskie v. Cleveland, C. & C. R. R. Co. 23 How. 381; Debois 0. Richmond, 18 Gratt. 338. FORMALITIES. 431 Secondly, in so far as they affect the acts, other than contracts, of the corporation or its officials. Let us take the former of these two heads, and first as to parties who are not bound to see to the ob- servance of the formalities. Now it must be borne in mind that the exact point to be determined is the effect of contracts and other en- gagements undertaken on behalf of a corporation by the agents thereof in accordance with the powers actually given them by the instruments of incorporation, but de- ficient in some formality prescribed, though not made absolutely essential, by these instruments, or in excess of the powers as subsequently limited by the private resolutions of the corporation. We have nothing to do with acts ultra vires, using this term in its proper mean- ing, of outside the powers of the corporation as a whole. What the corporation cannot do, a fortiort its agents cannot engage in so as to bind it, and any questions as to formalities will be irrelevant. We must consider first what are the powers, express or implied, of the directors in respect of the given transaction, such trans- action being admitted to be within the scope of the company’s business; and secondly, whether those pow- ers have been duly exercised, and if not, whether the formality omitted is essential or not. If it be, then the transaction is simply void—nothing can cure it. But if not, then the authorities establish that— I When any transactions of a corporation ought to be, but are not, accompanied with certain formali- ties, such formalities being directory only and not essential, the said transactions will be bind- ing upon the corporation as regards persons deal- ing with it not having notice, express or implied, of the need of the formality in question. 482 ACTS INTRA VIRES, BUT INFORMAL. The leading case at common law is Royal British Bank v. Turquand.’* By the deed of settlement of a joint stock company, the directors were authorized to borrow, under the common seal of the company, such sums as should from to time, by a resolution passed at a general meeting of the company, be authorized to be borrowed, not to exceed a certain sum, At a general meeting, the directors were authorized to borrow such sums and at such interest and for such periods as they might deem expedient, in accordance with the provis- ions of the deed of settlement and the act of parliament. The directors having borrowed £1,000 on bond under the common seal of the company, it was held that the company must repay the amount, whether the resolu- tion. was or was not a sufficient authority to the direct- ors to borrow, for though parties dealing with joint stock companies are bound to take notice of any limita- tion of the authority of the directors in the deed of set-, tlement, yet where the directors, as in this case, have power to borrow, the lenders of the money have a right to presume that the company, which put forward their directors as authorized to borrow, have taken every step requisite to empower them to do so. The decision was based upon the short ground that, apart from any ques- tion as to the validity or sufficiency of the resolution, or even as to the existence of such a resolution, the com- pany was liable to persons dealing bona fide with the directors, not knowing that the latter were exceeding their powers. Prince of Wales Life Assurance Company v. Hard- ing’ is very similar. The deed of settlement of the '6E. & B. 827; 25L. J. Q B, 817. 7 EB. & E. 183; 27 LJ. Q, B. 297. * See Bissell o. M. 8. & N. I. R. R, Co. 22 N. Y. 258, 292. FORMALITIES. 483 plaintiff company provided that “the common seal shall not be affixed to any policy except by an order signed. by three directors and countersigned by the manager.” The seal was affixed to a policy without the order first obtained, but in other respects in accordance with the deed of settlement. It was held that this provision was directory merely, and that consequently such policy was not void, the assured having been bona fide ignorant of the informality. Fe Atheneum Life Assurance Company ex parte Eagle Company’ is the leading decision in chancery. This was a claim against the Atheneum Assurance Society on account of an agreement by the directors to grant a policy—not one actually granted. In the course of his judgment Page-Wood, V. C., pointed out very clearly the principle upon which these decisions de- pend. “There is no doubt an important distinction to be drawn, and it is drawn in the case of the Royal British Bank v. Turquand, between that which on the face of it is manifestly imperfect when tested by the re- quirements of the deed of settlement of the company, and that which contains nothing to indicate that those requirements have not been complied with. Thus where the deed requires certain instruments to be made under the common seal of the company, every person contract- ing with the company can see at once whether that re- quisition is complied with, and he is bound to do so; but where, as in the case I have last referred to, the conditions required by the deed consist of certain in- ternal arrangements of the company—for instance, reso- lations of meetings and the like—if the party contract- ing with the directors finds the acts to be within the scope 14K. & J. 549; 27 LJ. Ch. 829; Gordon v, Sea, Fire, &e. Company, 1 H. : & N, 599; 26 L, J. Ex, 202. 28 434 ACTS INTRA VIRES, BUT INFORMAL. of their power under the deed, he has a right to assume that all such conditions have been complied with. In the case last supposed, he is not bound to inquire whether the resolutions have been duly passed or the like, other. wise he would be bound to go further back, and to inquire whether the meetings have been duly summoned, and to ascertain a variety of other matters, into which, if it were necessary to make such inquiry, it would be impossible for the company to,carry on the business for which it is formed.” He accordingly allowed: the claim, grounding his decision on the fact that though the deed of settlement required (section 28) every policy, &c., to be under the hands of not less than three of the directors, and sealed witli the common seal of the society, yet, “in every other contract” it was sufficient if there should be “a reference to these presents, and a proviso limiting, &c.,” which had actually been inserted in the instrument upon which the claim was based. The Vice Chancellor said: “In the case before me I find in the deed of this society the 28th section, distinguishing be- tween certain completed instruments which it requires to be under the common seal of the society, and other con- tracts which, like the former, are to be satisfied out of the funds of the society, but as to which there is no such requisition with reference to the manner in which they are to be executed. I find in the 38th section a power given to the directors, wherever the deed is silent, to do everything which is necessary for carrying on the busi- ness of the company; and I then find a ‘contract, exe- cuted by three of the directors, which is a reasonable contract and within the precise scope and object of the society—viz., a contract to issue a policy in the very form which the society was constituted for the purpose of issuing. Under these circumstances it appears to me FORMALITIES. 435 that the contract in question is one into which the di- rectors were authorized to enter, and which upon bill filed the society would have been decreed to perform. I therefore hold that the debt is established—if not at law—as a good equitable debt.” A very late case to a similar effect is Re County Life Assurance Company,'* the circumstances of which were as follows: In 1863 the County Life Assurance Company was registered. In the articles of association certain persons were named as first directors, with power to add to their number until the first general meeting. P. was named as first manager, or managing director. Policies were to be executed by three direct- ors, and the whole control of the company was to be in the hands of the directors. The directors named in the articles being dissatisfied with the constitution of the company, refused to carry on business, and passed a 1L. R. 5 Ch. 288. * Contracts made by de facto directors are binding. Angell & Ames, §§ 286, 287; citing Minor v, Mechanics’ Bank, 1 Pet. 46; Cooper ». Curtis, 30 Me. 488; Despatch Line of Packets v. Bellamy Mfg. Co. 12 N. Hamp. 205; Charitable Association ». Baldwin, 1 Met. 359; McCall o. Byram Mfg. Co. 6 Conn. 428; Green v. Cady, 9 Wend. 414; All Saints Church v. Lovett, 1 Hall, 191; Vernon Society v. Hills, 6 Cow. 23; ex parte Rogers, 71d. 580, n.; Lovett o. German Reformed Church, 12 Barb. 67; Riddle v. County of Bedford, 7S. & R. 892; Baird v. Bank of Washington, 11 S. & R. 411; York County ». Small, 1 W. & 9. 320; Kingsbury v. Led- yard, 2 W. & S. 41; M’Gargell 0. Hazelton Coal Co. 4 W. & S. 425; Del. Canal Co. ». Penn. Coal Co. 21 Penn. St. 181; Burgess v. Pue, 2 Gill, 254; Smith ». Erb, 4 Gill, 487; Union Bank of Md. ». Ridgely, 1 Harris & G. 421; Burr v. McDonald, 3 Gratt. 215; Elizabeth City Academy 2. Lindsey, 6 Ired. Law, 476; Bank of St. Mary’s v. St. John, 25 Ala. N. 8. 566; see Rockville & Washington Turnpike Co. v. Van Ness, 2 Cranch, 449; Sampson v, Bowdoinham Steam Mills Co. 36 Me. 78; People’s Ins. Co. ». “Westcott, 14 Gray, 440; re Mohawk & Hudson R. R. Co. 19 Wend. 135; Bartholomew ». Bentley, 1 Ohio, 88; Chamberlain ». Painesville & H. R. R. Co. 15 Ohio St. 225; Ohio & Miss. R. R. Co. 2. McPherson, 35 Mo. 18. 486 ACTS INTRA VIRES, BUT INFORMAL. resolution that nothing should be done in the affairs of the company, and no meetings held; but they did not proceed farther and wind up the company. Shortly after P. and one of the subscribers of the memorandum other than the directors took steps to carry on business ; they elected new directors, issued and allotted shares, made a seal, and granted policies. Held, that a policy granted by the de facto directors, and executed by them in a manner according with the articles, and sealed with the above mentioned seal, was binding upon the company. Giffard, L. J., on appeal, confirming the de- cision of the master of the rolls, said: “The (original and de jure) directors of this company might at any moment, had they chosen to do so, have restrained these transactions and put an end to the company. In this state of things the respondents, in the ordinary course of business, effected a policy. They knew noth- ing of the internal arrangements of the company, or that any irregularity had taken place. * * * The com- pany is bound by all that takes place in the usual course of business with anybody who deals dona fide with those who may be termed de facto directors, and who, so far as the stranger could possibly tell, were de jure directors. * * * I do not hesitate to say that the business of companies of this description could not be carried on if this order be not supported as good law.” * *« All acts done by any meeting of the directors, or of a committee of directors, or by any person acting as director, shall, notwithstanding it may be afterwards discovered that there was some defect in the ap- pointment of such directors or persons acting as aforesaid, or that they or, any of them were or was disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.” Companies Clauses Consolidation Act, 1845, § 99; Goddefroi & Shortt, p. 99. FORMALITIES. 487 What formalities will be considered directory, as between the company and persons contracting with it, can’ be determined only by the light of existing de- cisions. The one general rule is, that all formalities are such which relate merely to the internal arrange- ments and organization of the corporation. The diffi- culty consists in the application of this rule to special circumstances. It seems that the following requisites are directory merely : First. The holding of meetings of, and the passing of resolutions by, the individual members, prior to the exercise by the directors of their powers.'* Secondly. Unusual conditions as to requiring the direction, whether verbal or in writing, of particular directors or other officers, prior to affixing the corporate seal to any document.’ + 'See cases at law, Royal British Bank v. Turquand, 25 L. J. Q. B. 317; Agar v, Atheneum Life Insurance Com- pany, 3C. B. N.S, 725; 27 LJ. C. P. 95; and compare Northwestern Railway Company v. M’Michael, 5 Ex. 855; 20 L, J. Ex. 6, and Lowe v. London and Northwestern Railway Company, 18 Q. B. 682; 21 L. J. Q. B. 861. See cases in chancery, Atheneum Life Insurance Company, et parte Eagle Insurance Company, 4K. & J. 549; 27 L. J. Ch. 829; Fountaine v. Carmarthen and Car- digan Railway Company, L. R. 5 Eq. 316; North Hallenbeagle Mining Com- pany, Knight’s Case, L. R. 2 Ch. 321; the judgments of the Lords Justices in Land Credit Company of Ireland ex parte Overend, Gurney and Company, L. R. 4 Ch. 460; and compare Mair v, Himalaya Tea Company, L. R. 1 Eq. 411. ° Hx parte Overend, Gurney and Company, L. R. 4 Ch. 460; Prince of ‘Wales Insurance Company v. Harding, EB. & E. 183; 27 L. J. Q. B. 297; compare Hill ». Manchester Waterworks Company, 5 B. & A. 866. * As to acts of commissioners to receive subscriptions, and other acts prior to organization, Unity Ins, Co. ». Cram, 13 N. H. 636; Walker ». Devereux, 4 Paige, 239; Crocker #. Crane, 21 Wend. 217; Bank of Toledo ». International Bank, Id. 542; Leonardsville Bank ». Willard, 25 N. Y. 574; Buffalo & Allegheny R. R. ‘Co. v. Casey, 26 N. Y. 75; Black River & Utica R. R. Co. v. Barnard, 31 Barb. 258; Holmes ». Gilliland, 41 Barb. 568; Society ». Commonwealth, 52 Penn. St. 125; Fuld v. Croaks, 16 La. 158; Harris ». McGregor, 29 Cal. 124. + Medbury ». N. Y. & Erie R. R. Co. 26 Barb, 564; Berks & Dauphin ‘Turnpike Co. 2. Myers, 6 S. & Raw. 12. 438 ACTS INTRA VIRES, BUT INFORMAL. Thirdly. Special regulations as to the signature or counter-signature of particular officers.’ * Fourthly. Preliminaries—such as the issuing of*for- mal notices, the publishing of advertisements, and the like—prior to meetings, and regulations relating to the manner of conducting such meetings.’ ¢ ; Fifthly. Forms to be followed in making out lists of members, or in keeping the books of the corpora- tion.’ t 1 Apgs v. Nicholson, 1 H. & N. 165; 25 L. J. Ex. 348; Deffell v. White, L. R. 2, P. 144; compare Prince of Wales Insurance Company v. Harding, ubi su- pra; Allard v. Bourne, 15 C, B. N.S. 468; Bargate »v. Shortridge, 56 H. L. 297; 24 L. J. Ch. 457; re Norwich Yarn Company, ex parte Bignold, 22 Beav. 143; 25 L. J. Ch. 601; re Straffon’s Executors, 1D, G. M. & G. 576; 22 L. J. Ch. 194, But where a check did not, on the face of it, purport to be drawn on behalf of the company, the company were not liable even to a bona fide holder for value.» Serrell v. Derbyshire ce. Railway Company, 9 C. B, 811; 19 L, J.C. P. 871; on appeal, 10 C. B. 910. 2 Re Worcester Corn Exchange Com- pany, 3 D. G. M. & G. 180; 15 Jur. 960; Clarke v, Imperial Gas Company, 4B, & A. 315; Fountaine v. Carmarthen and Cardigan Railway Company, L. R. 5 Eq. 316, > Daniel v, Royal British Bank, 1 H. & N, 681; Dossett v, Harding, 1 C. B, WN. 8, 524; 26 L. J. 0. P. 107; Bain v.. Whitehaven Railway Company, 3 H. Lds. 1. ¢ * See Head v. Provident Ins, Co. 2 Cranch, 127; Mech. Bank ». Bank of Columbia, 5 Wheat. 826; Commercial Ins. Co. v. Union Ins. Co. 19 How. 318; New England Ins. Co. v. DeWolf, 8 Pick. 56; Sanborn 2. Freeman’s Ins, Co. 16 Gray, 448; Bulkley ». Derby Fishing Co. 2 Conn, 254; Beatty 0. Marine Ins. Co. 2 Johns. 109; Dawes o. North River Ins, Co. 7 Cow. 462; Safford 1. Wyckoff, 4 Hill, 446; Kelley v. The Mayor, 4 Hill, 263; Baptist Church v. Brooklyn Ins. Co, 18 Barb. 69; Barnes 9. Ontario Bank, 19 N. Y. 152; DeGroff v», Amer. Linen Thread Co. 21 N. Y. 124; Merrick v. Burlington &c. Plank R. Co. 11 Ia. 74; Rockwell 2. Elkhorn Bank, 13 Wis. 653; Dana vo. Bank of St. Paul, 4 Minn. 385; Hen- ning v. U. §. Ins, Co. 47 Mo. 425; Leavitt ». Conn, Peat Co. 6 Blatch. 139. t See post, p. 451. } Provisions in charters and by-laws providing for books of record of the proceedings of managing boards, are merely directory, and do not affect the validity of the unrecorded acts. Angell & Ames on Corps. § 291 a., citing Bank of U. 8. ». Dandridge, 12 Wheat. 75; U. 8. ». Kirk- patrick, 9 Wheat. 720; Same o. Van Zandt, 11 Wheat. 184; Cram ». Ban- gor House, 3 Fairf. 354; Scott v. Warren, 2 Fairf. 227; Bassett o. Mar- shall, 9 Mass, 312; Bissell ». McLellan, 14 Pick.63; Middlesex Husband- men v. Davis, 8 Met. 188; Davidson »v. Borough of Bridgeport, 8 Conn. FORMALITIES. 439 Sixthly. Formalities laid down for the appointment of directors and other officials; 2. ¢, de facto. directors will be presumed legally appointed, and so on.1* It may be added, as a general proposition, that where the constating instruments provide that certain trans- actions shall, as regards the corporation, be valid and binding only when done or concurred in under given circumstances or regulations—whether these take the shape of formalities or not—if such circumstances or regulations are matters which the corporation alone possesses the adequate means of securing the due and. stipulated occurrence or observance of, then the other party will be excused from looking after the same; and, in the absence of notice to the contrary, he will be al- lowed to assume that the corporation has provided for them. Thus,in Webb v. Commissioners of Herne Bay,’ debentures were issued by a body corporate to one of their commissioners, in payment of bricks supplied by him for the purposes of the act. The statute constituting the body, however, enacted that no person being a commissioner should enter into any contract under the act. It was nevertheless decided that the debentures were valid in the hands of a transferee for value, unac- quainted with the circumstances under which they were originally issued. In the same way, if powers are given to the manag- ing body, but with a limitation as to the extent to which ? Re County Insurance Company, L. works Co. 5 B. & A. 866, Compare 8 R 5Ch, 288; Mill v, Manchester Water- & 9 Vict. c. 16, 8. 99. 71, R. 5 Q. B. 642. 472: Goodwin o. U. 8. Annuity & L. Ins. Co. 24 Conn. 591; Bank of Northern Liberties v. Cresson, 12 8. & R. 306; Bank of Ky. ». Schuylkill Bank, 1 Parsons Sel. Cas. 251; Burgess 2. Pue, 2 Gill, 254. * See ante, p. 435. 440 ACTS INTRA VIRES, BUT INFORMAL, they may employ them—e. g., a power to borrow up to a certain amount—the corporation will be liable to per- sons dealing bona fide with the managers, although they exceed the limit so imposed.’ SECTION II. FORMALITIES, TO THE OBSERVANCE OF WHICH CERTAIN PARTIES ARE BOUND TO SEE. Hitherto we have been considering third parties ‘who, being unable to see to or to secure the due ob- servance of formalities imposed by a company upon its own officials, are excused the absence of such formalities whenever they personally have acted with bona fides. It is different with directors and others in a similar position. _ They are affected with notice of the required formality, and of the want of it when absent; and, therefore, no acts in which they participate, and which ought to be transacted in a particular manner or under particular arrangements, will, as between themselves and the company, be binding upon the latter. fe Agriculturist Cattle Insurance Company, Bush’s Case, * is a decision by the Lord Chancellor Hatherley, ? Royal British Bank », Turquand, 6 E. & B. 327; 25 L. J. Q. B. 317; and other similar cases, with which, how- ever, it is not easy to reconcile Pierce v. Jersey Waterworks Company, L. R. 5 Ex. 209, * Newcastle Marine Insurance Com- pany, ex parte Brown, 19 Beav. 97, and ex parte Henderson, 19 Beav. 107; Swan- sea Dock Company v. Levien, 20 L, J. Ex. 447; British Provident Assurance Company »v. Norton, 3 N. R. 147; 9 Jur. N. S. 1308. SL. R.6Ch. 246. The judgments in the different cases arising out of the winding up of this company are simply irreconcilable. See Spackman v. Evans, L. R. 8 H. Eds. 171, and,per Giffard, L. J., in Dixon’s Case, L. R. 5 Ch. 79.+ *The Chancellor’s. judgment was affirmed in the House of Lords (Lords Chelmsford and Colonsay dissenting), sub nom. Murray v. Bush, L. R. 6 H. L. English and Irish App. 37. : t See Buckley on Companies’ Act, 24 ed, p. 396, for history of this company, and the numerous cases relating to it. FORMALITIES. 441 to some extent perhaps conflicting, A company being in difficulties, and disputes having arisen, it was de- termined to admit new directors. Bush, one of the existing directors, agreed to transfer his shares to an incoming director, and in pursuance of such agreement a deed of transfer was executed by both, but the trans- feree did not execute a deed of covenant as required by the deed of settlement. The master of the rolls, on the winding up of the company, held Mr. Bush to be still liable upon the shares, and placed his name on the list of contributories. “It is true that there are many cases in which the undue neglect of forms by directors has not invalidated a dona fide transfer of shares; but so far as I have observed this has always been in cases between strangers, who had not the power to compel the directors to observe the proper forms, or in cases where they were ignorant of, and had no means of ascer- taining, the informality which had been committed. But the case is very different when, as here, the transfer is by a director himself, whose object is to retire from the company, and who has the power to see that every- thing is done according to due regularity, and still more different when the transfer is made to another person acting as director of the company ; and it is something more than form when the director who makes the trans- fer does not follow the form prescribed by the act of parliament in that very case, and when, by reason of the omission so to do, the transferee becomes in no respect bound by the deed of settlement, the execution of which was, by the rules of the society, prescribed as a pre- liminary condition to his becoming a member of the company.” This judgment of Lord Romilly contains a very clear statement of the law on the point. From it, as an exposition of law, the Lord Chancellor did not 449 ACTS INTRA VIRES, BUT INFORMAL. dissent, but he nevertheless discharged the order of the master of the rolls, upon the grounds partly of lapse of time, and of the acquiescence of the shareholders in the transaction,* partly, that it was the duty solely of the remaining directors to'see to the execution of the deed of covenant by the transferee. Upon this latter point his lordship observed: “It is quite true that Mr. Bush was a director when he dealt with the shares, but when he parted with his shares he was no longer a di- rector or shareholder, and he had no control over the matter beyond having the right to file a bill. The per- sons who were to see that within a month the deed was executed, were the directors of the company, and the duty of seeing the deed executed was thrown upon them, and not upon Mr. Bush.” But the questions to be settled were, first, whether a director proposing to retire from a company, is or is not bound to see to the performance of the proper formalities, and has or has not thrown upon him the duty of doing all that he can do to secure their due observance; and, secondly, whether, failing this, he ceases to be a shareholder. The Lord Chancellor, elsewhere in his judgment, admits the existence of the duty first mentioned—here he dis- tinctly denies it; and he also assumes the answer to the second question to be in the affirmative. * A corporation may incur a liability different from the prescriptions of its charter. Like individuals it is responsible in the manner in which it permits its agents to hold it out to the world. The corporation should disavow the practice, or the usages of their agents in the transaction of business shall be presumed to have their sanction. An authority to con- tract in a particular mode may be proved by a vote of the stockholders; and in prevention of fraud and prosecution of justice, it may be pre- sumed. It may be implied from their acquiescence in the usual mode of transacting the business of the corporation, and expressing no objection against it. Bulkley v. Derby Fishery Co. 2 Conn. 252; White v. Same, Ibid, 260; see Safford 0. Wyckoff, 4 Hill, 442. FORMALITIES. ‘ 443 These questions usually affect only the governing portion and the officials of a corporation, but certain of them equally concern the private members. Such, for instance, are all the general regulations prescribing the formalities or conditions ‘of the transfer or abandonment of shares ;' and whether these regulations be expressly laid down in the constating instruments of the company, or have become established merely by custom and uniform usage.” Whatever be the nature of these formalities, what- ever be the mode in which they have been created and rendered in a manner essential to the validity of the transactions to which they relate, provided their exist- ence can be clearly proved and brought home to the knowledge of the persons engaged in such transactions, é. g., private members disposing of their interests, they must be duly observed, or their absence waived by the consent, express or tacit, of the whole corporation. These formalities are generally the execution of the deed of transfer by the transferee, and the registration of the transfer ;* and sometimes also the obtaining the consent of the directors or other officials to the transfer ; and it is the duty of the transferrer to see that every- thing is done modo ac forma. If he has taken all the precautions that an ordinary man of business would take to secure this, and there has been a non-observance of some requisite through the default, carelessness,* or ” See especially re British Provident &c, Company, Grady’s Case, 32 L. J Ch, 327; re Overend, Gurney & Com- pany, Walker’s Case, L, R. 2 Eq, 554; ve Contract Corporation, Head’s Case, L. R, 3 Eq. 84; Biederman v. Stone, L. R. 2 0. P. 504; ve Merchants’ Company, Hermitage’s Case, L. R. 9 Eq. 5; re European Central Railway Company, Holden’s Case, L. R. 8 Eq. 444, Com- pare also Spackman v, Evans, L. R. 3 H, Lds. 171, and the cases there cited. 2 Re Imperial Mercantile Credit As- sociation, Marino’s Case, L. R. 2 Ch. 596, >See cases cited in the last two notes. 4 See cases already cited, and also re Joint Stock Discount Company, Fyfe’s Case, L. R. 4 Ch. 768; and Hill's. Case, L. R, 4 Ch. 769, n, 444 ACTS INTRA VIRES, BUT INFORMAL. , delay of the corporation, or its responsible officers, he will be exempted from liability; though even in such case there may be countervailing laches on his part, such as to debar him from the relief to which otherwise he would be entitled.? : Lastly. It must not be forgotten that a person cog- nizant of, and a party to, the want of a formality will, upon the ordinary principles of equity, be estopped by his admission, and be prevented availing himself of such informality.’ SECTION III. FORMALITIES RELATING TO THE TRANSACTIONS" OTHER THAN CON- TRACTS OF CORPORATIONS. We have next to consider directory formalities as affecting the validity of the other proceedings of corpo- rations. Very many of: the decisions relate to the transfer or acquisition of interests—shares, stock, or other rights—in the corporate property and privileges, and of these we have just been treating. Others have turned upon the making of calls, the forfeiture of shares, and the like. The regulations per- haps require the calling of meetings either of the cor- poration, or of its officials, or the giving a certain length of notice before such acts can be done. Requisites of this description will probably, in every instance, be ad- judged to be directory merely, not prejudicing innocent parties, but binding those acquainted with them, 1 Re Hercules Insurance Company, 6 Eq, 30. Compare Yelland’s Case, 5 Lowe’s Case, L. R. 9 Eq. 589, © D. G. & Sm. 395. _ 7 Re Anglo-Danubian Steam Naviga- 3 Cromford &c. Railway Company v. tion &c, Company, Walker's Case, L.R. Lacey, 8 Y. & J. 80. FORMALITIES RELATING TO TRANSACTIONS. 445 although, of course, waivable at the option of all par- ties.. Thus, where a company’s deed of settlement pro- vided that twenty-one days’ notice should be given to the shareholders who were in arrears of calls, and that if payment were not made within such time the direc- tory might then declare the shares forfeited; and the directors sent a notice saying that certain shares would be forfeited if payment were not made within twenty- one days, instead of actually waiting till the expiration of this time and then forfeiting the shares, such for- feiture, the shareholder having acquiesced and nothing more having been done, was held good.* This case, however, probably depends upon the fact that both parties concurred, and that the company were bound by their subsequent acquiescence ; it would seem that the length of notice specified as a condition precedent to a forfeiture is an imperative requisite.? * Again, as. persons who have become members of a company thereby become responsible for its liabilities, although not actually upon the list of members, it fol- lows that mistakes in the registration of the name? or 1 Re Home Counties &c, Assurance 2 See Cockerell v. Van Diemen’s Company, Wollaston’s Case, 4 De G. & Land Company, 26 L. J. C. P. 203. J, 487; 28 L, J. Ch. 721. ; 3 Yelland’s Case, 5 D. G. & Sm. 395; Clowes v. Brettell, 11 M. & W. 461, * See Lewey’s Island R. R. Co. v. Bolton, 48 Me. 451; Rutland R. R. Co. ». Thrall, 35 Vt. 547; Lexington R. R. Co, v. Chandler, 13 Met. 311; Bodle », Chenango Ins. Co. 2‘N. Y. 58; Schenectady & Saratoga Pik. Rd. Co. 2. Thatcher, 11 N. Y. 102; Lake Ontario &c. R. R. Co. 2. Mason, 16 N. Y. 451; Bangs ». Duckinfield, 18 N. Y. 592; Sands ». Sanders, 26 N. Y. 289; Jackson ». Roberts, 31 N. Y. 304; Harlem Canal Co. »v. Seixas, 2 Hall, 504; New Albany R. R. Co. 2. McCormick, 10 Ind. 490; Smith ». Indiana R. R. Co. 12 Ind. 61; Breedlove v. Martinsville R. R. Co. Ibid. 114; Eakright ». Logansport R. R. Co. 13 Ind. 404; Hays 2. Pittsburgh R. BR. Co. 38 Penn. St. 81; Heaston v. Cin. & C. R.R. Co, 16 Ind. 278; Smith v.,Plank-road Co. 30 Ala. 650; Eppes v. Mississippi R. R. Co. 35 Ala. 83; Mississippi R. R. Co. v, Gastre, 20 Ark. 455, 446 ACTS INTRA VIRES, BUT INFORMAL. the address’ of a member, can in no degree affect the question of his membership. Nor do informalities in making out the memorials or other lists of shareholders required by statute,” or in numbering the shares, or en- titling the register book.’ The directors having a general authority to employ servants and other inferior agents, may éxercise such authority, both in the engagement and dismissal,‘ with- out regard to any special regulations that may have been laid down;° but, of course, this qualification does not apply so as to dispense with the seal in such cases as this is necessary. Imperative Formatities. The third class of formalities, imperative, are those which are absolutely essential to the validity of certain proceedings, and whose absence cannot be excused or waived by the consent of the parties concerned. Such formalities have usually been created by the common law of the land or by statutory enactment, and not by the corporation itself* The chief example coming under this head is the use of the seal in the corporate transactions, of the necessity for which and of the limita. tions to this necessity we have spoken. Between directory and imperative formalities it is ditticult, if not 1 Wills v. Murray, 4 Ex. 848; 19 L. * Bain v, Whitehaven Railway Com- J. Ex, 209, pany, 3H. Lds.1._. 2 Powis v. Harding, 1 C. B. N.S. See Mair ». Himalaya Tea Com- 588; 26 L. J.C. P. 107; and Hender- pany, L, R. 1 Eq. 411. son v. Royal British Bank, 26 L. J. Q. See Totterdell ». Fareham Brick B. 112; Daniell v, Royal British Bank, Company, L. R. 1. P. 674. 1H. & N. 685. ® Ante, Chapter III, section 2, p. 356. *It may be doubted whether there are any imperative formalities recog- nized by American courts, except such as are required by the charter, or some general statute applicable. FORMALITIES RELATING TO TRANSACTIONS: 447 impossible, to discriminate. Probably, with the excep- tion of sealing, no formalities can be considered to be under all circumstances imperative as against third per. sons, excepting such as appear upon the constating in- struments. Of these they have fair notice, and there can be no injustice or even hardship in compelling them to see to their observance. Questions of this kind most often arise in respect of transactions between the corporation and its members or between the members themselves, and they generally relate to the creation, transfer, or canceling of shares. No definite rule can be laid down as to what formal- ities will be obligatory and what not. In Watson v. Eales,’ a nine days’ notice, where the rules of a cost book mining company required ten days, invalidated a forfeiture. Observance of Formalities cy pres. Sometimes circumstances arise rendering it impossi- ble to comply with the necessary formalities. In such case they must be observed cy prés.* In Exeter and Crediton Railway Company v. Buller,’ a dispute arose between the directors and the shareholders of the rail- way company, a majority of the former wishing to lease 193 Beav. 294; 26 L, J. Ch. 361; G. & J. 487; Knight’s Case, L, R. 2 Ch. Cockerell ». Van Diemen’s Land Com- 321; see also Bigg’s Case, L. R. 1 Eq. pany, 1C. B. N.S. 732; 26L.3.C. P. 3809. : 2038, Compare Wollaston’s Case, 4 D. 26 Rail. Cas. 211; 16 L. J. Ch. 449. * See matter of Wheeler, 2 Abb. Pr. N.S. 861; People v. Runkle, 9 Jehns. 147; Matter of Mohawk & Hudson R. R. Co. 19 Wend. 135; Peo- ple ». Peck, 11 Wend. 604; Matter, of Union Ins. Co. 22 Wend. 591; ee parte Willcocks, 7 Cow. 402; Moss o. McCullough, 5 Hill, 131; Peo- ple ». Cook, 14 Barb. 259; s. c. aff'd 4 Seld. 67. 448 ACTS INTRA VIRES, BUT INFORMAL. the line to the Bristol and Exeter Railway, a broad- gauge company—a minority of the former and a ma- jority of the latter wishing to lease it to the Tamar Valley Railway, a narrow gauge company. The majority of the directors got possession of the common seal, whereupon the minority, with the concurrerice of the shareholders, filed a bill in the name of the company to restrain them from leasing the line to the Bristol and Exeter Railway Company, or opening it on the broad gauge system. The defendants demurred because the bill was not under seal, but both the Vice Chancellor and the Lord Chancellor overruled the demurrer upon the ground it had been sanctioned by a general meeting of the shareholders, who could do no more “because they had not the seal, which had been withdrawn from the original custody of the secretary, obviously for the the purpose of preventing the company from doing what they intended to do.” In Foss v. Harbottle,’ the bill filed by some of the shareholders in a company alleged that there had ceased to be a sufficient number of qualified directors to con- stitute a board, that the company had no office or sec- retary, and that consequently general meetings could not duly be summoned or held, and it therefore prayed inter alia for the appointment of a receiver. The Vice Chancellor, however, held, that assuming the statements to be correct as to the impossibility of convening meet- ings in the way laid down in the companies act, it would be sufficient if, some of the shareholders having convened the others, met together and purported to act on behalf of the whole body. Although the neglect of imperative formalities will, as a rule, invalidate the whole arrangement, yet if any- 19 Hare, 461, FORMALITIES RELATING TO TRANSACTIONS. 449 thing be done under the arrangement so purporting to be entered into, whether by the company or the party contracting with it, equities may and often will arise enforceable in chancery on behalf of the party suffering loss as against the party benefited thereby. Tt would also seem that some at least of even im- perative formalities may be so universally disregarded by the corporation as to cease to be operative. Thus in Walter’s Case* shares had been transferred with the as- sent of the directors of a company, but without regard to certain formalities as to obtaining such consent. The company’s deed provided that “no assignment or trans- fer, without thé approbation of the directors, to be mani- fasted as hereinafter mentioned, shall have any force either at law or in equity.” It was, however, shown that this latter provision had been systematically neg- lected, and the Vice Chancellor accordingly settled the transferee on the list of contributories.* In Walton’s Case® the seven days’ notice required by the charter and deed of settlement of a bank pre- vious to any proposed transfer of shares was held to have been dispensed with by universal practice. To the same effect is the case of Bargate v. Short- ridge+ ‘The deed of settlement of a banking company allowed shareholders to dispose of their shares upon obtaining “the consent of the board of directors,” which was to be testified by “a certificate in writing signed by three of the directors.” During the whole time that 1See post, Part IV, Chap. III, on > Re Royal British Bank, Walton’s “The liability of corporations in respect Case, 26 L. J. Ch. 545, and see the of transactions absolutely ultra vires.” cases there cited. 2 Re Vale of Neath ake Company, 45H. Lds. 297; 24 L. J. Ch, 457, Walter's Case, 3D, G. & Sm. 149. * See cases cited ante, p. 366. + See Zabriskie v. Cleveland C. & C. R. R. Co, 28 How. 381, 398. 29 450 ACTS INTRA VIRES, BUT INFORMAL. the bank carried on business a managing director re- ceived the applications for sales of shares, consented and signed the certificate of “consent,” which was after- wards signed by two other directors, but was never signed by the three assembled as a board. R. 8, a shareholder, had at various times, with such consents, sold his shares. The directors, under 7 George IV, c. 46, made a return to that effect. The company failed, and the directors passed a resolution that there had been no valid transfer of the shares of R.S. It was held, however, that as between him and the company the consents given by the directors, although informal and irregular, were valid, and that they could not after- wards treat R: S. as a member of the company. It may very fairly be questioned whether the form- alities referred to in the above cases are really impera- tive. Imperative formalities, if not of such a kind as by their absence to void absolutely and irremediably the transactions with respect to which they are enjoined, must mean at least this: That they cannot be waived by any agreement or acquiescence of the parties imme- diately concerned so as to affect the rights of third par- ties; that third parties, unaware of the arrangement, are entitled to say that the contract entered into, the forfeiture made, or the transfer permitted, without the observance of such formalities, is as regards the existing rights of such third parties simply void, and that con- sequently the parties liable before such transaction re- main liable afterwards. In each of the three decisions just cited the dispute was between the corporation and the individual, between parties, that is, in pari delicto, the former attempting to take advantage of informali- ties in which it had been concerned and had Jong ae- quiesced. Had it been a question between creditors of FORMALITIES RELATING TO THE MEETINGS. 451 the corporation and its members, then the decision must have been that the absent formality was directory only, and therefore the transaction was valid; or, that it being imperative, the transaction was invalid. There could have been no middle course. It should also be noticed that the formalities in the three cases quoted were cre- ated by the corporation itself; had they been imposed by the supreme legislature directly, it may be doubted whether their absence could have been excused, as such a determination would be equivalent to pro tanto re- pealing an act of parliament. SECTION IV. FORMALITIES RELATING TO THE MEETINGS OF THE MANAGING BODY. One other class of formalities remains to be consid- ered—viz., those relating to the meetings of the various members of a corporation. A corporation undoubtedly in the eye of the law is a legal entity, existing apart and distinct from those who compose it. Nevertheless, for most practical purposes, it must be deemed identical with its members, and it is only through and by means of them that it acts and otherwise manifests its wishes and intentions. This it does through the medium of meetings of them. Such meetings must be duly sum- moned by the officials, if any, appointed for such pur- pose, and with regard to all ceremonies. What these ceremonies are cannot be precisely stated, as they de- pend upon the custom, the acts of parliament, the charter, &c., applicable to each particular case.* *Tn regard to notice of meetings see ante, pp. 350-854, where, on the subject of meetings of the general body, many rules and principles will be found equally applicable to the subject of this section. 452 ACTS INTRA VIRES, BUT INFORMAL. No meeting, whether of the governing body or of the ordinary members of any corporation, will be legal unless all those who have a right to attend—and in the " case of meetings of ordinary members this includes the whole of such members—have in some way received a summons or notice.’ Very generally such notice has to be sent to or served upon each individual member. Whatever be the regulations in this respect, they must be strictly followed. Thus, if an advertisement is to be issued, circulars will not suffice.’ Though no meeting, whether of the governing body or the ordinary members of any corporation, will be perfectly legal unless all those who have a right to at- tend have in some way received a summons or notice, -yet undoubtedly an informal meeting may, under pecul- lar circumstances, have a power more or less extensive, of binding the corporation in respect of third parties, and especially when it would amount to a fraud upon the latter, these having acted bona fide, not to hold the corporation liable.* This proposition, however, must be advanced with much circumspection, and as it almost invariably involves other questions of informality, it has been considered: in the previous sectiéns of this chapter. The question whether directors can act otherwise than at a board meeting,+ which was first raised * Smyth v. Darley, 2H. Lds. 789. Ch. 369; compare Kidderminster Town ° Re British Sugar refining Company, Council ». Court, 1 E. & E, 770; 28 L. ex parte Faris, 8 K. & J. 408; 26 L. J. J. M.C. 148. * Where by-laws of a corporation are prescribed, not by the stock- holders at large, but by the directors, if the directors disregard a by-law providing what notice shall be given of a special meeting, the corpora- tion cannot set up this irregularity in order to impair, as towards third persons, the directors’ acts, Samuel v. Holladay, 1 Wool. 400. + It may be stated, as 4 general rule, that the governing body of a ' FORMALITIES RELATING TO THE MEETINGS. 453 in Glover v. Northwestern Railway Company; was apparently decided in the negative in D’Arcy ». 'y Ex, 66; 19.L.J. Ex. 172; per Parke, B., Ibid. 173, corporation, as such merely, are agents of the corporation only as a board, and not individually, and accordingly that they cannot act save when assembled at a board meeting; and in all cases consultation among a part of the directors, at least, is necessary. See Redfield on Railways, § 23; Dispatch Line of Packets v. Bellamy Mfg. Co. 12 N. H. 205; Edgerly ». ‘Emerson, 8 Fost. 555; Cammeyer o. German Churches, 2 Sandf. Ch. 486; Corn Exchange Bank v, Cumberland Coal Co. 1 Bosw. 436; Dey v. Jersey City, 4 C. E. Green, 412; Schumm ». Seymour, 9 C. E. Green, 158; Shortz ‘o, Unangst, 8 W. & 8.45; Stoystown & Greensburg T. Co. ». Craver, 45 Penn. St. 386; Ross ». Crockett, 14 La. An. 811; Junction R. R. Co. ». Reeve, 15 Ind. 286; Yellow Jacket Mining Co. v. Stevenson, 5 Nev. 224. ‘But the rule has been broken in upon by some authorities, and it has been held that directors for some purposes may act otherwise than at a board meeting. Thus, in Bank of Middlebury o. Rut. & Wash. R. R. Co. 80 Vt. 159, where the question was whether an agent was duly authorized ‘by the directors, the court say: ‘‘The directors, in the absence of restric- tions in the charter or by-laws, have all the authority of the corporation itself in the conduct of its ordinary business. And it is not important that this authority be conferred at an assembly of the directors unless that is the usual mode of their doing such acts; If they adopt the prac- tice of giving a separate assent to the execution of contracts by their agents, it is of the same force as if done at a regular meeting of the board. If this were not so it would lead to very great injustice; for ‘it is notorious that the transaction of the ordinary business of railways, banks, and similar corporations in this country, is without any formal meetings or votes of the board. Hence there follows a necessity of giving effect to the acts of such corporations according to the mode in which they choose to allow them to be transacted.” This decision is followed in Bradstreet v. Bank of Royalton, 42 Vt. 128, in which the following language is used: ‘‘ The question of law then is simply this: whether, in all cases, a contract for service to the bank, concluded by two directors professing to act for the bank, and subsequently approved by a third, is unauthorized for want of a formal vote or conference with the other two ‘members of the board. It is very true that there might be contracts of such a kind that the action of the board, by formal vote, would be essen- tial to their validity. But, on the other hand, it is not necessary that the whole board should be consulted or a vote taken upon every trifling detail of the business. Ifa particular line of procedure has been resolved upon, -or is necessarily incident to the business of the bank, it is not essential 454 ACTS INTRA VIRES, BUT INFORMAL. Tamar &c. Railway Company,’ where the prescribed quorum of a meeting of directors being three, the de- 1L, RB. 2 Ex, 168; 86 L. J. Ex. 87;4H. & C, 463. - that every expenditure of money, or engagement of service, or other jtem within the line so marked out should receive the consideration of all the directors outside a meeting, or that a meeting of the board should act upon it.” In Edgerly v. Emerson, 3 Fost. 555, Bell, J., discusses the question as. to the modes in which directors may act. Hesays: ‘It was also objected that the meeting of the directors was illegal and their proceedings in- valid, because it was a special meeting at which only four of the seven directors were present or notified. Inthe case of the Dispatch Line of Packets », Bellamy Mfg. Co. 12 N. H. 205, certain questions were de- termined, in relation to the powers of directors of corporations, by which we feel bound to abide. The case was considered with great care and ability. In that case it washeld: I. That if the authority of the directors, to manage and exercise a general superintendence and control over the affairs of the corporation, had been conferred by the charter itself, it would have been in the nature of an original corporate power in a definite number, and a majority of the whole number, being duly assembled at a regular meeting, might act by major vote of those present. II. That where the by-laws of a private corporation confer upon the directors power to act in behalf of the corporation, without special limitation as to the manner, a majority may act within the scope of the authority given to the board, and bind the corporation, either where there is a consulta- tion of all together and a concurrence of a majority, or where there is a regular meeting at which all might be present, and a majority actually meet and act by major vote. III. That the act of a majority of such board, in the case last supposed, does not bind the corporation, unless— (1) There was an assent of all the directors at a meeting, or perhaps separately obtained. (2) Or there was a meeting and consultation of the. whole board, and a vote of a majority. (8) Or a meeting, held at some regular period, at which a majority were present, and acted by a major vote, (4) Or a meeting regularly notified, at which a majority assembled, and acted by major vote. IV. When the act purports to be the act of the board, it may be presumed it was the act of a majority, until the contrary is shown.” The judge concurs in the doubt expressed as to the case where the assent of directors is separately obtained, and proceeds, without intending to disturb the decision in Dispatch Line of Packets ». Bellamy Mfg. Co., as to the questions which arose there, and which dealt with the case where directors derived their powers from the corporation by by-law or vote, to examine the question whether the powers of officers. FORMALITIES RELATING TO THE MEETINGS, 455: fendants were held not liable on a bond to.which the secretary had affixed the seal of the company, after hav- ing obtained the written authority of two directors at a private interview, and at another private interview. the verbal promise of a third, to sign the authority. But this decision has since received a somewhat strained in- of corporations, conferred upon them by law, are in all cases subject to the limitations, ‘‘that a majority of the whole number, being duly as- sembled at a regular meeting, might act by a major vote of those present.” He says: “We assent to the rule as stated. It relates to the acts of a majority of those present, when less than the whole board are present at a regular meeting. If a quorum, usually a majority of the whole number, are present, a majority of that quorum may act. But this applies only to a regular meeting, at which all have, of course, the needful notice and opportunity to be present, or a special meeting, at which all have been duly notified to be present. The question which arises in this case is different. The meeting in question was not a stated meeting, nor a meet- ing at which all had been duly notified to be present. Four only of the seven directors were present, and no others had been notified. The gen- eral principles applicable to the exercise of joint powers are well settled. When individuals or corporations give an authority jointly to two or more persons, in order to bind the principal, all the agents must act. But where a number of persons are by law intrusted with power, not of mere private convenience, but in some respects of a general nature, and all of them are regularly assembled, the majority will conclude the minority, and their act will be the act of the whole. There are, however, many cases where an authority is granted to a board, or to several persons, or a majority of them, or a certain limited number, either more or less than a majority, who are thereby constituted a quorum. Thus, in the usual form of bank charters, there isa provision that ‘no less than four directors shall constitute a board for the transaction of business, etc.’ The effect of this clause we deem the same as a provision, that the directors, or any four of them, shall be competent to transact any business of the bank. Four constitute a quorum, and when assembled, possess all the powers of the entire board. The position of the directors in such a case, must be closely like that of the selectmen of a town, of whom a majority are by statute made competent to act in all cases.” After enlarging upon the powers of selectmen, the judge concludes: ‘‘We are, therefore, of opinion that where a quorum of the directors ef a bank meet, and unite in any determination, the corporation are bound, whether the other di- rectors are or are not notified.” ° See, also, Cram v. Bangor House, 12 Me. 359. 456 ACTS INTRA VIRES, BUT INFORMAL. terpretation, by which its importance is very consider- ably qualified: “There the action was an action of debt upon a bond under the seal of the company; the plea was non est factum,and under that plea it was of course competent to the company to prove the truth of the plea. They did prove it conclusively. There could be no valid bond in that case unless the seal of the com- pany was affixed to it, and the seal appeared to be so affixed. The seal could not be lawfully affixed but by the direction of the three directors, and it was proved beyond question that the seal had been affixed when only two directors, and not three, had given any kind of authority for it. The authority of.the third was ob- tained at a later period, and upon the plainest princi- ples of common law pleading there could be only one way of dealing with the case. It is true that the judges in D’Arcy v. Tamar Railway Company did, though not necessarily for the purpose of decision, say that what the law required was that there should be the com- bined action of at least three directors before the seal could be affixed to a bond.” This is the comment of Bacon, V.C., in Re Bonelli’s Telegraph Company, Collie’s Claim,! where the circum- stances were very similar to those in D’Arcy’s Case. The articles of association of the company provided that three directors should be a quorum, and endued them with wide powers of sale, appointment of agents, duc. The company resolved to sell their undertaking to the postmaster general, and in July, 1869, a letter was written, addressed to Collie, appointing him to act as agent for the directors in the matter of the sale, and agreeing that if he succeeded in obtaining from the postmaster general the sum of £20,000 or upwards, his 1L, RB. 12 Eq. 246, 260, FORMALITIES RELATING TO THE MEETINGS. 457 commission should be 25 per cent. The letter con- cluded by saying: “ We engage to sign a legal obliga- tion to the above effect when called upon, and to get the signatures of our brother directors.” This letter was written in C.’s office, and there signed by two of the directors and handed to C., who forwarded it to a third director in the country, by whom it was returned to C. confirmed and signed by himself and a fourth director. »This agreement, though not appearing to have been resolved upon or confirmed at any meeting of directors, was referred to at a subsequent meeting of shareholders and not repudiated, but no such legal ob- ligation as referred to in the letter was executed. The sale having been effected through C.’s agency for a sum of more than £20,000, Bacon, V. C., determined that the agreement was not ultra vires, and that though in- formal according to the internal regulations of the com- pany, it was binding against the company in favor of a person dealing with them, and consequently that C. was entitled to commission at the rate of 25 per cent. If these two decisions are to be considered valid and reconcilable, it must be upon the distinction taken by Sir John Stuart, viz. that D’Arcy v. Tamar Railway Company was a common law case decided upon com- mon law pleadings, the only question being whether the seal was properly affixed. But even admitting this distinction, could Collie have successfully sued at law upon the agreement entered into in manner aforesaid ? When a quorum of directors is made necessary for the transaction of a company business, what difference is there between the making of a special and a simple contract? And if none—if Collie’s agreement, looked at as a simple contract, was void at law—what claim 458 ACTS INTRA VIRES, BUT INFORMAL. could he have in chancery save upon a guantum meruit ? From D’Arcy v. Tamar Railway Company,’ we may also gather that when the constating instrument is silent as to the place of meeting, the law is so too. Martin, B., in his judgment, said: “ Now it is not neces- sary that there should be any fixed place of meeting, but it is quite clear that the directors are to act to- gether and in a meeting, whereas the authority on which the secretary acted was given by two only act- ing together, and by the subsequent assent of a third. The authority, therefore, was not of such a character as enabled the secretary to affix the seal so as to bind the company.” At any meeting it is almost unnecessary to say that the majority will bind the minority, unless the concur- rence of all has been for special reasons rendered necessary.* As to the number which will constitute aquorum: first, if the constating instruments fix some definite number, then at least this number must be present. + 1 Ubi supra, p. 454. Compare Wills v, Murray, 4 Ex, 843; 19 L. J. Ex. 209. a *See Cram 2. Bangor House, 3 Fairf. 354; Edgerly v. Emerson, 3 Fost. 555; Sargent v. Webster, 13 Met. 497; Lockwood v. Mech. Nat. Bank, 9 R. I. 308; ex parte Willcocks, 7 Cow. 402; Field v. Field, 9 Wend. 408; Wells ». Rahway Rubber Co. 4 C. E. Green, 402; Booker v. Young, 12 Gratt. 303; Cahill 2. Kalamazoo Ins. Co. 2 Doug. (Mich.) 124; Buell ». Buckingham, 16 Iowa, 284. +t ‘‘ There is a distinction taken between a corporate act to be done by a select and definite body, as by a board of directors, and one to be per- formed by the constituent members. In the latter case a majority of those who appear may act, but in the former a majority of the definite body must be present, and then a majority of the quorum may decide. This is the general rule upon the subject; and if any corporation has a different modification of the expression of the binding will of the corporation, it arises from the special provisions of the act or charter of incorporation.” FORMALITIES RELATING TO THE MEETINGS. 459 In Kirk v, Bell? the deed of a banking company pro- vided that the directors should not be fewer than five, three to be a quorum, with power to transact ordinary business. The number having fallen to four, these ex- ecuted a deed compromising a large debt due to the firm. It was held that this, not being ordinary busi- ness, and consequently requiring the concurrence of five directors, was not binding on the bank. Card v. Carr? is to the same purport. Here jfwe trustees of a building society had been constituted a quorum, and the plaintiff, a member, after being in arrear of payment on seven consecutive occasions, had paid arrears to ¢wo trustees, who received the payment in ignorance of the rules, but it was held that such receipt had not bound the society, but that the society could, on returning the payments forfeit the shares of the said member. Nor can the managing body transfer their authority to less than a quorum of the same,® unless express au- thority in that behalf is vested in them.‘ 716 Q. B. 290; Ducarry v. Gill, 4 ’ Re Leeds Banking Company, How- C, & P. 121; Brown v, Andrew, 13 Jur. ard’s Case, L. R.1 Ch, 661; 36 L. J.. 988; 18 L. J. Q. B, 153. Ch. 42. 210. B,N. 8.197; 26 L. J. C. P. * Totterdell v. Fareham Brick Com-. 113. But compare ex parte Bignold, 22 pany, L. R, 10. P. 674. Beav. 143; and Allard v. Bourne, 15 C, B. N.S. 468. 2 Kent. 293. In the absence of provisions in the charter or by-laws, a majority of the directors is a quorum. See Angell & Ames, § 502; Cram ». Bangor House, 3 Fairf. 354; Edgerly ». Emerson, 3 Fost. 555; Sargent v. Webster, 13 Met. 497; ex parte Willcocks, 7 Cow. 402; Lockwood v. Mech. Nat, Bank, 9 R. I. 308; Field v. Field, 9 Wend. 403; Price o. Grand Rapids & Ind. R. R. Co. 13 Ind. 58; Hamilton v. Same, Ibid. 61; Cowley ». Same, Ibid, 347; Cahill ». Kalamazoo Ins. Co, 2 Doug. (Mich.) 124, The expression “ president and directors,” often used in charters, is equivalent to “board of directors,” and the president is not an essen- tial part of a quorum by reason of its use merely. Sargent 0. Webster, 13 Met. 497. 460 ACTS INTRA VIRES, BUT INFORMAL. Secondly. The clauses appointing the quorum may, however, be directory only,' or controlled by subsequent clauses.” Thirdly. When the constating instruments are silent, then “it is the duty of the court to find out what was the usual number of directors who conducted the busi- ness of the company.’ As the managing body are in effect but a committee of the whole body of members, so they may also for the sake of convenience constitute, whether for general or special purposes, committees of themselves, and trans- fer to such committees, but not to a stranger,‘ the requisite powers and authority to act on behalf of the whole body.* Such transfer must not amount to a delegation or abandonment, but the whole body must still retain, and under certain circumstances, ¢.g., the dismissal of an officer, actually exercise a general con- trol over the doings of such committee.® At all meetings the proceedings must be carried on with due regard to order and regularity. If by custom or express provision, any special business takes precedence of other kinds, it must be first attended to.° If it has to be done seriatim, as for instance in ? Thames Haven Dock and Railway ‘ Rex v. Bird, 13 East, 367; Rex ». company a ees 4M. & G, 552; 12 Westwood, 4 Bligh, N. 5. 218; Rex v. L. J. 0. Attwood, 4B. & A. 481. 2 aay Goldsworthy, 4Q. B. 480; . Osgood vy, Nelson, L. R, 5 H. Lds. 12L.3.Q.B.1 636. * Lyster’s oe ve Tavistock Iron ® Rex v. Parkyns, 3 B. & Ald. 668. poe R. 4 Eq. 288, 287; 36 L, 616 * See Burrill o, Nahant Bank, 12 Met. 168; Waite ». Windham Man. Co. 36 Vt. 18; Corn Exchange Bank v. Cumberland Coal Co. 1 Bosw. 436; Hoyt ». Thompson, 19 N. Y. 207; Olcott v. Tioga R. R. Co, 27 N. Y. 546, and note to page 418, ante; Dillon on Mun. Corps. §§ 60, 221. In gen- eral, such committees would be governed in their mode of action by the same rules which apply to boards of directors. See State v. Jersey City, 3 Dutch. 493; Jenkins ». Union School District, 89 Me. 220. FORMALITIES RELATING TO THE MEETINGS. 461 electing members, a collective vote upon the whole mat- ‘ter will not suffice.’ Sometimes minutes or other records of the proceed- ings have to be kept and signed by the chairman or other official, and such minutes or records so kept and signed are admissible in evidence without further proof.’ * At most ordinary, and at all extraordinary, meet- ings, only certain kinds of business can be transacted, and usually, when notification has to be given before- hand of such meetings, the notice must contain a state- ment more or less definite of the purposes for which the meeting is called, and of the business to be deliber- ated upon thereat.’ + If certain powers are vested in a select body, a meeting of this body may be summoned by the proper authority, without specifying the objects of the same, since it can be summoned only for certain limited pur- poses.‘ The whole meeting will not be rendered irregular simply because of the transaction of business foreign to that set forth in the notice paper,’ or foreign to that which the meeting can validly transact.* 1 Rex v. Player, 2 B. & Ald. 707. 2See Inglis v. Great Northern Railway Company, 16 Jur. 895; Shef- field &c. Railway Company ». Wood- cock, 7 M. & W. 574; Miles v. Bough, 3 Q. B. 845; 12 L. J. Q. B. 74; West London Railway Company v. Bernard, 3 Q. B. 873; 13 L. J. Q. B. 68; Llan- harry Hematite Iron Company, Tothill’s Case, L. R. 1 Ch. 85. 5 See ante, pp. 352-855, and generally compare with this section, Part III, Chapter IL, Section 1. 4 Rex v. Pulsford, 8 B. & C. 350. 5 Re British Sugar Refining Com- pany, ex parte Faris, 3 K. & J. 408; 26 L. J. Ch. 369. : ° Wills ». Murray, 4 Ex, 843; 19 L. J. Ex. 209, * See ante, p. 439, note. + See ante, p. 354, and note. CHAPTER VI. RATIFICATION BY CORPORATIONS. Tue principles of ratification which concern private individuals will in the main be found applicable to cor- porations, due regard being had to the limited capacities of the latter.* It must also be remembered that the - tendency of modern judicial interpretation and legisla- tion has been to waive needless formalities, and that consequently at the present many agreements are held binding on corporate bodies, even without ratification, which a few years since would, from technical reasons, not have been so. Express Ratification by a Corporation itself. Ratification may be either express or implied. Sewell’s Case, re New Zealand Banking Corporation,’ furnishes an example of the former. The directors of a company whose capital was £300,000, divided into 8,000 shares of £100 each, made an unauthorized issue 1Z, R. 3 Ch. 181. * Ratification may be by express assent, or by acts or conduct of the principal, inconsistent with any other supposition than that he intended to adopt and own the act done in his name (Story on Agency, §§ 289, 252), and the principle is as applicable to corporations as to individuals. In applying it to a particular case, care must be taken that other principles of the law are not violated. For instance, no sort of ratification can make good an act without the scope of the corporate authority. Peter- son 2, Mayor of N. Y. 17 N. Y. 449; see ante, p. 377, note. As to rati- fication by municipal corporations, see Dillon on Mun. Corps. §§ 885, 886. «¢ RATIFICATION BY CORPORATIONS. 463 of 1,000 additional shares beyond their capital. They afterwards called general meetings, at which special resolutions were passed extending, as the company had the power by their articles of association in that way to extend, their capital to £600,000. It was held that the issue of the 1,000 shares, though originally ultra vires of the directors and invalid, was confirmed by these resolutions.* Implied Ratification by a Corporation itself. Ratification is, however, much oftener inferred from * An insurance company with a capital fixed by its charter, which gave authority to its stockholders in their discretion to increase the stock to a certain limit, issued additional stock without a formal vote of the stockholders. It was held, in a suit by its assignee in bankruptcy to enforce the collection of an assessment on the new stock, that the requi- site assent of the stockholders might be shown by acquiescence, and that the receipt of dividends for several years upon the basis of the increased capital, with the knowledge and assent of a large majority of the stockhold- ers, constituted a complete ratification. Payson v.Stoever, 2 Dillon Rep.427. A corporation increased their capital by new subscriptions; and by resolution of the board of managers, directed the installments on the stock held in the State of New York to be paid in at the defendants’ bank, in the city of New York, which was accordingly done to a large amount. The defendant’s cashier, who was also one of the managers of the plaintiff's bank, drew out and loaned a portion of the funds so de- posited, to be repaid on demand, and sent a statement of such loans to the plaintiffs’ cashier, at the office of the plaintiffs, kept in Philadelphia, requesting at the same time to be informed if the loans were not satisfac- tory, so that he might call themin. The plaintiffs’ cashier replied that all was satisfactory. The board of managers afterwards met, and took action in relation to the business in New York, but expressed no dissatis- faction in respect to the loans so made, nor in any manner repudiated them. Held, that the managers were chargeable with notice of the fact that the loans had been made, from the time it was communicated to their cashier, or at all events from the the time of their subsequent meeting. And held further, that by their silence and acquiescence they had ratified the loan, and therefore, that the defendants were not liable for permitting the funds to be withdrawn from their bank, and loaned without authority. New Hope & D. Bridge Co. v. Phoenix Bank, 3 N. Y. 156. 464 RATIFICATION BY CORPORATIONS. the proceedings and conduct of the parties, whether private individuals or corporations, than plainly and positively declared. * It is not easy—perhaps, correctly speaking, it is not possible—for a corporation, which is invisible and unable by itself to perform any act, to ratify immediately ;* it can do so only indirectly, by the acquiescence of either its members as a whole or its agents to whom it has intrusted a general authority. That it can thus bind itself is now completely estab- lished, as is shown by the decision in Phosphate of Lime Company, Limited, 7. Green and another.’ By the ar- ticles of association of the company the directors were prohibited from purchasing their own shares. They lent the defendants £6,500 to enable them to take up 400. shares which the latter had bought in the open market; and some time after, the defendants being unable to re- ? See Williams v. St. George’s Har- have ratified a contract by allowing bor Company, 2 De G. & J. 547; and judgment to go by default. . compare Edwards v. Kilkenny, de. L.R.47 C. P. 48; Atheneum Life Railway Company, 26 L. J. C. P. 224; Assurance Society v, Pooley, 3D. G. & in both which the company was heldto J. 294; 28 L. J. Ch. 119. ; * A corporation having allowed its officers to give notes for property, the power to "hold some of which was doubtful, and having taken pos- session of it and employed it in legitimate corporate purposes, was said to have unequivocally ratified the acts of the officers. Moss ». Averill, 10 N. Y. 449, citing Corning v. Southard, 3 Hill, 552; Moss ». Rossie Lead Co. 5 Hill, 187; Conro v. Port Henry Iron Co. 12 Barb. 27; Clark’s Executors », Van Riemsdyk, 9 Cranch, 183, See Church o. Sterling, 16 Conn. 388 ; Chicago Building Soc. ». Crowell, 65 Ill. 453, and cases cited. The directors of a- railroad company, after having allowed its presi- dent to purchase locomotives and to give bills in payment therefor, and for three years to operate the road with them, and to manage the prop- erty in his discretion without interference, afterwards resumed the charge of the road, and took possession of the locomotives thus obtained, not questioning the accounts rendered by the president of the transaction. This acquiescence was held to be such a ratification as to be evidence of the president’s original authority so as to bind the corporation for the bills issued by the president in payment for the locomotives. Olcott v. Tioga Railroad Co. 27 N. Y. 546. ' RATIFICATION BY CORPORATIONS. 465 pay this loan, they compromised the matter by accept: ing the 400 shares, £10 paid up, in lieu of the loan, which they thereupon canceled. At a subsequent meet- ing of the shareholders an account was handed round to every one present wherein the sum of £4,000 was set down as the price of “shares canceled,” and the ac- count of the defendants in the company’s ledger was credited with £4,000 “as per shares forfeited account.” This was acquiesced in for five years, when, on the liqui- dation of the company, the liquidator brought an action to obtain payment of the 400 shares. It was decided that, assuming that the compromise with the defend- ants by the acceptance and cancellation of the 400 shares was ultra vires of the directors, the subsequent conduct of the shareholders, in assenting to the transfer of the old to the new company with knowledge, or the oppor- tunity and means of knowing if they thought proper to inquire, that such transfer was in part founded upon such cancellation, was a ratification and acquiescence in what the directors had done; and that it sustained a plea of accord and satisfaction to an action brought in 1870 against the defendants in the name of the old company for the recovery of the £6,500 advance. The different judgments rendered in this case exam- ined rather carefully the circumstances under which a corporation can be deemed to have impliedly ratified an informal transaction, and one which otherwise would not be binding upon it. From them we may gather, that in the case of joint stock companies and other sim- ilar corporations it is not necessary or possible, in order to establish assent and acquiescence on the part of. the corporation, to prove the acquiescence of each indi- 30 466 RATIFICATION BY CORPORATIONS, vidual shareholder;* but that it is enough to show circumstances which are reasonably calculatéd to satisfy the court or a jury that the thing to be ratified came to the knowledge of all who chose to inquire, all having full opportunity and means of inquiry. + Very generally questions of ratification, when the point to be determined is the immediate and direct ac- quiescence of the corporation itself, relate to shares, their acceptance, forfeiture, transfer, and the like. In these matters it is quite clear that directory and other trivial formalities may be neglected, and that if a com- pany agree to an informal transfer or other dealing with shares, both parties will be bound thereby, and neither of them nor any third person can afterwards take ad- vantage of the informality, assuming it not to be essen- tial, to the dealing under consideration, so as to open and set aside the transaction. But if the omitted form- ality be essential, so that for want of it the arrangement is a nullity, no subsequent proceeding of the whole body of members can supply the defect. As they could not have dispensed with it by express agreement at the time the arrangement was entered into, so neither can they do so in an indirect manner by ex post facto acqui- >Compare Lord Chelmsford, in Spackman v, Evans, L. R, 8 H. Lds. 171, 233. *In order to establish ratification by a corporation, it is requisite to prove acts by a board of directors, with full knowledge of the circum- stances, if the transaction was within the powers of the directors, or that the corporation itself, i. ¢., the body of shareholders, has done some act significative of approbation or adoption. See Salem Bank 2. Gloucester Bank, 17 Mass, 1. t See Payson o. Stuever, 2 Dillon, 427. Where a director sells land of a company to himself, a majority of a corporation cannot ratify the trans- action so as to bind the minority. Cumberland Coal Co. ». Sherman, 30 Barb. 558. See Zabriskie v, Cleveland C.& C.R. R. Co. 23 How. 381. RATIFICATION BY CORPORATIONS, 467 escence. In such cases the mere passage of time is of no avail. “Lapse of time clearly would not make valid that which at the beginning was invalid.” +* Latification indirectly and mediately. + Reuter v. Electric Telegraph Co.? is a well-known case upon ratification. By the deed of settlement of *Per Lord Cairns, L. R. 3 H. Lds. Smith v, Hull Glass Company, 11 C. B. 253. 897. 76E. & B. 341; 26L, J. Q. B. 46; * If an act done by a corporation were contrary to law, it is incapable of ratification. No amount of ratification can give vitality to an act pro- hibited by law. Martin ». Zellerbach, 38 Cal. 300. ‘ + The law is well settled, that a principal who neglects promptly to disavow an act of his agent, by which the latter has transcended his au- thority, makes the act his own; and the maxim which makes ratification equivalent to a precedent authority is as much predicable of ratification by a corporation as it is of ratification by any other principal, and it is equally to be presumed from the absence of dissent. Kelsey v. National Bank, 69 Penn. St. 426, citing Bredin v. Dubarry, 148. & R. 830; Gordon v. Preston, 1 Watts, 387; Bank of Penn. v. Reed, 1 W. &S. 101. : The open and public establishment and advertising of tariffs of fare and freight by the president of a railroad company presupposes a dele- gated authority from the corporation, and the act of the corporation in receiving and appropriating the tolls thus established, without objection, amounts to a ratification. Hilliard 7. Goold, 34 N. H. 280. See Penn. Del. & Md. Nay. Co. 0. Dandridge, 8 Gill & J. 248. : A corporation is held liable for the act of an officer in paying out bank notes contrary to a general statute, when knowledge of such payment is brought home to the governing board and no disapprobation is manifested. Christian University v. Jordan, 29 Mo. 68. The manager of a mining company, who had been in the habit of making such contracts as he deemed necessary for the good of the corpo- ration, purchased in the name and for the use of the corporation a house, to be used as dn office for the corporation and as a boarding-house for its laborers. He took possession of the premises, and subsequently several meetings of the trustees of the corporation were held in the house. Six weeks after the purchase, at a meeting of the trustees, a resolution was offered and rejected declaring the contract legal and binding. Subse- quently the premises were destroyed by fire, and in a suit for the balance 468 RATIFICATION BY CORPORATIONS. the company, which had been incorporated by royal charter, it was provided that the directors should man. age the business, but all contracts above a certain value were to be signed by at least three directors, or sealed with the seal of the company under the authority of a special meeting. Plaintiff sued the company on an agreement above the prescribed value. It was made by parol by the chairman, who himself entered a memorandum of it in the minute book of the com- pany; and it was recognized in correspondence with the secretary. Plaintiff did work under it, and re- ceived payment by checks for it, which payments were audited in the company’s accounts. Jt was within the scope of the company’s business; but it was not signed by three directors or sealed at a special meeting. It was held that the contract had been ratified by the directors, and per consequentiam by the company ; since the deed of settlement declared that “the directors shall conduct and manage the affairs of the company, and shall exercise all the powers which may be exercised by the company at large.” * of purchase money, it was held that if the authority of the manager to make the purchase were doubtful, the acts stated amounted to a ratifica- tion: The court remark, that ‘‘the entry of the resolution was a very singular mode of repudiating a contract. It would have been more in accordance with correct notions of propriety and justice, if a resolution refusing to accept the contract had been passed, accompanied by an offer to cancel the deed, which had not been recorded, and return the property of which they were in possession.” Shaver 0. Bear River Co. 10 Cal. 396. Receipt of dividends from the assignee of an insolvent, pursuant to an agreement to release, made by the treasurer of a corporation, which he was not authorized to enter into, will not amount to a ratification of the release, unless with full knowledge of the agreement by the trustees of the company. Dedham Savings Inst, v. Slack, 6 Cush. 408, * The articles of a joint stock association prohibited the officers in- trusted with the conduct of its business from making purchases on credit. They, notwithstending, made a purchase on credit, sirst giving the seller a RATIFICATION BY CORPORATIONS. 469 In this case the ratification was by the directors. This is the commoner method, and it is but seldom that it is by the corporation directly in general meeting. With régard to the extent to which directors can ratify, in Wilson v. West Hartlepool Harbor &. Co. it was laid down by Turner, L. J., that whatever directors can do personally in reference to a company, they can ratify when done by others. “It is nét disputed that the di- rectors had power on behalf of the company to sell the land in question ; and having this power, it roust, as it seems to me, have been competent to them to ratify a contract made by the manager of the company for the sale of it.” *_ Browning v. Great Central Mining Company,’ was a case arising thus: The plaintiff was employed by R., one of the promoters of a company, to make surveys, re-’ ports, &c., as to a mine which he proposed to assign to the company. Afterwards, by resolution of the promoters, before registration, it was agreed that the plaintiff should be “captain” of the mine, at a salary “to commence at 12D.G. J. & 9. 475; 84 L. J. Ch. compare Totterdell », Fareham Blue 241, Brick &c, Company, L, R. 1 C. P. 674. 75H. & N. 856; 29 L. J. Ex, 399; copy of the articles. The goods were forwarded pursuant to the direction of the agent purchasing them, and there was evidence tending to show that they were seen in the store of the association by its members. It was held that this was not a ratification, and that the officers themselves were not au- thorized to ratify their unauthorized act. Hotchin ». Kent, 8 Mich. 526. Ratification of a mortgage purporting to be of corporate property, though signed by the president individually, and sealed with his individual seal, without special authority, is presumed from the knowledge of all the members of the board of directors, and their long continued acquiescence. Sherman ». Fitch, 98 Mass. 59; see Lyndeborough Glass Co. v. Mass. Glass Co. 111 Mass. 315; Brown v. Winnisimmet Co. 11 Allen, 326; Strider ». Western College, 31 Ia. 547. * Whatever acorporation can authorize its officers to do, it can ratify when done. McLaughlin v. Detroit & Milwaukee R. R. Co. 8 Mich. 100, 470 RATIFICATION BY CORPORATIONS. the completion of the company’s contract with R.” This contract was afterwards entered into between R. on one side and N. & F. on the other, on behalf of the company. The memorandum and articles of association were next prepared, authorizing the directors to complete the contract with R., and to “elect and dismiss” the secretary, manager, and other servants; and then the company was duly registered. The contract was, how- ever, not carried out. After registration, prospectuses were published by the company, in which the plaintiff was described as “ manager,” and reports from him in that capacity were printed. There was no other evi- dence of any actual “election” of the plaintiff as man- ager, and two of the directors were called to prove that there had never been any. The court decided that there was evidence to go to the jury, that the plaintiff had been employed by the company; and the jury having found for him, the verdict was not set aside. It need hardly be said that ratification founded upon acquiescence by the directors must be acquiescence in dona fides, and with the genuine intention to benefit the company. The directors are trustees for all the members. As they may make no contract, &c., either with a view to their own exclusive advantage, or collu- sively to benefit others at the expense of the company, so neither may they ratify for similar purposes, nor con- ceal from general meetings of the corporation such facts as would probably cause such meetings to refuse their assent to engagements otherwise not binding on them.! * 1 Atheneum Life Insurance Society v. Pooley, 8 D.G. & J. 294; 28 L. J. Ch, 119. * The president of a mining company leased in the name of the com- pany, but without its authority, certain of its mining ground, and the money paid as rent was reported to the board of trustees by the superin- RATIFICATION BY CORPORATIONS. 471 The Effect of Ratification.* Engagements of every description entered into on behalf of an existing corporation, which are not in them- selves illegal, but which do not at present bind the cor- poration, may be duly ratified by it, whatever be the defect—whether it be the absence of some formality or the want of authority on the part of those who have purported to act for the corporation or the like—always provided that the defect be not essential to the validity of the engagement, and such ratification will have its usual effect of generally discharging the agent from lia- bility, ¢. g., when he has signed a contract on behalf of a named principal. + What will be the effect of ratification when the en- gagement was formed on account of a non-existing cor- tendent of the property as received for ores sold. The facts of the receipt of the money and of the knowledge on the part of the president and a minority of the board of trustees of the lease, did not create a rati- fication of the lease. Where it is sought to charge a corporation with the ratification of an unauthorized act by reason of its acceptance of some benefit or advantage from it, it should appear that such benefit was ac- cepted with full knowledge of the character of the act. Yellow Jacket Mining Co. v. Stevenson, 5 Nev. 224. * “(Tf a corporation ratify the unauthorized act of its agent, the ratifi- cation is equal to a previous authority, as in case of natural persons, no maxim being better settled in reason and law than ‘ omnis ratihabitio re- trotrahitur, et mandato priori equiparatur.’” See Angell & Ames on Corps. § 304, and cases cited. t ‘Ratification operates upon the act ratified precisely as though authority to do the act had been previously given, except where the rights of third persons have intervened between the act and the ratifica- tion. The retroactive efficacy of the ratification is subject to this qualifi- cation. The intervening rights of third persons cannot be defeated by the ratification. In other words, it is essential that the party ratifying should be able not merely to do the act ratified at the time the act was ‘done, but also at the time the ratification was made.” Cook v. Tullis, 18 Wall. 382; see Wood v. McCain, 7 Ala. 806; Taylor 0. Robinson, 14 Cal. 396; McCracken ov. San Francisco, 16 Cal. 591. 472 RATIFICATION BY CORPORATIONS. poration is not altogether certain; but it has been laid down that it will not relieve those already responsible. Scott v. Lord Ebury e¢ ai,’ was a suit by the public of- ficer of the Union Bank of London against the pro- moters, of whom Lord Ebury was one, of the R. A. & C. Railway Company, upon a check signed by two of them—the check being headed “R. A. & C. Railway Company,” and expressed to be for “parliamentary ex- penses: house fees,” and explained by a collateral agree- ment that it was “to be repaid out of the calls on shares.” An act authorizing the railway passed, the promoters being named therein as the first directors ; and at a meeting subsequently held the directors passed a resolution that the acts of the secretary—one of them being the obtaining the above loan—should be adopted and confirmed. No shares were allotted or calls made, and the undertaking was not proceeded with. It was decided that the advance was made upon the personal responsibility of those who signéd the check, and that the subsequent adoption of their acts by the directors did not alter their position. The only point to be determined in this case was whether the money sought to be recovered; was ad- vanced by the plaintiff to be repaid by the company after its incorporation, or by the directors personally. If the defendants were originally liable, they could not have subsequently been relieved from responsibility. This had been decided a few weeks previously in the case of Kelner v. Baxter.?* Here an agreement for the 'L, R.2C. P. 255; compare as to Morris, 3 H. & C. 664; 34 L. J. Ex. the liability of persons holding them- 131; Beattie v, Lord Ebury, L. R. 7 selves out as directors, Doubleday » Ch. 777. Muskett, 7 Bing. 110; Burbidge v. 9 L. R. 2 0. P. 174, * See Melhado ». Porto Allegre Rw. Co. L. R. 9 C. P. 508; Pritchard’s RATIFICATION BY CORPORATIONS. 473 purchase of the plaintiff’s premises, d&c., was come to between the plaintiff and the projectors of a hotel company, in the following form: “Janwary 27th, 1866. To John Dacier Baxter, Nathan Jacob Calisher, and John Dales, on behalf of the proposed Gravesend Royal Alexandra Hotel Company, Limited. Gentlemen,—I hereby propose to sell the extra stock now at the As- sembly Rooms, Gravesend, as per schedule hereto, for the sum of £900, payable on the 25th of February, 1866. John Kelner.” At the end was written—‘ To Mr. John Kelner. Sir,—We have received your offer to sell the extra stock, as above, and hereby agree to- and accept the terms proposed. J.D. Baxter, N. J. Calisher, J. Dales, on behalf of the Gravesend Royal Alexandra Hotel Company, Limited.” In pursuance of this agreement, the goods in ques- tion were handed over to the projected company and consumed by them. On first February, a meeting of the directors took place, who passed a resolution that the above arrangement should “be, and the same is hereby ratified.” On 20th February, the company was registered, but it collapsed. Thereupon Kelner sued the persons who had signed the above agreement, and - the court held them liable upon the ground that, as the company was not in existence when they made the con- tract, they alone were then liable upon it, and that it was not competent upon the company after its incor- poration to ratify the contract, so as either to relieve them of liability, or to impose upon itself any liability in respect thereof.* Case, L. R. 8 Ch. 956; Touche ». Metropolitan Co. L. R. 6 Ch. 671; Stainsby v. Frazer’s Metallic Lifeboat Co. 3 Daly, 98. * As to ratification generally, see Story on Agency, $§ 289, 260; Fleck- ner ». U, §. Bank, 8 Wheat. 363; Putnam ». City of New Albany, 4 Biss. ATA : RATIFICATION BY CORPORATIONS, 365; Medomak Bank ». Curtis, 24 Me. 38; Baker », Cotter, 45 Me. 236; Despatch Line of Packets v. Bellamy Mfg. Co, 12 N. H.. 205; Whitwell v. Warner, 20 Vt. 425; Essex T. Corp. ». Collins, 8 Mass. 299; Hayden , ‘Middlesex T. Corp. 10 Mass. 403; White v. Westport Mfg. Co. 1 Pick. 220; Episcopal Char. Soc. ». Episcopal Ch. in Dedham, 1 Pick. 372; Hay- ward ». Pilgrim Soc. 21 Pick. 270; Burrill ». Nahant Bank, 2 Metc. 167; Bulkley v. Derby Fishing Co. 2 Conn. 252; Witte o. Same, 2 Conn. 260; Emmet », Reed, 4 Seld. 412; Peterson v. Mayor of N. Y. 17 N. Y. 449; Hoyt v. Thompson, 19 N. Y. 207; Hawley v. Keeler, 58 N. Y. 114; Med- bury v. N. Y. & Erie R. R. Co. 26 Barb. 564; Hoyt v. Bridgewater Copper Mining Co. 2 Halst. Ch. 253, 625; Fox o. Northern Liberties, 3 W. & 8. 108; State v. Jersey City, 5 Dutch. 441; Schumm 2. Seymour, 9 C. E. Green, 148; Bank of Ky. v. Schuylkill Bank, 1 Pars. Sel. Cas. 267; Titus o. Catawissa R. R. Co. 5 Phila, Rep. 172; Merchants’ Bank v. Central Bank, 1 Kelly, 428; Everett o. U. 8S. 6 Port. (Ala.) 166; Planters’ Bank », Sharp, 4 Sm. & M. 75; City of Detroit ». Jackson, 1 Doug. (Mich.) 106; Ohio & Miss. R. R. Co. v. Middleton, 20 Ill. 629; Evans v. Chicago & Rock Island R. R. Co. 26 Ill. 189; Balston Spa Bank »v. Marine Bank, 16 Wis. 120; Walworth Co. Bank v. Farmers’ L. & T. Co. 16 Wis. 629. CHAPTER VII. THE LIABILITY OF CORPORATIONS FOR THE ENGAGEMENT ENTERED INTO UPON THEIR BEHALF BY THEIR PRC MOTERS.* Ir is in connection with the formation of companié that the doctrine of ultra vires arose, and that man: * The subjects discussed in this chapter are only of practical impo: tance to the profession in this country, so far as their limited application t our corporations may illustrate analogous questions. The subject of th liability of corporations for the engagements of their projectors or prc moters, is discussed in but few cases in our reports. The mode of inst tuting corporate enterprises in England has been essentially differen from that adopted in the United States; although since the change in th policy of the law here, which in most States confines the incorporation c companies to general laws, rather than by special charters, and the pat sage in England of acts like the ‘‘ companies acts, 1862 and 1867” (Buck ley, p. 1, 468), the difference is materially diminished. The last name acts provide for the formation of an incorporated company, with or withot limited liability, by any seven or more persons associated for any lawft purpose, subscribing to a memorandum of association, and otherwise con plying with the requisitions of the act; see §§ 4, 6, Buckley, p. 24. Th companies act, 1862, § 4, provides that, “no company, association, c partnership, consisting of more than ten persons shall be formed, afte the commencement of this act, for the purpose of carrying on the bus ness of banking, unless it is registered as a company under this act, or i formed in pursuance of some other act of parliament, or of letters patent and no company, association, or partnership consisting of more tha twenty persons shall be formed, after the commencement of this act, fo the purpose of carrying on any other business that has for its object th acquisition of gain by the company, association, or partnership, or by th individual members thereof, unless it is registered as a company unde this act, or is formed in pursuance of some other act of parliament, or o .letters patent, or is a company engaged in working mines within and sut ject to the jurisdiction of the Stanneries.” By § 209, Buckley, p. 374 certain companies formed before the commencement of the act are require: under certain penalties prescribed by § 210, to register. Companie 476 LIABILITY FOR ACTS OF PROMOTERS. most conflicting decisions have been given. The cor- poration is distinct from its members, and a fortiori formed after the passage of the act are illegal. These acts are applica- ble to trading, railway, banking, manufacturing, insurance, and indeed every kind of company or partnership, §§ 179, 180, Buckley, p. 349, It is said in Hodges on Law of Railways, 4th ed. p. 2, that ‘‘there are so many difficulties attending the transactions of a railway. company not reg- istered in accordance with the provisions of ‘the companies act, 1862,’ or, incorporated by special act of parliament—for though not exactly partners in the strict sense of that term, the projectors may very likely, without intending tv do so, incur a liability similar to that of partners (Bright ». Hutton, 3 H. L. C. 358; Hamilton ». Smith, 5 Jur. N. 8. 82); and if the company consists of more than twenty persons, it will be illegal unless registered—that when a sufficient number of persons, 7. ¢, seven or more, can agree as to the formation of a company for the purpose of making a railway, the best course for them to pursue, until they can get a special act of parliament conferring the necessary powers upon them, is to avail themselves of the provisions of the act of 1862, and register themselves as a preliminary company for the purpose of obtaining a special act of parliament.” The ‘‘companies clauses consolidation act,” 1845, and the ‘‘land clauses consolidation act,” 1845 (Goddefroi & Shortt, pp. 1, 141), were passed to consolidate the provisions usually inserted in acts with respect to the constitution of companies incorporated for carrying on undertak- ings of a public nature, and for authorizing the taking of lands for such purposes. The term promoters is in the latter statute defined to mean “the parties, whether company, undertakers, commissioners, trustees, corpora- tions, or private persons, by the special act empowered to execute the works or undertaking.” The term special act in the latter statute means any act passed to authorize the taking of lands for the undertaking to which the same relates; and in the former statute, any act passed incor- porating a joint stock company for the purpose of carrying on apy under- taking which shall, by this special act, be authorized to be executed. The formalities to be observed by persons desirous of obtaining parliamentary authority for the construction of works, and the proceedings before the Lords and Commons and the committees of each house are prescribed in standing orders, and form a branch of the law peculiar to Great Britain. See Goddefroi & Shortt, App. p. cexxii; Hodges on Railways, ch. 11; May on the Law and Usage of Parliament, 7th ed. p. 670. The “ special act” ob- tained usually adopts the provisions of the general acts, or modifiés some pro- visions of them, and then incorporates the company by name, as a body cor- porate, with perpetual succession, and with power to purchase and hold lands, within the restrictions therein and in the consolidation acts contained. LIABILITY FOR ACTS OF PROMOTERS. 477 from the promoters who originated it, and who may not even be amongst its members. Can these, the pro- As soon as the “special act” is obtained, all the powers which the railway company previously enjoyed, by reason of registration, cease and deter- mine, except so far as may be otherwise provided by the special act. Hodges, p. 41. The special act names the first board of directors, Hodges, p. 44. Previous to the passing of a bill through parliament, the managing or provisional committee usually issue letters of allotment, and subsequently scrip certificates of shares. Hodges, p. 87. As to the forma- tion of English companies, see Lindley on Partnership, Chap. V, p. 102, 3d ed.; Shelford on Joint Stock Companies, 2d ed. p. 9; compare Laws of New York, 1875, Chap. 611, p. 755. This statement, incomplete as it is, will show how different are the methods pursued in Great Britain and in this country as to creating corporations and investing them with compulsory powers. In this country, corporations are created by special act, or organized under general laws. When created by special acts, they are either made 80 in presenti, or after the subscription of stock, or the issuing of patent by the executive. The preliminary contracts of the projectors of the en- terprise, therefore, cannot be said to be made by the corporation in any sense, nor by the projectors as the agents of the incipient company. The only logical ground on which liability for such contracts rests, is, that where the corporation claims the benefit of the contract, it must take it cum onere, and assume the liabilities also ; and this is the ground upon which Low v. Conn. & Pass. R. R. Co. 45 N. H.'370, is placed. There, after the charter and before the organization of the corporation, the plaintiff ren- dered service in obtaining subscriptions to the capital stock, and other «acts requisite to complete the organization, and after the organization the corporation took the benefit of the services, knowing that they were ren- dered with the understanding with the projectors that compensation was to be made. See Low v. Conn. & Pass. R. R. Co. 46 N. H. 284. This case has been much criticised, and cannot be reconciled with N. Y. & N. H. R. R. Co. ». Ketchum, 27 Conn. 170, where it is said: “The services for which it is claimed that the plaintiffs were liable to pay the defendant, were rendered * * at a time before the stock was taken up in conformity to the charter, and before the company had a proper ex- istence. Hence, it is not easy to see how they could be. rendered for or at the request of the company (or rather the first bona fide stockholders, for they must be looked at as the company), and if they were not so ren- dered, then how the company could be liable for them upon any known principle of law. We are aware that it is no uncommon practice for cor- porations to assume and pay these preliminary and antecedent charges after the company has become organized, but we do not see how the com- pany, if it should object, could -be compelled to pay them, and in some 478 LIABILITY FOR ACTS OF PROMOTERS. moters, bind. the future corporation? In other words, can one person, assuming to act on behalf of another cases it would be most inequitable to require it. Can a few persons com- bine for their own interest to get up a railroad, agree with one of their number to give him a large commission or bonus for every stockholder he can allure into the company, and privately make this commission or bonus a charge upon the corporation when formed ? This would be a breach of faith towards honest and unsuspecting stockholders who pay the charter price for their stock, and expect to take it clear of allincumbrances, The effect would be the same, as if commissioners should enter into a private bargain with subscribers to let them subscribe on terms which the charter does not allow. * * * It is soon enough for corporate bodies to enter into contracts incumbering their property, when they are duly organized according to their charters, and have their chosen and impartial directors to conduct their business. If a vote was necessary in this case to make these charges a debt against the company, the grant, for that very reason, cannot stand, for the directors had no power to assume or to create. such a debt for such a service.” The case, of Low v. Railroad, 45 N. Hamp. 3870, was largely placed upon the authority of Hall ». Vermont & Massachusetts R. R. Co. 28 Vt. 401, which was a suit for those services, rendered by the plaintiff at Boston, in conjunction with other citizens of Brattleboro, in procuring the charter of the company; the court say: ‘‘They appear to have been voluntarily rendered, as it was antic- ipated by him that the construction of the road would give an increased value to his real estate. The plaintiff could not have been employed by the defendants to render these services, for the corporation at that time had not a legal existence, nor has there been any subsequent promise to pay for them; and certainly none can be implied against parties, when at the time the services were rendered they were incapable of making an express contract.” Other charges were for services in attending various meetings of the corporators after the charter was granted and previous to - the organization of the company in the choice of directors, As to the latter, the court say: ‘‘Those charges, we think, were properly allowed. The plaintiff, with others and their successors, were, by charter, made a corporation, having powers and privileges, and subject to the duties and abilities contained in the general act of Massachusetts relating to railroad corporations. Among other matttrs required by the charter, subscriptions to the capital stock of the company, to the amount of five thousand shares, were necessary before an organization could be perfected. The duty rested upon the corporators to do whatever was required by the charter to effect that result. It may be true that the company were not invested with full corporate powers, until after the stock was subscribed and their organization perfected in the choice of directors; yet, the cor- poration was in esse before that event; it had an inchoate existence, and LIABILITY FOR ACTS OF PROMOTERS. AT9 yet unborn, so far be the “agent” of this latter as to bind him by, and to enable him to take advantage of, the corporators had the power, and were so far the agents of the corpora- tion, as to bind them by any act which they were required to do, or which was necessary to perfect their organization under their charter.” It must be admitted that this case lays down a rule ‘‘ of too great laxity,* and too susceptible of abuse to afford a safe guide in these lax times, when every possible avenue to corruption is sure to find some one desperate to enter.” 1 Redfield on Railways, § 14, note. A town has no authority to appropriate money to pay the expenses of persons engaged in getting the charter. Frost v. Belmont, 6 Allen, 153. In Rockford, Rock Island & St. Louis R. R. Co, o. Sage, 65 Ill. 328, which was an action of assumpsit by Sage against the railroad company, to recover for services rendered and expenses incurred before the organization, by Sage; who was a director, the court remark: ‘‘For services and expenses before the organization of the company, which subsequently the company accepts and receives the benefit of, and promises to pay for, we will not say a party might not recover, in virtue of such express promise; but we are disposed to deny the right of recovery for such services and expenses upon any implied promise resulting from the facts, although 46 N. H. 284, seems to sanction such a right of recovery; as does also 28 Vt. 401, as respects services. rendered subsequent to the act of incorporation and prior to perfecting the organization of the company, but not for services prior to the act of incorporation. A right of recovery against a corporation for anything done before it had a proper existence, does not appear to rest on any very satisfactory legal principle. It appears more reasonable to hold any services performed or expenses incurred prior to the organization of a corporation to have been gratuitous, in view of the general good or pri- vate benefit expected to result from the object of the corporation. It seems unjust to stockholders, who subscribe and pay for stock in a com- pany, that their property should be subject to the incumbrance of such claims, and which they had no voice in creating. N. Y.&N. H.R. R. Co, », Ketchum, 27 Conn. 170, is an authority which denies the liability of a corporation on account of services rendered prior to the perfecting of its organization, and we accept the authority of that case as, in our judg- ment, establishing the more just and satisfactory rule.” See, also, Safety Life Deposit Ins. Co. 2. Smith, 65 Ill. 328; Franklin Fire Ins. Co, v. Hart, 31 Md. 59. In Chater». San Francisco Sugar Refinery Co. 19 Cal. 219, several per- sons agreed to form a corporation, and to divide the stock in a certain way among themselves. An action was brought by one of the original parties to the agreement against the corporation, to compel the delivery of the stock according to the agreement. The company was held liable. Thecourt, ona 480 LIABILITY FOR ACTS OF PROMOTERS. engagements purporting to have been made for his account ? SECTION I. WHEN THE ENGAGEMENTS ARE ULTRA VIRES. The liability. of a corporation when fully established for the acts of its promoters will of course have to be rehearing, say: ‘‘ We asserted no such doctrine as that, by force of a secret agreement between the original corporators in a commercial corporation, whether made before or after the act of incorporation, the stock issued by the corporation to inhocent parties, without notice of the agreement, could be charged or affected by it. There was no case before us for the application of such a principle. But the right to incorporate for such a purpose as that here, is a.statutory right, which is free to everybody. The rights in the corporation can be adjusted by contract, and the terms fixed by con- tract. The corporation is little more under our laws than a joint stock company under the English laws; indeed, in its true nature more nearly re- sembling a limited partnership under special articles, than a corporation at common law. This corporation was organized under an agreement, which was in itself legal and binding. The original corporators were really the men who were bound to execute it. They had the power to execute it; for they had on the organization the power, subject to restrictions which do not apply here, to control their own business in their own way, A man may as well make an agreement with another for certain stock in a corporation to be organized hereafter, as an agreement for stock in a present existing corporation.” A company, when fully incorporated, may assume the liabilities of a preliminary association, incurred in obtain- ing acharter. Salem Mill-dam Co. ». Ropes, 6 Pick. 23. It is held that where an association becomes incorporated, and the corporation accepts an assignment of all the property of the association, for the purpose of carrying out its object, the corporation is primarily liable. Hazlett ». Wotherspoon, 1 Strob. Eq. 209; but see Georgia Co. v. Castleberry, 43 Ga. 187. The association would not, however, be relieved, unless by the acquiescence of creditors. Whitwell », Warner, 20 Vt. 425; Witmer o. Schlatter, 2 Rawle, 359. : An understanding between original subscribers, that advances are to be repaid when funds are sufficient, is not binding after incorporation, un- less there is a reservation in the conveyance of the property of the associ- tion to the corporation. Bluehill Academy v. Witham, 13 Me. 403. WHEN THE ACTS ARE ULTRA VIRES. 481 determined primarily by an appeal to the general prin- ciples of ultra vires of the promoters purporting to represent the future corporation. If these acts or agree- ments are ultra vires of the corporation as constituted, it evidently will not be liable for, nor, ¢ contrario, be able to take advantage of them, not even though the directors have attempted after the creation of the cor- poration to ratify such prior proceedings. | In Earl of Shrewsbury v. North Staffordshire Rail- way Company,’ the promoters of the defendant com- pany had covenanted with a landowner, a peer of par- liament, to pay him £20,000 before taking possession — of any of his land, as an inducement for him to with- draw his opposition to the bill, and for his own personal and absolute benefit, independent of the ordinary pay- ment for land and other compensation. After the pass- ing of the act, the directors of the company, now formed, ratified under seal this agreement; but upon a bill being filed to obtain from the company payment of the £20,000, Kindersley, V. C., held both the original agreement and the subsequent ratification to be ultra vires, and therefore dismissed the bill with costs.* ‘LR. 1 Eg. 593; Caledonian &c. Navigation v. Shrewsbury &c. Railway Railway Company v. Helensburgh, 2 Company, 3 K. & J. 654; 26 L. J. Ch. Macq. 391; compare Leominster Canal 764. *See ante, p. 233, note, and post, p. 504, note; Pingrey v. Wash- burn, 1 Aiken, 264. 31 482 LIABILITY FOR ACTS OF PROMOTERS SECTION II. WHEN THE ENGAGEMENTS OF THE PROMOTERS ARE NOT ULTRA VIRES OF THE CORPORATION AS CONSTITUTED.* The attempt is seldom, perhaps never, intentionally made by persons assuming to act on behalf of a pro. posed corporation, to bind it to enter into transactions which are beyond the powers given it. Itis manifestly a mere simple and necessary precaution to endow it with all the authorities that may be needed for the due discharge of its contemplated business, and the other contingencies. Provision for this may be made in one of two ways, either by giving it all the powers and ca- pacities that can possibly be required for the accom- plishment of the purposes in view, or by not only doing this, but also by inserting in the constating instruments clauses investing it at the moment of its creation with particular duties and liabilities. First. When the engagements of the promoters have been embodied in the constating instruments of the cor- poration. - It is these instruments which primarily determine, due regard being had to the rules of common law and equity, the capacity and the responsibilities of the cor- poration. Consequently, speaking generally, whatever powers and rights they give to the corporation it can enforce, and whatever obligations they throw upon it can be enforced against it. No cases need be quoted— they are of every day occurrence—to illustrate the ca- * As to acts of commissioners and others prior to organization, see ante, p. 487, note; Renssel. & W. Plank-road Co. 0. Barton, 16 N. Y. 457. .WHEN THE ACTS ARE NOT ULTRA VIRES. 483 pacity of a corporation to enforce its rights and powers ; but it is much less seldom that actions are successfully brought upon the express provisions of its constating ‘instruments, to enforce claims arising from proceedings carried on before its creation. The following are in- stances : In Tilson e al. v. Warwick Gas Company,’ the first count stated that the plaintiffs had been employed by the defendants to obtain the act of parliament which in- corporated them; that they did obtain it, and their costs amounted to a certain sum; and that by the act it was provided that the costs of obtaining it should be paid out of the first money subscribed. It was held that the plaintiffs might maintain an action of debt founded on the statute. Pilbrow v. Pilbrow’s Atmospheric, &c. Company ? was a strong case. The declaration was upon the deed of settlement. The first count stated that by a deed made between the plaintiff and defendants, who were described as a “company registered and incorporated after a deed of settlement had been executed under 7 & 8 Vict. c. 110,” the defendants agreed on the pur- chase of a patent to pay the plaintiff £15,000 “out of the money raised by the first instalments or calls on the shares of the company,” which they had not done. The second count set out the articles of agreement, stating that the plaintiff had sold his patent to the company, and containing a covenant that the company should pay him £15,000 in cash, &c., which they had not done. It was contended by the defendants that the money was not to be paid at all events, but only out of the first in- 14 B, & CO, 962; Carden v, General L. J. Ex. 166; and Nixon », Brownlow, Cemetery Company, 5 Bing. N.C. 253; 3H. & N. 686; 26 L, J. Ex. 273. Clowes v, Brettell, 10 M. & W. 506. 250. B. 440; 17 L. J. C. P. 166; 5 Compare Midland &c. Railway Com- Ry. Ca, 89. pany v. Gordon, 16 M. & W. 804; 16 484 LIABILITY FOR ACTS OF PROMOTERS. stalments, and that as none had been obtained - they were not liable. But the court considered this was not the correct construction of the contract; and they, there- fore, decided that the second count was good on general demurrer, although the plaintiffs in their third plea to the first count had alleged that the deed of settlement was obtained by the fraud of plaintiffs. In the Madrid Bank v. Pelly,* the articles of associa- tion of a banking company with a nominal capital of £1,200,000 in 60,000 shares, of which the prospectus stated that the first issue would be 30,000, empow- ered the directors to commence business as soon as they should think fit, notwithstanding the whole capital might not have been subscribed for, and provided that upon the first allotment of shares £10,000 should be paid to the promoters. When only 5,000 shares had been subscribed for, and before the company was in a situation to commence business, the directors allotted shares, and paid £5,000 to the promoters, who im- mediately paid to four of the directors £500 apiece. The company having been ordered to be wound up, and the official liquidator having brought a suit in the name of the company against the directors, to which the pro- moters were not parties, it was decided that the directors could not be charged with the money paid to the pro- moters, but that each of the four directors must repay to the company the £500 received ny him from the pro- moters,* 'L. R, 7 Eq. 442; see ex parte Wil- liams, L, R. 2 Eq. 216, where a claim by promoters was disallowed. * Fremont ». Stone, 42 Barb. 169; Blatchford v. Ross, § Abb. Pr. N.S. 438; Gardner o. Ogden, 22 N. Y. 333; Coleman ». Second Ave. R. R. 38 N. Y. 201; Bliss o, Matteson, 45 N. Y. 22; Davison v. Seymour, 1 Bos, 88; Redmond 2. Dickerson, 1 Stockt. 507; McElheny’s Appeal, 61 Penn. St. 188; Simons v. Vulcan Oil Co. Id. 202. WHEN THE ACTS ARE NOT ULTRA VIRES. 485 One other case may be cited, as showing the nature of the engagements for which provision may be made in the constating instruments, and the conditions under, and the extent to which the corporation will then be liable in respect thereof. Touche v. Metropolitan Rail- way Warehousing Company; arose thus: The plaint- iffs had incurred labor and expense in organizing a scheme for certain exhibition rooms, and had entered into negotiations with, and sent the plans to, some of the promoters of a certain company, and offered to ac- cept £2,000 for remuneration. The company was formed, and by the articles of agreement it was recited that the plaintiffs had incurred labor and expense in organizing the exhibition rooms, and that it had been arravged with one of the promoters that he should pay them £2,000, when and so soon as the company should be in a position to commence business. And it was agreed that no expense should be incurred until 10,000 shares had been subscribed, and at least £2 a share paid thereon, and that if the company was not in a position to carry on the undertaking before a certain day, then neither the promoters nor the officers of the company should have any claim upon the funds of the company. It also provided that when the shares were subscribed for and paid up to the amount aforesaid, the directors should pay the above-mentioned promoter the sum of £2,000. Copies of the articles of association were sent to the plaintiffs. The shares in the company were sub- scribed for and the deposits were paid, but the company was unable to obtain a site, and never actually com- menced business. The lord chancellor, on the evi- dence, held that the company had adopted the agreement as to the payment of £2,000 to the plaintiffs through aL, R. 6 Ch, 671. = 486 LIABILITY FOR ACTS OF PROMOTERS. the promoter; and, as to the contract, he decided that the performance of the agreement was not con- tingent on the actual commencement of business by the company, and that consequently the company were liable.* The expenses incidental to the foundation of a corporation, must vary indefinitely with the objects and with the necessity of obtaining compulsory powers, concessions from foreign States, &c. Therefore no rule can be laid down as to the preliminary expenses, which will be considered to come within a clause of the con- stating instruments, which provides for the payment out of the funds of the company “ of the expenses incidental to the formation of the company;” but on this point Terrell v. Hutton’ should be consulted. Of course there cannot be charged under this head sums of money which are only disguised bribes. As stated by Lord Cranworth, in Scottish Northeastern Railway Company ». Stewart:? “If that sum was agreed to be paid as a bribe to buy off opposition to the new bill, I think the agreement could not be sustained—it would have been an unwarrantable application of the funds of the com- pany.” 8 *4 H, Lds. 1091. As to the pre- L, J. Ex. 254, Upon this section several liminary expenses of a solicitor, see Re Tilleard, 3 D.G. J.d& Sm. 519; 23 L. J. Ch. 765. * 8 Macq. 408; and see per Kinders- ley, V. C., L. R. 1 Eq, 619, °4 & 8 Vict. c, 110, enabled, by section 23, persons engaged in getting up @ company to enter into certain con- tracts, and to incur certain expenses on behalf of the intended company, the con- tracts to be “ conditional on the comple- tion of the company, and to take effect after the certificate of complete registra- tion,” per Alderson, B., in Taylor v, Crow- land Gas and Coke Co. 10 Ex. 288, nu. ; 28 decisions have been given, in none of which were the company held liable— e. g., Hutchingon v. Surrey Gas Con- sumers’ Co, 11 C. B. 689; 21 L. J.C. P. 1; Bullv. Chapman, 8 Ex. 444; 22 L. J. Ex. 257; Payne v. N. S. W. Steam Navigation Company, 10 Ex, 288; 24 L, J. Ex. 117; Jobv. Lamb, 11 Ex. 539; 25 L. J. Ex. 87; Gunn v. London and Lancashire Fire Insurance Company, 12 C. B.N. 8.694, n. The statute is now repealed, but these authorities are useful as illustrating the liability, or rather the non-liability of companies for their founders.+ * See ante, pp. 394, 395 and 396, notes. t Table A, Art. 55, Companies Act, 1862 (Buckley, p. 419), provides WHEN THE ACTS ARE NOT ULTRA VIRES. 487 * Secondly, when the engagements of the promoters have not been embodied in the constating instruments of the corporation. Hitherto the subject has been comparatively clear ; questions of fact and of interpretation may arise, but the law is settled. We have now to deal with a large number of contradictory decisions, many of them irrec- oucilable with each other, upon the question as to how far a corporation can be deemed liable for the proceed- ‘ings of its promoters when no liability has been im- posed upon it from the outside. The simpler way will be to consider first the cases— (a) Where the Corporation has in no way recognized these Proceedings.* The term “recognition” is used rather than “adop- tion” or “ratification,” as having the wider meaning, viz., that absolutely no notice whatever has been taken of these acts, and that the powers of the corporation have not been employed to the detriment of the person contracting with the promoters. Justice would seem to require that a corporation should be answerable for all the engagements entered into in good faith with its pro- moters, and that when its existence has been secured by the buying off of fair opposition and by compromises made with opposing interests, it should not be allowed that the directors “may pay all expenses in getting up and registering the company.” See Melhado 2. Porto Allegre Rw. Co. L. R. 9 C. P. 503. * Stainsby o. Frazer’s Metallic Lifeboat Co. 8 Daly, 98; Titus ». Cata- wissa R. R. Co. 5 Phila. Rep. 172, Where an agent acted without author- ity in taking a subscription for stock, bringing suit upon the subscription was an adoption and ratification by the corporation. Walker 0. Mobile & Ohio R. R. Co, 34 Miss. 245. : 488 LIABILITY FOR ACTS OF PROMOTERS. * to repudiate the arrangements thus arrived at. But on the other side it is urged that the corporation is totally distinct from the. association which originated it, and that shareholders who have joined it on the faith of the facts set forth in its constating instruments have a right to say that they do not assume liabilities other than are contained in the same. Moreover persons who form agreements with promoters have their remedy in their own hands—they may easily frame their agreements so as to render the promoters personally liable These considerations have in many—it cannot be said in all— cases prevailed, and perhaps we may lay down as an established rule on this branch of the subject that “Engagements entered into by or with promoters. not expressly provided for in the constating in- struments cannot, even though within the powers. and scope of the corporation when created, be enforced by or against, unless in some manner adopted by it.” — This conclusion was arrived at and thoroughly vindi- cated by Lord Cranworth in the well known and leading case of the Caledonian &c. Railway Company v. Helens; burgh? “When such a body [2.¢, projectors, &c.] ap- plies for an act of incorporation, what they ask of the legislature is not an act incorporating and giving powers. to those only who are applying—not necessarily even incorporating and giving powers to any of them—but 1 Barton v. Hutchinson, 2 Car. & K. pany, 4 H. & C. 409; in Exch. Cham, 712; Lake v. Duke of Argyll, 6 Q, B. LR, 2 Ex, 356; and in Dom, Proce, L. 477. R. 4 H. Lds. 628; in Scottish North- 29 Jur. N. 8. 695; 2 Macq. 891; eastern Railway Company v. Stewart, 3 Earl of Shrewsbury v. North Stafford- Macq. 382; an in Preston v. Liverpool, shire Railway Company, I.. R. 1 Eq. Menchester dc. Railway Company, 5- 598; compare judgments in Taylor v. H. Lds. 605; 25 L, J. Ch. 421, Chichester and Midhurst Railway Com- WHEN THE ACTS ARE NOT ULTRA VIRES. 489 an act incorporating all persons who may be willing to subscribe the specified sums, and so to become share- holders in the company. If the legislature accedes to the application, the act when passed becomes the char- ter of the company, prescribing its duties and declaring its rights; and all persons becoming shareholders have a right to consider that they are entitled to all the bene- fits held out to them by the act, and liable to no obliga- tion beyond those which are there indicated. * * * The principle on which all railway acts and acts of a similar character proceed is to specify the sum to be raised and the shares into which the funds of the com- pany are to be divided, to incorporate the shareholders, and to prescribe the objects into which the funds are to applied. It is inconsistent with the policy of such acts to hold that there can be any other terms binding on those who subscribe their money beyond what appear on the face of the act itself. Not only is such a doc- trine calculated to occasion injury to the shareholders, but it may often be a fraud, or at least a surprise, upon the legislature. The statutory powers are given on the faith of the terms apparent on the act itself. It may well be that the additional terms, if communicated to parliament, would have prevented the passing of the special act at all. Special terms as ‘to particular cases or particular persons are often made the subject of special clauses, and then neither the legislature nor any person taking shares can complain. * * * In hold- ing that the company is a body different from its pro- moters, in substance as well as in form, I am acting on what is the mere truth, and no injustice can arise to those who have dealt with the projectors, for against them, and all under whose authority they acted, there will be a clear right of action if the company does not 490 LIABILITY. FOR ACTS OF PROMOTERS. fulfill the engagements which they have contracted that it shall perform, and that is surely all which those who have dealt with the projectors can claim as their right. For these reasons I am of opinion that on principle there is no ground for holding that a company is bound by any engagement made by those who obtained its act of incorporation unless those engagements are embodied in the terms of the act itself.” In this case an agreement had been come to between the respondents and three gentlemen calling themselves “a quorum of the committee of management of the Caledonian and Dumbartonshire Railway Company,” then unincorporated, whereby the respondents on one hand agreed not to oppose the railway company to ob- tain an act of parliament—at the expense of the rail- way company—for the formation of a quay and harbor, and to apply the dues, d&c., arising from the same in de- fraying the expense of management and in paying in- terest on £3,000 to be borrowed by them from the com- pany; and the company on the other hand agreed to advance to the respondents the whole costs already in- curred and to be hereafter incurred in reference to the said harbor and act of parliament, and to make the ad- vance of £3,000 stipulated for. The company after its incorporation having refused to perform the agreement, on the ground that it was ultra vires, the court of ses- sion held this defense unsustainable. Thereupon an appeal was brought, and the House of Lords unani- mously reversed the decision. WHEN THE ACTS ARE NOT ULTRA VIRES. 49t (b) Cases where the Corporation has either recognized or acted upon these Proveedings. * If the “recognition” has amounted to ratification, and the proceedings were such as could be ratified, then no doubt can exist that the corporation will be bound. But without actually ratifying, a corporation, like an individual, may so conduct itself in reference to a given transaction as to be afterwards estopped from denying the validity of the same. In Williams v. St. George’s Harbor Company,’ the plaintiff had withdrawn his op- position in parliament to a harbor and railway bill on an agreement with the promoters that the company would take his land on certain terms. After the pass- ing of the act he brought an action against the pro- moters for breach of the agreement, which was stayed on the company being made by arrangement defendants to a new action, and suffering judgment for the demand. The Lords Justices held that the company thereby adopted the agreement, whether it would have been otherwise binding on them or not—which Lord Justice Turner doubted—and that it was not vitiated by one of its terms being that the company should pay the costs of the landowner’s opposition to the bill. It would appear that the company did not take any of the plaintiff’s land—the line merely passed close to it, and so caused consequential damage. In the next place, suppose that a corporation, which has not in any other way “recognized” as binding upon themselves agreements entered into by their promoters, 19 De G. & Jo. 547; Edwards ». facts and decision in Blackmore »v. Kilkenny dc. Railway Co.20.B.N.S. Yates, L. R. 2 Ex. 225. 307; 26 L. J. ©. P. 224. Compare the * See ante, p. 2389, note. 492 LIABILITY FOR ACTS OF PROMOTERS. proceeds to employ the powers given it by its constat- ing instruments, and obtained, it may probably be, by means of these same agreements, to the detriment of the persons who are parties to such agreements, and who, upon the faith of them, forebore to oppose the creation of the corporation—will they (the corporation) be deemed, under such circumstances, to “recognize” the agreements in, question, so as to lay itself open to a suit at law or in equity upon them ? On this point the first case to be mentioned is that of the Vauxhall Bridge Company v. Earl Spencer.’ The promoters of a company for making a bridge across the Thames, in order to buy off the opposition of the trustees of Battersea Bridge, covenanted by deed to pay them for the use of their company, if the act of parliament should be obtained, the sum of £5,000. The act was passed, and the obligors of the bond thereupon paid over out of the funds of the company the £5,000. The company having afterwards filed a bill to have the bonds canceled and the stock retransferred—held by Lord Eldon that the agreement was not in itself illegal, and that, therefore, the bill must be dismissed. This decision was thus commented upon by Lord Cranworth, and distinguished from the ordinary case, where it is sought to render acorporation liable for the proceedings of its promoters: “In the Vauxhall Bridge Case, there was no attempt to make any one liable on the bond except the obligors, and the only question was as to the validity of the engagement itself. It is true that the £5,000 was in fact advanced out of the funds of the company, but that arrangement did not form any part of the contract with the Battersea Bridge proprie- 1 Jac, 64, WHEN THE ACTS ARE NOT ULTRA VIRES. 493 tors, who looked only to the persons with whom they contracted.” * .Edwards v. Grand Junction Railway Company’ arose thus: The promoters of a railway company, a bill for the incorporation of which was then pending in parliament, having designed the railway so as to cross a certain turnpike road, the trustees of the road took measures to oppose the bill. After some negotiation, the promoters agreed with the trustees that the turn- pike road should be carried over the railway by a bridge 50 feet wide (the present width of the road), with proper approaches, dc, and thereupon the trustees withdrew their opposition, but clauses confirmatory of this arrangement were not on account of the expense inserted in the bill. The bill passed, but the company commenced operations for making the bridge only 30 feet wide. Both the vice chancellor and Lord Cotten- ham granted an injunction to restrain the company from interfering with the road in any manner other than that agreed to by the promoters. Petre v. Eastern Counties Railway Company® is another decision on this point, and one which has aroused a great deal of comment.* Here the committee of the promoters of a certain line agreed with the plaintiff, a peer, that in consideration of his withhold- ing his opposition to their bill the incorporated com- pany, in the event of the railway being under the powers of their act made to pass through his estates, should pay him previous to entering upon his lands £120,000. The company, after the passing of the act, 1 Per Lord Cranworth, 2 Macq. 415. *1 Ry. Cas, 462. 21 My. & Cr, 650; 1 Ry. Cas. 178. * As to cases of this character, see ante, p. 283, note, and post, p. 504, note. 494 LIABILITY FOR ACTS OF PROMOTERS. being empowered to take compulsorily plaintiff’s land, served on him a notice to treat for the same. The plaintiff thereupon obtained an injunction from the lord chancellor to restrain the defendants from pro- ceeding to assess the value of such land, and the vice chancellor afterwards refused to dissolve such injunc- tion. The amount of compensation seems enormous, but the company had the choice of two lines, one of which Lord Petre would not have opposed so strongly, but they chose the other, which passed close by the mansion house and intersected the private grounds.* In Stanley v. Chester and Birkenhead Railway Company,’ the projectors of the Birkenhead and Chester railway had agreed with the plaintiff to give him for 14 acres of land, and as compensation for injury to his estate, £20,000. Other parties had started a competing line, the Chester and Birkenhead railway, and in com- mittee on the rival bills it was agreed that the merits of the two bills should be referred to arbitration, and that the adopted company should take the engagements with the landholder into which the rejected company had entered, and to this agreement all parties signified in writing their assent. The Chester and Birkenhead railway was adopted and their bill passed, which would require 16 acres of land in a place different from that where the 14 acres were situated. The plaintiff filed his bill against the Chester and Birkenhead company to compel them to keep the agreement entered into with him by the Birkenhead and Chester company, and to restrain them from entering upon any of his lands till 13 My. & Cr. 773; 1 Ry. Ca. 58. * See Preston ». Liverpool, Manchester &c. R. W. Co. 5 H. L. Cases, 605; 25 L. J. Ob. 421. ‘ WHEN THE ACTS ARE NOT ULTRA VIRES. 495 after the payment of the first instalment, which was already due. To this the defendants demurred gener- ally, and Lord Cottenham, affirming the vice chancellor’s decision, overruled the demurrer with costs, and with- out calling upon the respondent’s counsel. “ The case, as it appears on the face of the bill, is one of the gross- est frauds I have ever seen attempted.” There is also another case which should be men- tioned, and in which both Lord Cottenham and the common law courts decided that an agreement for a valuable consideration by a peer to withdraw opposi- tion to a bill then in parliament is not fraudulent, but binding on the parties. This was Simpson ¢ al. v. Lord. Howden.! The projectors of a railway, when ap- plying for an act of parliament, had agreed with the defendant, a peer—through whose estates the intended line would pass, and who was opposing the bill—that if he would withdraw his opposition, in case the bill then pending should pass into an act, the plaintiffs or the company to be incorporated would pay to him £5,000 as compensation for the detriment to his estates, &c. The bill passed, but the company resolved to adopt a line differing from that authorized by the act and pointed out in the agreement, and by which the estates of the defendant were altogether avoided. The defendant having brought an action in the Queen’s Bench for the £5,000, and the plaintiffs having filed a bill praying that he should be ordered to deliver up the agreement, and be restrained from proceeding with his action, it was held by the lord chancellor that the ille- gality of the instrument, if any, appeared on the face of it, and was a question cognizable at law. He therefore dismissed the bill. The defendant thereupon continued 190, & F. 61; 8 Ry: Ca, 204, 496 LIABILITY FOR ACTS OF PROMOTERS. his action, and the Court of Exchequer Chamber also adjudged the agreement to be valid.’ It has been commonly considered that in these cases the lord chancellor laid down that the projectors are quodam modo the agents of the future corporation, and that the contracts and engagements of the former bind as such—, ¢., as being entered into by an agent on be- half of his principal—but his language scarcely admits of such a construction. His words in Edwards v. Grand Junction Railway Company are: “ But the question is, not whether there be any binding contract at law, but whether this court will permit the company to use their powers under the act, in direct opposition to the ar- rangement made with the trustees prior to the act upon the faith of which they were permitted to obtain such powers. If the company and the projectors can- not be identified, still it is clear that the company have succeeded to, and are now in possession of, all that the projectors had before; they are entitled to all their rights and subject to all their liabilities. If any one had individually projected such a scheme, and in prosecution of it had entered into arrangements, and then had sold and assigned all his interest in it to another, there would be no legal obligation between those who had dealt with the original projector and such purchaser, but in, this court it would be otherwise. So here, as the company stand in the place of the projectors, they cannot repudiate arrangements into which such project- ors had entered; they cannot exercise the powers given by parliament to such projectors in their corporate capacity, and at the same time refuse to comply with those terms upon the faith of which all opposition to their obtaining such powers was withheld. * * * ? Howden v, Simpson et al, 10 A. & E, 798; 1 Ry. Ca, 326, WHEN THE ACTS ARE NOT ULTRA VIRES. 497 What right have the company to meddle with the road at all? The powers under the act give them the right, but before that right was so conferred it had been agreed that the right should only be used in a particular manner. Can the company exercise the right without regard to such agreement? I am clearly of opinion that they cannot.” é Similarly in Stanley v. Chester and Birkenhead Railway Company :' “Would any court of equity per- mit the company first to obtain the concurrence of the plaintiff in an agreement like this, and then to turn round and say they will disregard it altogether, and put in force the adverse powers of the act as if no such agreement was in existence?” And in the subsequent case of Greenhalgh v. Man- chester &c. Railway Company,’? Lord Cottenham ex. plained more clearly the reasons upon which his judg- ments had been founded: “The right (@. ¢, which plaintiff has against the defendants) ¢s not, properly speaking, a right of contract, but rather arises out of the contract; for neither in this case nor in the case of Edwards v. The Grand Junction Railway Company was it a matter of contract; but the equity is this, that what has subsequently taken place, and the po- sition in which the parties stand, give the party seek- ing the benefit of the contract a right to the interfer- ence of this court by virtue of an equity which induces the court to prevent the company from exercising their legal right unless upon the terms of adopting and giv- ing effect to the contract which has been entered into by other parties.” Whether any exception can be taken to, or any flaw 3 My Ce, 184, 790, where, from Fe aa whuaetioh wie Lee, : 32 498 LIABILITY FOR ACTS OF PROMOTERS, found in, this reasoning—whether the assertion ever will be made in a court of equity, that because the fic- tion of an artificial existence is thrown around a body of individuals its jurisdiction is ousted and its power to prevent fraud and injustice gone; that by the operation of law a being can be created, endowed with :rights, and having powers obtained for it to the detriment of other persons, and on the faith of solemn engagements purporting to be made on its behalf for the compensa- tion of the individuals thus damnified, that this being may approbate and reprobate, may employ its rights and powers to the ruin of those who have permitted its creation, and that the court cannot interfere—is more than doubtful. Lord Cottenham perhaps expressed himself—at least the reports make him do so—in too general a manner. ‘We must evidently except all engagements which are either ultra vires of the constituted company or mere bribes to secure the good will of powerful interests, neither of which can, under any circumstances, be en- forced against the company. A large landowner may from various reasons, more or less whimsical and exclusive, object to a railway, a manufactory, or a colliery, invading his domain, and his opposition may be a great obstacle to the success of the scheme, but beyond the damage done to the estate di- rectly and indirectly—including under this fair compen- sation for the loss of privacy—it is difficult to see to what extent injury will be caused to the person of the owner. He is not a rival carrier, manufacturer, or coal- master, whose business will be destroyed by the insti- tution of the proposed undertaking—he is simply a powerful opponent, a member, it may be, of the legisla- ture, able by his social influence and by his command WHEN THE ACTS ARE NOT ULTRA VIRES. 499 of able agents and counsel, to hinder, perhaps to thwart totally, the nascent corporation. Being such he is per- fectly justified in using his influence for his own emolu- ment, but he should take care to have any bargains which he may make for his private support duly en- tered on the constating instruments of the corporation. If this provision be not made, there is no principle of law or equity by which such a bargain can be enforced. The corporation does not, simply by commencing its operations, “recognize” the agreement, or inflict any damage on the party to the same—it is only when it proceeds to take his land 6r to usurp his business or the like, that it does really cause him tangible and manifest injury, and that, in Lord Cottenham’s words, “ the posi- tion in which the parties stand give the party seeking the benefit of the contract a right to the interference of the court of equity.” It is therefore submitted that’ with the qualifications pointed out above, Lord Cotten- ham’s decisions still hold good.t Leominster Canal Navigation v. Shrewsbury and Hereford Raitway Company,’ is a case which at first seems to militate against them, but the actual decision there was based on the ground of informality on the part of the directors of the defendants. An arrange- holders or of the public, Lord Cotten- See Earl Lindsey v. Capper, 3 H. Lds, 298; and Earl Lindsey v. Great Northern Railway Company, 10 Hare, 665; 22 L, dy Ch. 995, where Wood, V. C., approves of and follows the prin- ciple of Lord Cottenham’s decision. The same learned judge also thus speaks of Lord Cottenham, 2 J. & H. 114: “When the merits of Lord Cottenham as an equity judge come to be weighed hereafter, one of his marked character- istics will be found to be the skill and boldness with which, as for example in Wallworth v, Holt, 4 My. & Cr. 619, he accommodated the practice of the court to new commercial exigencies. Whether as regards the interests of the share- ham was the last man to shrink from restraining with a strong hand any un- due exercise of a by a company; and, therefore, when I find him taking a view favorable to the company, his opinion is entitled to even more than the weight which would always belong to it.” This eulogium may be worth little in point of law, but it is evidence of the high opinion entertained of Lord Cottenham as a lawmaker, and of the respect that is justly due to his decis- ions. 23K. & J. 654; 26 L. J. Ch. 764; 8 Jur, N. 8. 936. 500 LIABILITY FOR ACTS OF PROMOTERS. ment had been come to between the promoters of the . Shrewsbury and Hereford Railway Company and the - Leominster Canal Company, in pursuance of which an act was obtained by the Leominster Canal Company empowering them to sell their canal, and “ authorized and acquired the Shrewsbury and Hereford Railway. Company, with the consent of at least three-fifths of the proprietors” in the same, to purchase the said canal. A meeting was accordingly held, in pursuance of the above act, at which the directors were duly authorized to complete the purchase, but without referring to the agree- ment. The directors having “failed to take any further _ steps towards the completion of the purchase—held that there being no agreement signed by two of the directors, as required by the 97th section of the companies clauses consolidation act, specific performance could not be de- ‘creed. Page-Wood, V. C., after referring to the Helens- burgh Case as deciding “that that which the directors could not do after the formation of the company, cer- tainly the provisional directors could not do before for the purpose of binding the company,” stated that the purchase of the canal by the Shrewsbury and Hereford Railway Company would before the passing of the act have been ultra vires of this company, and that conse- quently there was at the time of its passing no agree- ment binding on this company. He then pointed out that the act did not refer to the agreement even in its imperfect and inchoative form, and considered that it was left to the parties after the act passed, to enter into such arrangement and agreement as they might be ad- vised todo. He therefore determined that, the agreement being invalid from the absence ot the necessary signa- ture, there was nothing binding of which the court could enforce specific performance. WHEN THE ACTS ARE NOT ULTRA VIRES. 5OL The recent cases in which Lord Cottenham’s decisions have been especially questioued are Preston wv. Liver- pool, Manchester &c. Railway Company,’ and the Scot- tish Northeastern Railway Company v. Stewart,’ both in the House of Lords, the one in 1856, the other in - 1859. The facts in each were very similar—an agree- ment by the promoters of a company to take land at certain rates, which the company, after incorporation, refused to carry out, and in both cases the lords, con- sidering the agreement to be conditional on the land being taken, which had not been done, gave judgment in favor of the company, without actually deciding whether a corporation is under any, and if any, under what circumstances, liable for the acts of its originators. Another case may here be mentioned, one which has hitherto received but little attention. Bedford and Cambridge Railway Company v. Stanley® was a bill filed by the plaintiffs and two of the promoters of the company, who were joined to obviate any objection that might have been raised as to want of parties, for specific performance of an agreement entered into by a landowner with the agent of the promoters before the formation of the company, by which he agreed that in the event of the company obtaining an act of parliament he would sell them such land as might be required at the rate of thirty years’ purchase upon the annual rental. Page-Wood, V. C., for certain technical reasons dismissed the bill, but he considered the contract to have been binding on the defendant, and apparently on the plaintiff. His words were: “If an agreement of this description is entered into before the passing of the 18 H, Lds, 605; 25 L. J. Ch. 421; bury v North Staffordshire Railway see also Caledonian Railway Company Company, ubi supra. f Shaftes- 23 Macq. 382; 6 Jur. N. 8. 607. v. Helensburgh, and Earl of Shattes oa ae Tab. 39 LJ. Ch, 60. 502 LIABILITY FOR ACTS OF PROMOTERS. act, which it would be competent to the directors of the company as soon as the act should be passed to enter into, it is known of necessity, from the characters of acts of parliament governing ‘these matters, that those _ powers will be included in the act when it is passed, and if the contract be beneficial and intra vires of the directors when the act shall be passed, there can be no conceivable reason, as it appears to me, for saying that parties are not bound by an arrangement of that kind, entered into by the promoters of an intended company for the benefit of that company, as soon as the act is obtained.” This is strong and unqualified language. It must, however, not be understood too literally. The learned vice chancellor probably intended to lay down only that a person may be bound to a corporation im posse by a contract which that corporation when actually in esse can take advantage of and enforce—a proposition to which some little exeeption may be taken on the ground, first, that the corporation is not a party to the said contract, and secondly, that it is only the parties to contracts who can sue or be sued upon the same. If his honor intended to go farther, and to state that agreements entered into by persons assuming to represent a corporation not yet existing, but made conditional on the creation of such corporation, will bind the same on its coming into being, then we have an assertion which if not absolutely irreconcilable with, is at least a con- siderable qualification of,*the decision in Caledonian Railway Company v. Helensburgh. The results arrived at in this chapter as to the agreements and engagements purporting to be made on behalf of a corporation not yet created, may be thus restated : WHEN THE ACTS ARE NOT ULTRA VIRES. 503 First, if ultra vires they do not bind and cannot be made to bind the corporation. Earl of Shrewsbury v. North Staffordshire Railway Company; Leominster Canal Navigation v. Shrewsbury d&c. Railway Company. Secondly, if not ultra vires and provision has been made for them in the constating instruments, they bind the corporation and the other contracting parties re- ciprocally. Pilbrow wv. Pilbrow’s Atmospheric &c. Com- pany; Madrid Bank ». Pelly, and similar cases. Thirdly, if not ultra vires, but such provision has not been made, then, if the corporation has in no man- ner “recognized ” these agreements, it will not be bound by nor be able to enforce them. Preston v. Liverpool, Manchester &c. Railway Company; Caledonian Rail- way Company v. Helensburgh; Scottish Northeastern Railway Company v. Stewart—though there is the strong opinion of Page-Wood, V. C., to the contrary, in Bedford and Cambridge Railway Company v. Stanley. If it has recognized them or emplofed its powers to the detriment of those who contracted with the pro- moters, it will be bound—at least in equity, on the principle that a person cannot derogate from his own stipulations—hy such agreements, according to Lord Cottenham’s decisions and to Page-Wood, V. C., in Lindsey v. Great Northern Railway. Company, and in Bedford Railway Company ». Stanley; and see Wil- liams v. St. George’s Harbor Company; fe Saxon Life Assurance Company, Era, and Anchor Cases; but—ac- cording to dicta in Preston v. Liverpool &c, Railway Company; Caledonian Railway Company 2. Helens- burgh; and Earl of Shrewsbury v. North Staffordshire Railway Company—there is some doubt whether, even 504 LIABILITY FOR ACTS OF PROMOTERS, in equity, it can under any circumstances be held to such agreements. * *The cases cited on pp. 481, 493, 495, and the comments of the author, will strike those who have not before noticed the decisions with surprise. Their tendency, all must concede, is towards a laxity of admin- istration, which is dangerous to public morality, and is opposed to purity of government. No substantial difference can be found between con- tracts made with influential parties to withdraw their opposition to meas- ures of public improvement and contracts with lobbyists to influence legislation. More especially are such contracts immoral when made with a peer or other legislator. Public sentiment has recently very decidedly reprobated the course of legislators in this country suspeoted of being in- fluenced in their votes by their private interests; and the American courts are unanimous in condemning contracts which lead to the use of im- proper means or the exercise of undue influence in obtaining the passage of public or private acts by the legislature, or the probable tendency of which would be, to sully the purity or mislead the judgment of those to whom the high trust of legislation is confided. See Marshall v. Balt. & Ohio R. R. Co. 16 How. 814; Myers ». York & Cumb. R. R. Co. 2 Curtis, 28, and cases cited ante, p. 234, note. As to right of corporations to take the benefit of transactions before or- ganization, see Kenngbec & Portland R. R. Co. ». Palmer, 34 Me. 365; Penobscot R. R. Co. ». Dummer, 40 Me. 172; Vermont Central R. R. Co. » Clayes, 21 Vt. 30; Chester Glass Co. ». Dewey, 16 Mass. 94; Salem Mill- dam Co. ». Ropes, 6 Pick. 23; Danbury & Nor. R. R. Co. ». Wilson, 22 Conn, 278; Lake Ontario R. R. Co. v, Mason, 16 N. Y¥. 451; Wayne & Ontario Collegiate Inst. ». Blackman, 48 N. Y. 661; Dutch Ch. ». Brown, 4 Abb. Ct. App. Dec. 29; Troy & Boston R. R. Co. v. Tibbetts, 18 Barb. 297; Davis v. French, i1 N. Y. Sup. Ct. (4 Hun), 292; Del. & Alt. R. R. Co. v. Irich, 8 Zab. 821; McElhenny’s Appeal, 61 Penn. St. 188; Brownlee v. Ohio, Ind. & Ill. R. R. Co. 18 Ind. 68; Tonica & Petersburg R. R. Co. 21 Til. 71. CHAPTER VILL THE AMALGAMATION OF COMPANIES. SECTION I. THE PRINCIPLE OF NOVATION. * Many of the most important questions relating to ultra vires have arisen on the amalgamation of corpora- tions. For the better understanding of the doctrine as applied to this subject, it will be advisable to consider very briefly what is meant by the principle of novation, and what is sufficient to constitute, under ordinary cir- cumstances, a novation, before proceeding to an examina- tion of the main subject. “Movatio est prioris debit in aliam obligationem transfusio atque translatio: hoc est cum ex proecedenti causa ita nova constituatur ut prior perimatur.” Dig, 46, 2, 1 pr. This is Ulpian’s well known definition of novation—“the transfer of an al- ready existing claim into another obligation.” No mat- ter what were the nature of his prior claim, even though it were one which could not for want of a causa be en- forced, either at law or in equity, yet it could be the subject of a novation—that is, it was sufficient to form the consideration of a new contract—“qualiscunque igitur obligatio sit que precessit, novari verbis potest, dummodo sequens obligatio aut civiliter teneat aut natur- * As to novation, see 1 Parsons on Contracts (Sth ed.) p. 217; 2 Chitty on Contracts (11th Am. ed.) 1871, and cases in Mr. Perkins’ notes, 506 THE AMALGAMATION OF COMPANIES, aliter ; ut puta si pupillus sine tutoris auctoritate pro- miserit.” The only conditions were, first, that neither the original claim nor the substituted agreement should be illegal; and, secondly, that there should have been the intention to work a novation—“dummodo sciamus no- vationem ita demum fiert, st hoc agatur, ut novetur ob- ligatio, * * novationem fieri, si modo id actum sit ut novetur.” This latter condition is as important as the former, and is many times repeated. The result in every case was that the former obligation was destroyed —“licet posterior stipulatio inutilis sit, tamen prima novationis jure tollatur.” (Inst. Bk. 3, 29,3.) As a necessary consequence the creditor might be deprived of his remedy; the former claim was gone by the novation, the substituted one might, as in the instance above given of the ward acting without his guardian’s interposition, be merely “naturalis,” 7. ¢., binding in morality only. The French code gives no definition of novation, but enumerates the various ways in which it was brought: “1, Lorsque le débiteur contracte envers son créancier une nouvelle dette qui est substituée a V’ancienne laquelle est éteinte. 2. Lorsqu’un nouveau débiteur est substitué a Dancien qui est déchargé par le créancier. 3. Lorsque par l’effet d’un nouvel engagement un nou- veau créancier est substitué 4 Dancien envers lequel le débiteur se trouve déchargé.” (Code Civil, Art. 1271.) There must be an unequivocal intention : * “ La novation ne se présume point; il faut que la volonté de lopérer résulte clairement de Vacte.” (Art. 1273.) And the novation can be between those only who are able to contract; it is therefore evident that the substituted s : * See Lord Westbury, in Blundell’s Case,. Reilly (European Arb.) 94. THE PRINCIPLE OF NOVATION. 507 contract must be one enforceable at law, 7. ¢., not giving rise to a moral claim merely. The principle of novation is familiar to our own legal system. All cases of accord and satisfaction de- pend upon it; but in these the application of the prin- ciple has been needlessly perplexed from the rigidity of the old common law, and from its lack of general prin- ciples. The law, as at present established, seems to be this: (1.) To an action on a specialty contract, accord and satisfaction,—1. If entered into before breach, is not a good plea; the discharge must be by a bond ex- pressly purporting to discharge the obligee’ 2. If entered into after breach, it is a good plea when the breach gives rise to a claim for unliquidated damages ; secus, if it produces a debt, or throws any “certain duty ” on the obligee.? (II.) To an action on a simple contract, accord and satisfaction,—1. If entered into before breach, is a good plea; 2. If entered into after breach, then first, when unliquidated damages have re- sulted, it is.a good plea; secondly, when a liquidated claim has resulted, it is not a good plea, if it be an agreement to pay a less sum of money,® though it is if to do any other act, as to give a peppercorn,‘ and the like; thirdly, when the liquidated claim has resulted from a negotiable instrument, it would almost seem that. it may be discharged by parol.’ Of accord and satisfac- tion, the instance which shows most decidedly the effect of novation, is where a negotiable instrument is taken in satisfaction and discharge of a cause of action arising 1 See judgment in Mayor &c. of Ber- Trowsdale, 3 E. & B. 83; 23 L. J. Q. wick v. Oswald, 1 E, & B. 295; 22L. B. 107; 18 Jur, 552. J. Q. B. 129; but compare the effect of ? Blake’s Case, 6 Rep. 44, — an equitable plea under the ©, L. Proc. *Cumber v. Wane, 1 Smith L. C. Act, 1864, stating a valuable considera- 439. ~ tion for such a release, and Smith ». 4 Pinnel’s Case, 5 Rep. 117. 5 Foster v. Dawber, 6 Ex. 839. 508 THE AMALGAMATION OF COMPANIES from a simple contract or a tort. In such case the original right is gone, and the taker of the instrument has to look to the instrument alone, and the maker or acceptor of it, for payment.’ * Other frequently occurring examples of novation are where, on the total dissolution of a partnership, the existing liabilities and assets are, by arrangement with creditors, and by due notice to the debtors, transferred to one or more members; or where, on the partial dis- solution, by the withdrawal of some member, they are in like manner transferred to those who remain and continue the business. As stated by Parke, B., in Hart w. Alexander:? “I apprehend the law now to be set- tled, that if one partner goes out of the firm, and another comes in, the debts of the old firm may, by the consent of all three parties (the creditors, the old firm'and the new firm), be transferred to the new firm.” All that it is now requisite to prove is the consent of all parties— of the creditors to discharge the late or old firm, of the new firm in order to charge them.’ But the most important instances in connection with the subject of ultra vires are those which arise upon the so-called amalgamation of corporations in de- termining the rights of members in, or creditors of, either of the corporations concerned in the amalgama- tion. These are considered in the next section of this chapter. 1Goldshede v. Cottrell, 2 Ww. * See Thompson ». Percival, 3 N. & M. ‘20; Sibree v. Tripp, 15 M. & W. 28 M. 167; 5 B. & A. 925; Lyth v. Ault, 7 29M. & W. 484; 70. & P. 746, Ex, 669; 21 L, J. Ex. 217, * See 2 Parsons on Contracts, 5 ed. 681; 1 Smith Leading Cases, 7 Am. ed, 622; Strang ». Holmes, 7 Cow. 227; Keeler v. Salisbury, 83 N. Y. 648. POWER OF CORPORATIONS TO AMALGAMATE, 509 SECTION II. THE POWER OF CORPORATIONS TO AMALGAMATE. I. Corporations have not impliedly the power, and they cannot even by express provision give them- selves the power to amalgamate. The idea commonly attached by the unlearned, and even by many lawyers, to the term “amalgamation” in connection with corporations, is very simple, viz., the absorption of one corporation by another, the former being ¢pso facto destroyed and its members relieved, both individually and collectively, from all existing lia- bilities save such as have been expressly reserved to them by the deed of arrangement. How far this idea has any real basis may be gathered from the observa- tions of Page-Wood, V. C., in Re Empire Assurance Corporation, ew parte Bagshaw :!* “I think it is impos- 1L. R. 4 Eq, 341,347; 86 L. J. Ch. 668; 15 W. R. 889; 16 L. T. N.S, 348. * In re Bank Hindustan, &c., Higgs’ Case, 2 H. & M. 666, Page-Wood, Y. C., observes: ‘‘I do not find anywhere any technical definition of the term ‘amalgamate,’ 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 stockholder to his directors to execute a deed to another company, and so to make him liable for all the engagements of that other company. Mr. Jessel says it consists in making two companie into one; but that is scarcely sufficient. That might suit the case of two companies whose articles of association were identical, because then the shareholders would be bound by no new stipulations; all would remain the same, except that the business, still similar, would be extended, and the capital would be somewhat larger; but when you have two companies with different articles, this notion would not apply. Mr. Lindley, vol. 3, p. 44, says, ‘In the case of the Era Insurance Company, Williams’ Case, and the Anchor Insurance Company’s Case, 2 J. & H. 400, it was held that it is ultra vires to amalgamate one company with another; that is to say, it is not competent for the directors or the majority of the sharehold- 510 THE AMALGAMATION OF COMPANIES. sible to give to the word ‘amalgamate’ the force which is contended for. It is difficult to say what the word ‘amalgamate’ means. I confess at this moment I have not the least conception of what the full legal effect of the word is. We do not find it in any law dictionary, or expounded by any competent authority. But f am quite sure of this,that the word ‘amalgamate’ cannot mean that the execution of a deed shall make a man a partner in a firm in which he was not a partner before, under conditions of which he is in no ways cognizant, and which are not the same as those contained in the former deed. It is true, that in this instance partners engaged in a concern for insurance of a particular char- acter have authorized their directors to amalgamate with another company. It is possible that this authority may go thus far; it may empower the directors, with- out being called to account for so doing in this court, or by any other jurisdiction, to sacrifice, or to give up (which implies something more), the whole of their business, and to transfer their assets, if they think fit, to some other company, allowing that other company to carry on the business on the best terms they can make with them. In carrying out this the ‘directors may possibly be authorized by the clause to say, ‘You who do not like this arrangement must simply lose; we érs of one company to bind it by an agreement to take the assets and lia- bilities of another company, unless such transaction is expressly warranted by the constitution of the said company.’ Take the assets and liabilities —that I can understand; but that is not any such amalgamation as Mr. Jessel suggests, but is simply sale of its business by one company to the other. I should rather assume an amalgamation to be where both com- panies agree to abandon their respective articles of association and to register themselves under new articles as one body. That would be anew company formed by the coalition or amalgamation of the two old com- panies.” POWER OF CORPORATIONS TO AMALGAMATE. 511 have amalgamated one company with the other’ (which seems to be a process of annihilation or extinction rather than anything else), ‘and we have placed all our assets in the hands of another concern.’ But that does not imply that the dissentient shareholders, besides losing all their assets, are personally bound to take their part and lot in the new concern. It is one thing to say (not ‘probably, but) ‘Possibly you may find all the assets gone, and your shares of no value ;’ but it is a prodigious step further to say that a dissentient shareholder, having been concerned in an insurance 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 purchase of houses and various other things as well. I am here assuming that the. words of this clause are large enough to embrace all the assets of one company, and mix them up with those of another. Here I apprehend the applicants have never consented to take shares in this company, unless they consented under the words whereby they authorized the directors to amalgamate, and to execute all neces- sary deeds for the purpose. Now, no doubt people are very foolish, and I dare say if express words were put into a deed, under which subscribers to company A. purported to give their directors full powers to make them subscribers to company B., C., or D., plenty of people would be found ready to execute such a deed. But I think this much may be said, that persons who execute those deeds ought to know that the word ‘amalgamate’ is nota word by which, having subscribed . to company A., they may be compelled to become sub- scribers to company B. It is just possible that directors may, under this clause, be justified in transferring all 512 THE AMALGAMATION OF COMPANIES, the assets of a dissentient shareholder to another com- pany; but it does not appear to me that these words go to anything-like the extent of saying that the appli- cants in this case shall be put on the list of a totally different concern, to being members of which concern they entirely object.” This judgment is clear, and to the point. Articles and memoranda of association which allow the directors mero motu to “amalgamate” with another company, may, and probably do, authorize them to transfer the assets of their own company to some other; but such provisions do not empower them to make their own shareholders the members of this other company. Corporations cannot confer on themselves an express Power to Amalgamate. The next question is, can a corporation itself have | this power? Can the constating instruments be so worded as to enable a majority of the members, by special resolutions or otherwise, to transform, to com- mute, so to speak, their own shares into those of another association? . The answer is, that such a proceeding is absolutely ultra vires. In Clinch v. Financial Corporation,’ A. company had agreed to purchase the good-will and property of B. company, and such agreement was confirmed at a special meeting of B. company. Clinch, one of the shareholders in B., objected, and filed his bill against the other shareholders and the directors to set aside the arrangement. Lord Cairns, L. C., said: “The arrange- ment between A. and B., which has been called an ‘LR, 4 Ch. 117; Hige’s Case and shaw, L. R. 4 Eq, 841; 86 L. J. Ch. Martin’s Case, 2H. & M. 657, 669; 668; London, Bombay, and Mediterra- Los’s Case, 84 L. J. Ch. 609; Empire nean Bank, Drew’s Case, 86 L. J. Ch. Assurance Corporation, ex parte Bag- 785. POWER OF CORPORATIONS TO AMALGAMATE, 513 amalgamation or combination, was in substance a trans- fer by B. to A. of the business, good will, connection, and property of the former, in consideration of 25,000 shares in the latter. It was admitted in the argument, and indeed it could not be denied, that there was no power in the special constitution of B. which could warrant an arrangement of this nature; and that if it could be supported at all, it must be supported under the provisions of section 161 of the act of 1862.”1 His lordship decided that it clearly was not authorized by this section ; and he then proceeded: “It was argued, however, that a large number, and indeed a majority, of shareholders in B. had assented to the arrangement, and had actually taken shares in A. under it, and that the plaintiff could not sustain this as a bill on behalf of himself and all other members of the corporation, without making all or some of those parties who had assented to the arrangement. parties to the suit. But the contract was one between the two companies, and if the contract was ultra vires of B., cé is a contract which in the eye of this court it is for the benefit of all the shareholders in B. to arrest; and in my opinion, a proper form of suit in which to accomplish this end, is a suit of one member of the company on behalf of him- self and all other members, making the directors of B. and A. parties as defendants.” This case was approved of and followed in Bank of Hindustan v. Alison? Here two incorporated bank- ing companies agreed under the powers contained in their respective articles of association, to amalgamate, — the business of C. being transferred to H., and the shareholders in C. having the option of taking newly- 2 ict. c. 89; Buckley, p. pare Re Bank of Hindustan, Campbell's, 380. See eee eee Puippialey?a, and Alison’s Cases, L. R. 9 ?L,R.6 0. P. 64; with which com- Ch. 1. 33 / 514 THE AMALGAMATION OF COMPANIES. created shares in H. at a premium. H. issued circulars informing the shareholders in C. of the arrangement. The defendant, a shareholder in C., in consequence, in 1864, applied for and obtained an allotment of 25 shares, paid a portion of the deposit and premium thereon, and by his letter of application engaged to pay the residue on a given day. Several calls were afterwards made of which defendant had notice, but he never repudiated his liability, until an action was brought against him in 1867 for non-payment of those calls. In 1868 the sup- posed amalgamation of the two banks was, by a decree of Giffard, V. C., in a suit’ by dissentient shareholders in C., declared to be void, on the ground that whatever the legal meaning of “amalgamation,” the proposed ar- rangement would have imposed additional liabilities on the shareholders of C., and it therefore could not be sup- ported under either the articles of association of the com- pany, or under 25 & 26 Vict. c. 89, 8.161. The Court of Common Pleas accordingly held, on action brought to recover calls, that the directors of H. had no power to issue the new shares, and that the defendant was not, by any acquiescence or conduct on his part, es- topped from denying that he was a shareholder in H. Clinch v. Financial Corporation may, perhaps, be considered an authority to the effect that the arrange- ment there in question was invalid only as between the corporation and its members; but it would seem that most if not all agreements of this description are ultra vires in the fullest sense—in the sense that they do not become good even by the acquiescence of all the share- holders in each of the companies concerned. Such apparently is the result of the decision in Me London and Northern Insurance Corporation, Stace & Worth’s 1 Imperial Bank of China v. Bank of Hindustan, de. L, R. 6 Eq. 91. POWER OF CORPORATIONS TO AMALGAMATE, 515 Case.’ By the articles of association of the London &c. Corporation, the directors were to be elected by the shareholders, and power was given to purchase the business of any other company. Power was also given by an extraordinary meeting of the company to amal- gamate with any other company. An agreement was made for the amalgamation of this company with an- other company, on the terms that the second-named company should sell their assets to the first-named company ; that the directors of the amalgamated board should consist of the present five directors of the pur- chasing company, and of seven of the directors of the selling company. This agreement was acted upon, but: was never confirmed by an extraordinary meeting of the purchasing company. Both James, V. C., and the lords justices, on appeal, held that this agreement was void, and that two of the directors of the selling com- pany, who had been allotted shares in the purchasing company in exchange for shares in the selling company, and had acted as directors of the amalgamated com- pany, were not liable to be put on the list of contribu- tories to the purchasing company. The ground of the decision, as stated by Lord Justice Giffard, was this, that the agreement “was a material alteration of the constitution of the London and Northern Corporation, being nothing less than giving to the Investment (7. e., the purchasing) Company the power of appointing a majority of the board of the amalgamated company. The agreement was therefore void, and not merely void- able.” * As the arrangement was acted upon for ten ‘LR. 4 Ch. 682; James v. Eve, L. R.7 Eq. 278; and Re Empire Assur- R, 6 H. L. 385; compare Re Oriental ance Corporation, Challis’s Case, L. R. Commercial Bank, Alabaster’s Case, L. 6 Ch. 266. * Fremont v. Stone, 42 Barb. 168; Bliss 0. Matteson, 52 Barb. 335; 8. 0. 45 N. Y. 22, 516 THE AMALGAMATION OF COMPANIES. months, and not questioned till the winding up of the corporation, when Stace and Worth objected to being placed upon the list of contributors of this company, this decision must be considered conclusive to the effect that the agreement was ultra vires in the widest mean- ing of that term. The amalgamation of companies is then impossible, save by the direct interposition of the legislature; it is ultra vires not merely of the directors but of the company. How far, when all the members of a corporation have agreed to what this term implies, and have profited by the arrangement, they can be permitted to repudiate the agreement and yet to retain the benefit—to reprobate and approbate at the same time—is a question which will be considered in Part IV, Chapter III. In reality the whole of this matter lies in a very small compass. A corporation is an ex- istence owing all its qualities, powers and capacities to the law. The law which calls it into being has also appointed the manner in which its existence shall be determined, but which has not said that it may commit civil suicide. In whatever mode—by surrender or for- feiture of the charter, by winding up, &c.—a corpora- tion be ended, we find that the law, 2. ¢, the State, intervenes. A corporation is something distinct from its members; all these may leave it, yet it still exists; how then is it possible that any action of theirs, unrec- “ognized by the law, can destroy that which depends for its origin and continuance on the law alone? In fact, Page-Wood, V. C., expressed clearly the gist of the ‘whole matter when he said: “I should rather assume an amalgamation to be where both companies agree to ‘abandon their regulations and articles of association, POWER OF CORPORATIONS TO AMALGAMATE. 517 and to register themselves under new articles as one body.” } . II. Corporations may, in an indirect manner, accom- plish nearly the same purposes as intended by a direct amalgamation. But though a corporation cannot directly’ put an end to its existence and merge it by any process of amalgamation in that of another, yet it may accomplish this in an indirect and circuitous manner. It may do so by transferring its property, funds, rights and Jiabil- ities to the other contracting corporation, and then vol- untarily. dissolving itself, usually by winding up. Gen- erally the arrangement is supplemented by a proviso, whereby the transferee, the purchasing company, in- demnifies the selling company against the liabilities which it may be under in respect of claims, existing or prospective.*? ‘This, after all, is not an amalgamation, it is not a union of one corporation with another, but is simply a transfer of assets with attendant responsibili- ties.* It is, however, a sufficient amalgamation for all practical purposes, and it is therefore the process al- ways adopted. The modus operandi is well illustrated by the at- tempted amalgamation between the Progress Assurance Company and the United Ports Company, which led to 12H, & M. 666. bert Life Assurance Company, ex parte * Anglo-Australian Company v. Brit- Western Life Assurance Society, L. R. ish Provident Insurance Company, 3 11 Eq. 164, Gif, 521; 4 D.G. F. & J. 341; Re Al- * See Hodges ». New England Screw Co. 1R, I. 312; 8.0.3 R114; Booth v. Bunce, 33 N. Y. 139; Rorke v. Thomas, 56 N. Y. 559; Barclay ». Quicksilver Mining Co. 9 Abb. Pr. N. 8. 283; Same v. Same, 6 Lans. 25; Kelly v. Mariposa Mining Co. 11 N. Y. Sup. Ct. (4 Hun) 632; Zinc Co. v. Franklinite Co, 2 Beas. 322; s. c. 2 McCarter, 418; ante, p. 103, note. 518 THE AMALGAMATION OF COMPANIES. Wynne’s Case.' Negotiations took place between the directors of the two companies for the purpose of bring- ing about an amalgamation. Terms being agreed to, they were embodied in an agreement under the seals of the two companies, dated the 8th of June, 1869, whereby it was provided that the Progress Company should sell all their business and property to the United Ports Company; that the United Ports Company should pay £12,000 in cash or bills, and should issue to the paid-up shareholders in the Progress Company shares of £1 each in the United Ports Company, on which the full sum of £1 should be considered as paid up, to the same amount as their former shares, and that no further lia- bility should attach to the holders thereof; and that they should issue to the holders of partly paid-up shares in the Progress Company shares in the United Ports Company, on which an amount should be consid- ered to have been paid proportionate to the amount credited on the shares in the books of the Progress Company. It was further agreed that the purchase should be completed on the 8th June, and that from that day the United Ports Company should take upon itself all the debts, engagements and liabilities of the Progress Company, and should at all times thereafter protect and indemnify the directors and officers of the Progress Company against the same; and that the Progress Company should be forthwith wound up vol- untarily, either with or without the supervision of the court. This agreement was engrossed in two parts, and one part was sealed with the seal of the Progress Com- pany and delivered to the United Ports Company, but ivanen, Ceumpany, Wynnets Case, EB. cans Sa the Meaagenent feo der tog 8 Gh. 1002. See another case arising its validity. Perrett’s Case, L. R. 15 out of the same transaction, where the Eq, 250, POWER OF CORPORATIONS TO AMALGAMATE.: 519 the United Ports Company, before executing their part, added a proviso at the end of the agreement which altered it in some material points. The agreement, as executed by the United Ports Company, was accepted by the directors of the Progress Company, and entered on their minutes on the 10th June, 1869; and an extra- | ordinary meeting of the shareholders was held on the 24th June, when it was confirmed, and a resolution was passed to wind up the company voluntarily. In this way it is manifest that, supposing nothing to happen to disturb the arrangement, the Progress Company would have been put an end to, its assets and liabilities being transferred to, and its shareholders becoming members of, the United Ports Company; and to that extent an amalgamation of the two companies would have re- sulted. But on the 22d June a petition was presented, and on the 26th an order was made, to wind up the Progress Company compulsorily. Wynne, a director of this company, and the holder of twenty fully paid-up shares in it, had, in pursuance of the above agreement, applied for 100 shares in the United Ports Company. In November following, an order was made to wind up this latter company, and in the winding up, the question arose whether or not Wynne was a contributory in respect of the 100 shares so applied for by him. The lords justices determined that he was not a member of the United Ports Company, on the ground that, owing to the variance in the agreement as above-men- tioned, the two companies never had agreed upon the terms of the amalgamation, but they expressed no doubt whatever, that if the terms had been agreed upon, the amalgamation would have been complete and binding on the shareholders in each company. . Arrangements of this kind being in substance ar- 520 THE AMALGAMATION OF COMPANIES. rangements for winding up, or otherwise dissolving some one or more of the companies participating there- in, are manifestly matters of internal government only. Consequently their validity, and the extent to which they are binding upon recalcitrant members, will be determined by the constating instruments. If there be not the express powers necessary, in order that a cor- poration may itself enter into such arrangements,’ or if from any cause whatever the arrangement be not bind- ing’on the shareholders as a whole, then manifestly only such of them as actually accept its terms will be bound thereby.? Creditors, policy holders and other third parties, having similar claims against the company about to be dissolved, may, of course, intervene in the ordinary manner in the winding up or other mode of dissolution; but they cannot call upon the Court of Chancery to prevent the contemplated arrangement being perfected, on the ground that it is ultra vires. It is indeed possible that it is ultra vires even as regards third parties; but this can’ be so only when conditions have been introduced which are contrary to express statutory enactment, or to some fixed policy of the law.® In reference to members, the power to “amalga- mate,” in the sense and manner now in discussion, must be expressly given in the constating instruments; it will not be raised by implication. Thus, in Ae Empire 1 Smith v. Bank of Victoria, 41 L. J. P. C. 84; see also Re United Ports In- surance Company, Brown’s and Tuck- er’s Cases, 41 L. J. Ch. 157. 2 See Re Empire Assurance Corpora- tion, Chalis’s Case, Somerville’s Case, L. R. 6 Ch, 266, where Challis was held bound and Somerville not bound by an agreement for amalgamation. See also the cases in the last note, and Perrett’s Case, L, R. 15 Eq. 250, which was an- othef case arising out of the winding up of the United Ports Insurance Company, and where, as in Brown’s and Tucker’s Cases, a shareholder in a limited com- pany, which had no express power to amalgamate, was held to have agreed to become, and consequently to be, ashare- holder in an unlimited company with which the former was attempting to amal- gamate, ; *See the judgements in Stace and Worth’s Case, L. R. 4 Ch. 682; and in Re Irrigation Company of France, Fox's Case, L. R. 6 Ch. 176, POWER OF CORPORATIONS TO AMALGAMATE. 521 Assurance Corporation, Dougan’s Case,! the articles of association of a company made it lawful for a special general meeting “to determine upon the propriety of selling, disposing (sic), or otherwise dealing with the business, good will, property and effects of the com- pany,” The directors agreed to amalgamate with an- other company, and the agreement was duly submitted to and approved by meetings of the shareholders. The lords justices, however, held that the agreement was ultra vires, Mellish, L. J., observing, “there are no. special words in the clause giving power to amalgamate with another company; and I cannot help thinking that if it had been intended by the clause, that a special general meeting of the company should have power absolutely to bind all the shareholders, and to hand them over to another company—that, in fact, it should have power to effect what is commonly called an amal.- gamation, that word would have been made use of.” Where the constating instruments contain express. powers to amalgamate, the provisions must be carefully observed, and the powers exist only to the extent and for the exact purposes given. Thus, where the direct- ors of a fire and life assurance company were authorized, with the consent of an extraordinary general meeting, to “amalgamate with the business of any other company of a like nature,” Page-Wood, V. C., held that these words did not empower the directors to compel a dis- sentient shareholder to become a member in a company with more extended objects.’ 1 L, R. 8 Ch. 540, in Re United Ports &c. Company 2 Re Empire Assurance Corporation, Brown’s and Tucker’s Cases, 41 L. J ex parte Bagshaw, L. R. 4 Eq. 341; see Ch. 157, that an order in winding up or the judgment cited in part, ante, pp. other decision of a court may render 509-12; compare Los’s Case, 34 L. J. valid and binding an “amalgamation Ch. 609, It would seem from expres- which would otherwise be void as being sions of Bacon, V.C., in his judgment ultra vires. 522 THE AMALGAMATION OF COMPANIES. Moreover, if an agreement of this kind be either wholly or in part ultra vires, then, as has already been frequently mentioned, each and any member may refuse his assent thereto, though all the others agree, which, indeed, actually happened in Fox’s Case,' where a soli- itary shareholder, who objected to an arrangement of the kind now in question, was held entitled to relief.* Of course to any attempted “amalgamation ”—which is not ultra vires of the corporation as a whole—the shareholders of the companies concerned may have, by acquiescence, so become parties as to be afterwards es- topped from denying the validity of the same, just as a novation may be worked by the tacit acquiescence of a creditor, in the substitution of another person in place of the one originally liable to him. But the circum- stances must be very strong thus to bind shareholders; the application for shares, or the attending meetings held in accordance with the provisions of the proposed “amalgamation,” is not necessarily sufficient.’ It is very important to distinguish a purchase or sale from an “amalgamation.” The latter term conveys the idea of something—though, perhaps, in law it may not effect, save when the legislature has intervened and expressly bound the parties, anything—more than the former. In, however, not a few reported cases, we find the two terms confused.? Indeed it is not unseldom very difficult to determine the nature of a given trans- " Re Irrigation Company of France, Cases, L. R. 9 Ch. 1; and ante, pp. 519, Fox’s Case, L. R. 6 Ch.176; see the 6520. judgments in Clinch v. Financial Cor- 5 See Anglo-Australian &c. Company poration, L. R. 4 Ch. 117. v. British Provident &c, Insurance Com- ? See especially Somerville’s Case, L. pany, 3 Giff. 521, before Stuart, V. C., R. 6 Ch, 266; Wynne’s Case, L., R. 8 and on appeal, 4 D. G. F. & J. 341, and Ch. 1002; Campbell’s and Hippisley’s the case next cited, * See cases cited, post, p. 589, note. POWER OF CORPORATIONS TO AMALGAMATE, 523 action, one court or judge considering that to be an “amalgamation” which another styles a purchase. A series of judgments, illustrative not only of this par- ticular point, but of the whole subject of novation, will be found in the various cases. growing out of the wind- ing up of the Saxon Life Assurance Society. In 1857 the Era Assurance Society purchased the business of the Saxon Life Assurance Society, received all its as- sets, and undertook all its liabilities. The Era paid some of the liabilities, to an amount exceeding the as- sets received by them. They also gave a mortgage and covenant to the Anchor Insurance Company for a debt due to them from the Saxon, in substitution for a similar security held by the Anchor against the Saxon, which was given up and canceled. The Saxon and Era Com- panies were both ordered to be wound up; and in the matter of the Era, Page-Wood, V. C., held that the se- curity given byit to the Anchor was void, on the ground that the transfer to it of the business of the Saxon was ultra vires! This transfer he considered to be an amalgamation. ‘“ Both these cases seem to me to turn in a very great measure on the question, what power the directors of the Era Company had to ‘amalgamate’ —that is to say, to take upon themselves the responsi- bilities of another company.” Such power was not contained expressly in the deed of settlement, and the learned vice chancellor determined that the 38th clause, whereby the directors were authorized generally “where these presents are silent, or do not otherwise provide, to act in the direction of the concerns of the society in such manner as at their absolute discretion they shall think most conducive to the interests of the society,” 1 Re Saxon Life Assurance Society, on appeal, Jb. 210, and 1 D.G. J. & Sm. Anchor Case, Era Case, 2 J. & H. 400; 29; on rehearing before Page-Wood, V. 30 L. J. Ch. 187; also 82 L. J. Ch, 206; C., 32 L. J. Ch, 211, and 1 H. & M. 672, 524 THE AMALGAMATION OF COMPANIES. could not be construed as giving such power. But on appeal Lord Justice Turner held that the transfer was a purchase, and within the authority possessed by the directors. “It was contended that it (¢. ¢, the deed of 1867) was absolutely void, as being ultra vires as to both of these companies. Whether it was so as to the Saxon I will say nothing; but, looking to the.deed of ‘ settlement of the Era Society, I think that it was within the power of that company, with the consent of a general meeting, to enter into the agreement and to bind themselves by it. It was said that the Era had no power to take to the assets, and to subject themselves to the liabilities of the Saxon Society. But those were the terms of the agreement itself, and if they had power to purchase the business they must have the power to carry into effect the terms of the purchase.” In all cases of this kind several distinctions have to be drawn: First, there may be a sale, pure and simple, for a consideration more or less valuable, by 8S. company to P. company of all its assets and Nabilities —no covenants beyond what are necessary to secure the payment of the consideration being entered into by P. company. Here it is patent that S. has not relieved it- self of its liabilities. Its position with regard to its creditors is in no way changed; no novatio has been. made; to them, therefore, it still remains responsible. What has been done ‘is this—S. company has simply sold its business, nothing more, and has to discharge claims upon it out of the consideration received for such sale. Secondly, there may be a similar transaction, with the addition of a covenant by P. company to in- demnify S. company against all claims upon it. Under these circumstances S. will still remain liable for its debts, d&c., but can compel P. to indemnify it against POWER OF CORPORATIONS TO AMALGAMATE. 525 the same, though should such indemnity fail in whole or in part S. must nevertheless discharge the claims of its creditors.' In these two transactions there are merely a sale and a purchase, the contracting parties re- maining as distinct after the arrangement as before. No one would pretend, not even the companies concerned, that under such circumstances the selling has become defunct—the arrangement was not intended to have this result, a dissolution, but simply to be a trans- fer of assets and liabilities. The selling company will therefore remain liable to its own creditors, unless by the acquiescence, express or tacit, of these a novation has been worked, and the P. company substituted as debtors in place of the S. company. Thirdly, there may be, not a sale by 8. company, but an amalgamation of itself with P. company. This means, as already seen, that 8. company is dissolved, | but its assets and liabilities have previously been made over to, and accepted by P. company. Its members, too, are generally assumed to be made members of P. com- pany, and to have allotted to them, and to be compel- lable to receive shares in that company proportionate to the value of those which they previously held in S. com- pany. It may, however, very fairly be questioned . whether membership can be thus compulsorily trans- formed save by the consent of each individual concerned. On the one side it is argued that the term “amalga- mate” must mean—if it means anything more than merely “sell” or “transfer” assets—the power to ex- change the shares of the one company for, and to com- mute them into, those of some other company, and by 1 As to the legal import of such an Life Assurance Company, L. R. 11 Eq. indemnity, and the manner in which it 164; see also Hemming v. Maddick, L. will be effectuated, see Re Albert Life R. 7 Ch. 395. Assurance Company, ez parte Western 526 THE AMALGAMATION OF COMPANIES, consequence to substitute membership in the new com- pany for membership in the old one. On the other hand, it is urged in the first place that a person by en- tering into a company, even though its constating in- struments contain provisions for amalgamation, intends and enters into a contract to be a member of that par- ticular company and no other; and secondly, that no one can become a member of a company save by his consent given ad hoc, and that no vague and general authority given beforehand, and least of all such as is to be implied from the fact that he belongs to a com- pany whose articles contain such a power, can suffice for this purpose. This question has not yet been ju- dicially decided, though the dictum of Page-Wood, V.’ C., is in the negative.’ Hitherto, however, the liability of persons as members of amalgamated companies has always been determined by considering whether they have or not by their own application, acts, or laches, constituted themselves members of the company with which the amalgamation was proposed.’ The Principle of Novation as tt affects Creditors. What has been just said will be sufficient in respect of the rights and liabilities of shareholders. If an agreement to amalgamate be nothing more than an agreement to sell the assets and good will, then mani- festly there is no novation of membership, and it is doubtful whether this occurs even when it is proposed to amalgamate in the proper sense, unless each share- holder assents. If he does so assent, then, unless care +See ex parte Bagshaw, ante, pp. 88; and Adams’ Case, L, R,13 Eq, 474; 510-512, also ante, pp. 519-522, and post, pp. 2 See United Ports Company, Tuck- 528, 529. er’s Case, 41 L. J. Ch. 157; 20 W. R, POWER OF CORPORATIONS TO AMALGAMATE, 527 be taken to make his acceptance of the new shares con- ditional on the accomplishment of the amalgamation, it is possible that this may fall through, and yet the per- son concerned may be fixed with shares in the new com- pany, while he has not got rid of those he held in his original company. With respect to a creditor of the amalgamating company the considerations are much simpler. That he must in all cases of novation consent to the arrangement would seem so thoroughly in accord- ance with common sense and the simplest maxims of law as to call for no proof.* Numerous cases have, how- ever, come before the courts where the attempt has been made against the will of the creditor to substitute a new person, firm, or corporation for his old debtor. It can- not too clearly be borne in mind that when once an obligation has been brought into being, whether by breach of a contract or by committal of a tort, it can be destroyed only by the means provided by law, and amongst these we nowhere find that the obligee can of his own accord free himself from the liabilities in which he has involved himself. A very explicit exposition of the law is contained in the judgment of James, V. C., in Re Manchester and London Life Assurance and Loan Association, ex parte Pike:* “The policy holder whom [the petitioner] represents effected his policy in Man- chester and London é&ec. Association. That association transferred their business to the W. office. It is stated that the transfer in some way or other had deprived the policy holder of his remedy against the office that un- dertook to pay him the amount assured. * * * it would be a very strong thing indeed to say that a policy 1L, R. 9 Eq, 643, * See cases cited post, p. 546, note, 528 THE AMALGAMATION OF COMPANIES, holder is to be deprived of his remedy against the per- sons with whom he contracted because those persons entered into an arrangement of that kind, and only gave him that notice [7.¢, an alteration in the heading of the receipt]. * * * It would be monstrous that a per- son having a contract of this kind should be told that he has lost his right under his original contract, and must take such remedy as he may get from some other office, because he pays his premiums and takes receipts at the place where he is told to do so.” With this judgment may be compared that of Lord Chancellor Hatherley in Re Family Endowment Society, which is instructive as showing the amount of proof necessary to bind acreditor by acquiescence in a novation. In this case it was held that though the petitioner had to a great extent recognized the amalgamation of the com- pany from which he had bought an annuity with another company, and had received several payments from this latter company, yet he had not so completely acquiesced. in the arrangement as to have debarred himself from going against the original company on the bankruptcy of the latter. The question is one of fact, and therefore in &e National Provincial Life Assurance Company,” where the holder of a life assurance policy, having no- tice that the N. assurance office, with which the policy was effected, had transferred its business and assets to the A. assurance office, and had. ceased to carry on its business, paid the premiums on his policy to. the A. office for thirteen years, and upon the dropping of the life sent in a claim upon the policy to the A. office, it was held that there had been a complete novation of the contract, and that the N. office was released from liability on the policy. 1L, B. 6 Ch, 118, 131-33, "L R. 9 Eg, 306. POWER OF CORPORATIONS TO AMALGAMATE. 529 A novation is, so to speak, a tripartite contract. It is an arrangement to which three persons must be par- ties—viz., the original contractors and the new contract- ing party. There is necessary in addition an agree- ment, express or implied, by which the creditor in the existing contract gives up his rights against his debtor under that contract, and accepts instead the responsi- bility of the new debtor. When the agreement is expressly made, little difficulty arises beyond that in- volved in interpreting the exact purport of the agree- ment which has been entered into. If, on the other hand, there is no such express consent, but this has to be gathered from the acts of the creditor or his concur- rence in other arrangements, the question becomes far more difficult. No general principles can be extracted from the many cases that have been decided, for the facts of each and their significance vary excessively. Payment of insurance premiums to a new company may,' but usually will not,* constitute a novation, while the acceptance of a bonus is generally sufficient for that purpose.’ So, upon the transfer of a business, the pay- ment by the new company of interest upon debts or deposits due to creditors of the old company will,‘ or will not,’ according to the circumstances, discharge the old and charge the new debtor. The receipt of an an- 1 Per Malins, V. C.,in Re National Provincial Life Assurance Society, L. R. 9 Eq. 806; and compare the same case before Bacon, V. C., and the L. JJ., . Fleming’s Case, L, R. 6 Ch. 893; see also Re Times Life Assurance &c, Com- any, L. R. 6 Ch, 881; and Hz parte lood, L. R. 9 Eq. 316; and now the provision in 85 & 36 Vict. ¢. 41, 8. 7. 2 Re Manchester dsc. Life Assurance Association, L. R. 9 Eq. 643; L.R.5 Ch. 640; Re Medical Invalid &e. Society, Griffith’s Case, L, R. 6 Ch. 374. 34 3 Re Times Life Assurance Company, ubi supra ; Re Anchor Assurance Com- pany, L. R. 5 Ch, 632; Spencer’s Case, L. R. 6 Ch, 362. ‘ « 4 See Rolfe v. Flower, L. R.1P. C. 27; and Fleming’s Case, L, R. 6 Ch. 393. ® Re Smith, Knight & Co. ex parte Gibson, L. R. 4 Ch. 662; Re Commer- cial Bank Corporation of India, Jones’ Claim, 16 W. R. 958, 530 THE AMALGAMATION OF COMPANIES, nuity from a new company, or other new source, has never been held per se to work a novation.' It should be mentioned that in the Albert arbitra- tion, Lord Cairns was content with the minimum of evidence as to the assent of the creditor, holding in ‘many cases that a novation had been worked where undoubtedly the Court of Chancery would not have so ‘decided Lord Westbury, however, in the European -arbitration, went to the other and more equitable ex- ‘treme, placing the onus of proof where it properly lies —on the debtor—and requiring the clearest proof of novation. “To raise the new contract there must be on the part of the company power to make it; there must be on the part of the policy holder a knowledge of the company’s right so to contract with him; and there must be conduct on the part of the policy holder, when it is an incomplete contract, or where there is. no -evidence in writing, that unmistakably shows his inten- tion to accept a new contract and to discharge the old one.’ * 1 Re Family Endowment Society, L. 767; Fagan’s Case, 15 Sol. J. 855; Bud- ‘R. 5 Ch. 118; Re India dc, Assurance den’s Case, 16 Sol. J.462; Allen’s Case, Company, L. R. 7 Ch, 651. 16 Sol. J. 657. ‘ -? See especially Kennedy's Case, 15 * Coghlan’s Case, 17 Sol. J. 128, 180; Sol. J. '729; Wernnick’s Case, i5 Sol. J. see Blundell’s Case, 17 Sol. J. 87. * See article by Mr. Bunyon, 1 Law Mag. & Rev. N.S. p. 404. The Albert and European arbitrations are anomalies, and, according to Lord Westbury, ‘‘only to be justified by their necessity, and their necessity is a great reproach to the judicial institutions” of Great Britain. They arose out of the failure of two life insurance companies which had pre- viously absorbed numerous other companies. By reason of the complica- ‘tions thus arising, it seemed requisite to create a special court of most arbitrary powers, whose decisions were to be final and conclusive on all ‘parties, and not subject to review by any other tribunal—in fact, depend- ing only upon ‘‘ the absolute and unfettered discretion of the arbitrator,” and determined as he should ‘think most fit, equitable and expedient, and as fully and effectually as could be done by act of parliament. §§ 5, STATUTORY ENACTMENTS, 5381 SECTION III. STATUTORY ENACTMENTS AS TO AMALGAMATION. The chief statutory enactments on this point are those contained in the companies act, 1862, and in the life assurance companies act of 1870.1* The companies act, 1862, + by section 161, provides: “That where any company is proposed to be, or is in the course of being, wound up altogether voluntarily, and the whole or a por- tion of its business or propert is proposed to be transferred or sold to another company, the liquidators of the first-mentioned company may, with the sanction of a special resolution of the company by whom they were appointed, conferring either a general authority on the liquidators, or an authority in respect of any particular arrange- ment, receive in compensation or part compensation for such transfer or sale, shares, policies or other like interests in such other company, for the purpose of distribution amongst the members of the company being wound up, or may enter into any other arrangement whereby the members of the company being wound up may, in lieu of receiy- ing cash, shares, policies or other like intereSts, or in addition thereto, participate in the profits of or receive any other benefit from the purchasing company; and any sale made or arrangement entered 1See also 88 & 34 Vict. c. 104 to arrangements and compromises in (Buckley, p. 488), “The Joint Stock winding up between companies and Companies Arrangement Act, 1870,” as their creditors, 8, 21, European act; §§ 5, 11, 21, 24, Albert act. Lord Cairns was the arbi- trator for ‘‘ the Albert,” and Lord Westbury for “the European.” After Lord Westbury’s death, Lord Romilly was chosen his successor; and he, though believing it to be his duty to follow Lord Westbury, in the end felt constrained to follow Lord Cairns—holding, among other rules, that it was not necessary that the three parties, ¢. ¢., the assured and the two compa- nies, must concur, and all join together to make a fresh contract, in order to constitute novation. Talbot's Case, 18 Sol. J. 758; Pratt’s Case, 19 Sol. J. 68. See 1 Law Rev. & Mag. N. 8. p. 480; Buckley on Compa- nies Acts, 820-325; Bliss on Life Insurance, 2d ed. 762. These decisions are not considered as of binding or indeed any authority, save as being the opinions of able and learned jurists. Fisher’s Digest, 1872, preface. * 33 & 84 Vict. c. 61; Buckley, p. 607. + Buckley, p. 380. 1 532 THE AMALGAMATION OF COMPANIES. into by the liquidators in pursuance of this section, shall be binding on the members of the company being wound up; subject to this. proviso, that if any member of the company being wound up, who has not voted in favor of the special resolution passed by the company of which he is a member at either of the meetings held for passing the same, expresses his dissent from any such special resolution in writ- ing addressed to the liquidators, or one of them, and left at the reg- istered office of the company not later than seven days after the date of the meeting at which such special resolution was passed, such dis- sentient member may require the liquidators to do one of the fol- ‘lowing things, as the liquidators may prefer, that is to say, either to abstain from carrying such resolution into effect, or to purchase the interest held by such dissentient membBer at a price to be determined in manner hereinafter mentioned, such purchase money to be paid be- fore the company is dissolved, and to be raised by the liquidators in such manner as may be determined by special resolution; no special resolution shall be deemed invalid for the purposes of this section, by reason that it is passed antecedently to or concurrently with any any resolution for winding up the company, or for appointing liqui- dators; but if an order be made within a year for winding up the company, by or subject to the supervision of the court, such resolu- tion shall not be of any validity unless it is sanctioned by the court.” Upon this section the master of the rolls, in Re Bank of Hindustan &e. ex parte Los, after observing, “the law undoubtedly is that you cannot, without his consent, make a person a shareholder in another com- pany than that of which he consented to become a shareholder,” decided that a member of a company which was being wound up voluntarily, and whose business was to be transferred to another company in consideration of shares in such company, could not be compelled under the powers given to the liquidators by the above to take shares in the other company, and that he did not forfeit his right to refuse to become such shareholder by failing to express his dissent from the arrangement within seven days after the holding of 134 L. J, Ch. 609. STATUTORY ENACTMENTS. 533 the meeting at which it was determined upon. Under such circumstances the shareholder forfeits all claims he may have upon the original company in respect of his shares, but he is also relieved from any further lia- bility. In Clinch v. Financial Corporation? Page-Wood, V. C., considered the effect of this section to be, “that if a company be desirous of merging themselves in another company, inasmuch as a minority of dissentient shareholders cannot be compelled to take shares in the other company, it may be desirable that the first com- pany shall have a power of closing its concerns and winding up its affairs, and upon so doing of selling its assets to the other company, which may be disposed to purchase those assets, paying for them*in shares. Then it would be for the shareholders in the company which was being wound up to say whether they will take shares or not. If they refuse to take shares, they lose all interest in the purchase money; they are so far bound by the resolution of their own company as to lose all right of claiming any portion of it; but the sale may still be a good sale of the one concern to the other.” In the same case, on appeal,® Lord Chancellor Lord ‘Cairns said: “I think that section 161 clearly contem- plates a sale of the assets of the liquidating company for such an equivalent in value as is pointed out in that section, and does not contemplate the subjecting of the shareholders in the liquidating company, without their unanimous consent, to a fresh and original lia- bility in the shape of a guaranty.” His lordship then went on to lay down—to this extent overruling the de- 1 Compare Hx parte Higgs, 2 H. & Page-Wood, V. C., and in which his M. 657, an exactly similar case arising honor gave a similar decision. out of the same circumstances as Hx 2L, BR. 5 Eq, 450, 472. parte Los, heard a few days later by *L, BR. 4.Ch, 118, 121. 534 ‘THE AMALGAMATION OF COMPANIES. cision of Vice Chancellor Page-Wood—that not even could the shares of dissentients be forfeited: “It is sufficient to say that, in my opinion, the liquidators of a company would have no right to place a shareholder of a company in this position, that he must either dis- sent altogether from the arrangement, and be subject to: have his shares taken from him at a valuation, or else come in under the arrangement, and thus be forced to subject himself to the liability of guaranteeing the suf- ficiency of the assets.” And Selwyn, L. J., in his judg- ment, expressed himself similarly: “The words of the 161st section are doubtless very wide and comprehen- sive, but it contains no power to impose any new or additional liability upon the shareholders of the selling company, and provides only for the payment of the purchase money of the shares of dissentient sharehold- ers, which is directed to be paid before the company is dissolved, and to be raised by the liquidators in such manner as may be determined by special resolution.” The exact position of a dissentient shareholder under: this section seems to be this. First, he may assent to the proposed arrangement, either simpliciter or with modifications adapted to his particular case. Secondly, he may dissent therefrom. Thirdly, if he dissent, he can require the liquidators at their option “ either to abstain from carrying the resolution into effect, or to purchase his interest at a price to be determined by ar- bitration,” 7. ¢., as provided by section 162; that is, he is not compelled to accept the liquidator’s valuation.” Fourthly, if he dissents and wishes his interest to be valued, he must give the requisite notice in that behalf _ 7 The shareholder has a right of ac- Italian Bank, L. R. 4 Q. B. 462, Com- tion upon non-payment of the purchase pare re Anglo-Italian Bank and De- money agreed on or awarded to him, in Rosaz, L. R. 2Q. B. 452. case of arbitration, De Rosaz v, Anglo- STATUTORY ENACTMENTS, 535: within seven days, or he may dissent simply and: abandon all interest in the company. Fifthly, if he: dissents, and his interest is purchased by the liquidat- ors, he nevertheless remains liable up to the amount of that interest to the creditors of the company; though if he dissents and abandons his interest, it seems that his liability thereupon ceases? Though the section speaks of a winding up “ altogether voluntarily,” yet it applies to a winding up under the court, which can, like the official liquidator, direct a sale of the assets under section 95, and such a sale is regulated by the principles laid down ‘in this section.? Foreign com- panies may avail themselves of this section.’ So may companies not formed under this act, but they must first register themselves so as to bring themselves within its provisions. In Southall v. British Mutual Life As- surance Society,’ it was decided that an unregistered company, which has no power under its deed of settle- ment to sell or transfer its business to another company, may carry into effect an agreement for that purpose by registering under the companies act, 1862, passing a resolution for voluntarily winding up and directing the liquidators to carry out the agreement. The mismanagement of life assurance companies hav- ing produced great distress and absolute ruin to many, the legislature has recently interfered and enacted regu- lations with respect to the conduct of their business and the control of their affairs. The greater portion of 1 Re Imperial Land Company of pany, L. R. 6 Ch. 381; 83 & 34 Vict. Marseilles, Vining’s Case, L. R.6 Ch. 96. ¢, 104, 8. 2 (Buckley, p. 488). 2 See Los’s Case and Higgs’s Case, 4 Re Irrigation Company of France, ubi supra; and Martin’s Case, 2H. & ex parte Fox, L. R, 6 Ch. 176. . M. 669, 5L, R. 11 Eq. 65. Compare Droit- ® Re Imperial Mercantile Credit As- wich Patent Salt Company v. Curzon sociation, L. R. 12 Eq. 504; re Agra L. RB. 3 Ex, 85; and Princess of Reus and Masterman’s Bank, L. R. 12 Eq. v. Bos, L. R. 5 Ch, 863; LR. 6 H. Lds. 509, n.; re Albert Life Assurance Com- 176. 536 THE AMALGAMATION OF COMPANIES. the disasters brought about by these bodies has arisen from the amalgamation or fusion of many small associa- tions into one large and unwieldy concern. True enough the policy holders and other creditors of the original associations would not be bound by any such arrange- ments unless they agreed thereto; but their recourse to their original debtors is usually of theoretical rather than practical value. What use is it to preserve them. their remedy when the assets and funds of their debt- ors are gone or very seriously diminished? The unfor- tunate shareholders, too, have to be considered. Like the creditors, they need not agrée to an amalgamation if they do not so choose. But this also is a merely theoretical privilege, for they are to a great extent in | the hands of the managing body, and unable to protect their own interests. Consequently parliament has de- cided that the amalgamation of these companies shall be to some extent under the supervision of the courts. Accordingly 33 & 84 Vict. c. 61, the life assurance companies act, 1870,* contains among various pro- visions referring to the accounts and other internal mat- ters the following relating to amalgamation : “Section 14. Where it is intended to amalgamate two or more companies, or to transfer the life assurance business of one company to another, the directors of any one or more of such companies may apply to the court, by petition, to sanction the proposed arrangement, notice of such application being published in the Gazette, and the court, after hearing the directors and other persons whom it considers entitled to be heard upon the petition, may confirm the same, if it is satisfied that no sufficient objection to the arrangement has been es- tablished. “Before any such application is made to the court, a statement of the nature of the amalgamation or transfer, as the case may be, to- gether with an abstract containing the material facts embodied in the * Buckley, p. 611. STATUTORY ENACTMENTS. 5387 agreement or deed under which such amalgamation or transfer is pro- posed to be effected, and copies of the actuarial or other reports upon which such agreement or deed is founded, shall be forwarded to each policy-holder of the transferred company in case of transfer, by the same being transmitted in manner provided by section one hundred and thirty-six of the companies clauses consolidation act, 1845, for the transmission to shareholders of notices not requiring to be served personally; and the agreement or deed under which such amalgama- tion or transfer is effected shall be open for inspection by the policy- holders and shareholders, at the office or offices of the company or companies, for a period of fifteen days after the issuing of the abstract herein provided. “The court shall not sanction any amalgamation or transfer in any. case in which it appears to.the court that policy holders representing one-tenth or more of the total amount assured in any company which it is proposed to amalgamate, or in any company the business of which it is proposed to transfer, dissent from sich amalgamation or transfer. “No company shall amalgamate with another, or transfer its busi- ness to another, unless such amalgamation or transfer is confirmed by the court in accordance with this section. “Provided always, that this section shall not apply in any case in which the business of any company, which is sought to be amalga- mated or transferred, does not comprise the business of life assur- ance. “Section 15. When an amalgamation takes place between any companies, or when the business of one company is transferred to another company, the combined company, or the purchasing company, as the case may be, shall within ten days from the date of the com- pletion of the amalgamation or transfer deposit with the board of trade certified copies of statements of the assets and liabilities of the companies concerned in such amalgamation or transfer, together with a statement of the nature and terms of the amalgamation or transfer, and a certified copy of the agreement or deed under which such amal- gamation or transfer is effected, and certified ‘copies of the actuarial or other reports upon which such agreement or deed is founded; and the statement and agreement or deed of amalgamation or transfer shall be accompanied by a declaration under the hand of the chairman of each company and the principal managing officer of each company, that to the best of their belief every payment made or to be made to any person whatsoever, on account of the said amalgamation or 538 THE AMALGAMATION OF COMPANIES. transfer, is therein fully set forth, and that no other payments beyond those set forth have been made, or are to be made, either in money, policies, bonds, valuable securities, or other property, by or with the knowledge of any parties to the said amalgamation or transfer.” The amalgamation of railway and other similar com- panies possessing compulsory powers is usually effected by means of a special act of parliament obtained for the particular case. There are also certain statutes contain- ing general provisions. Thus 26 & 27 Vict. c. 92 (the railways clauses act, 1863) lays down in Part V a series of regulations in reference to the amalgamation - of railway companies, but they apply only to such com- panies as shall be amalgamated by a special act there- after passed and incorporating that part of the act. So 33 & 34 Vict. c. 70 (the gas and water facilities act, 1870) authorizes two or more companies or persons supplying gas or water in any district, or in adjoining districts, to manufacture and supply gas, or to supply water, and to enter into agreements jointly to furnish and supply, and to amalgamate their undertakings.* * The term “amalgamation” is seldom applied to corporations in this country. That which takes its place as much as any is /‘ consolidation.” But, though it is difficult accurately to define amalgamation as commonly used in English law, it certainly has a wider meaning than consolidation has with us. Consolidation would, e. g., be inapplicable to a union of two or more companies, in such a way that one of the original corporations only was continued in existence, while the others were merged or absorbed in it. An absorption of one corporation by another would, according to some of the decisions, be an amalgamation in England; but it would not be a consolidation here. In McMahan 2. Morrison, 16 Ind. 172, a case fre- quently cited with approval in later decisions, it was said, that the effect of the consolidation “ was a dissolution of the three corporations named, and, at the same instant, the creation of a new corporation, with property, liabilities, and stockholders derived from those then passing out of exist- ence.” Similarly in Lauman » Lebanon &e. R. R. Co. 80 Penn. St. 42, consolidation is said to amount to ‘‘a surrender of the old charters by the companies, the acceptance thereof by the legislature, and the formation CONSOLIDATION. 539 of a new corporation out of such portions of the old as enter into the new.” Where, by the terms of the statute and deed, the first corporation was extinguished, the second only continued in existence, this was held not to be ‘‘an amalgamation or consolidation of the two corporations into one.” Powell v. Northern Missouri R. R. Co. 42 Mo. 63. In the Ameri- can view, therefore, it would seem that the dissolution of all the old cor- porations and the creation of one new one are essential to consolidation. And this idea must not be overlooked in determining the rights of credit- ors. -For if all the corporations cease, the consolidated company is liable to the creditors of each, in the absence of special agreement, only so far as it is assignee of its property; while if one is continued in existence, the debts of that one which continues, would seem to burden the whole property, however acquired. It should be observed also, that consolidation in England means, to put two or more shares of stock of the same company into one share, or to- consolidate ‘‘shares” into “stock.” See Buckley, pp. 9, 80; 2 Shelford on Railways, 4th ed. pp. 118, 718; Goddefroi & Shortt, pp. 58, 478. The power of corporations to consolidate must be considered from two- standpoints, viz., that of the State and that of the individual stock- holders. These parties have separate interests and rights which cannot be disregarded. I. As to the legislature. A charter being a contract, giving to a cor- poration all the powers which it can exercise, any alteration which the corporation desires to make therein, must in the first place have the sanction of the legislature. The authority to consolidate is not to be implied from general powers of management of particular business. Clearly, if the consolidation works the dissolution of the old bodies and the creation of a new one, express legislative authority is the first essential. “The power of the legislature to confer such authority cannot be ques-- tioned, and without the authority, railroad corporations organized sepa- rately, could not merge and consolidate their interests.” Clearwater 0. Meredith, 1 Wall. 25. This authority may be given in the original charters. Nugent v. Supervisors, 19 Wall. 241; or by act passed previous to con-- solidation, Black v. Del. & Rar. Canal Co. 9 C. E. Green, 455; or by the express sanction of an authorized contract of consolidation. Bishop ». Brainerd, 28 Conn. 288. Almost all the cases cited in this note will be. found -to uphold the necessity of legislative authority in order to the con- solidation of corporations. As to what language will authorize consolida- tion, see Pearce », Madison & Ind. R. R. Co. 21 How. 441; Bishop o. Brainerd, 28 Conn. 289; Fisher ». Evansville & Crawfordsville R. R. Co. 7 Ind. 407. IL The first essential, authority from the legislature, having been ob- tained, the rights of individual stockholders are next to be considered. There is a contract with the stockholders, as well as with the State, and the rights of the one party can no more be disregarded than the rights of 540 CONSOLIDATION. the other. Without the intervention of the right of eminent domain, the consent of every stockholder is necessary for consolidation, for the reason that it changes the nature and purpose of the organization to which the stockholder has confided his property, and with which he has contracted. The legislature cannot authorize a majority of the corpora- tion to make any such change, against the will of the minority, for such act would “ impair the obligation of a contract.” In Kean v. Johnston, 1 Stockt. 401, it is said: ‘‘As stockholders, they own the road in com- mon, to be employed in specified uses. Each owns a share in the whole, and is to have a proportionate share in its profits. They have invested a portion of their capital init, and in it alone. They have a right in the road and in every dollar it earns. The directors are their trustees, to employ the joint capital in the management of the road, and the road only, to the end that from the investment the stockholders have chosen, they may reap the contemplated profits. And this is the agree- ment of the stockholders among themselves. They each contract with the other that their money shall be so employed. What the majority de- termine within 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 con- ‘sistent with, and growing out of this original fundamental joint inten- tion. To sell the road, to abandon the contemplated investment and em- bark in another scheme, whether entirely different or only more extensive 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 stock- holders. If they had any right as partners or beneficiaries, it would seem to be this, that their money should be devoted to that use, and never em- ployed in any other, nor returned to them before they desire it. The mere ‘statement of the proposition seems to me to prove it. No argument, however lengthened, can add to the force of the naked position.” In Black ». Del. & Rar, Canal Co. 9 C. E, Green, 455, the court use the fol- lowing language: ‘‘ The proposition now considered is whether, after Shareholders have entered into a contract among themselves, under legis- ° lative sanction, and expended their money in the execution of the plan mutually agreed upon, the scheme can be radically changed by the ma- jority, by virtue of legislative enactment, and a dissentient stockholder compelled to engage in a new and totally different undertaking, without impairing the obligation of his contract with his associates and with the State. That this cannot be done, is as well supported by every considera- tion of justice and right, as it is firmly imbedded in judicial decision.” Again in Lauman 2. Lebanon Valley R. R. Co. 830 Penn. St. 46, Lowrie, C. J., says: ‘* The dissentient stockholder may object that his co-corpora- tors have no power to make a new contract for him, and thereby consti- tute him a member of a new and different corporation. * * * He may object that even the legislature cannot authorize this, for by so doing CONSOLIDATION, 541 they would authorize the destruction of one private contract, and the com- pulsory creation of another in its stead, and would take away the remedy by due course of law, which the dissenting stockholder is entitled to, be- cause of the depenburs or diversion of the association from its agreed purposes; and would, besides this, change the essential nature of con- tracts, which even legislative power cannot do, and much less legislative authority.” Also, in Clearwater ». Meredith, 1 Wall. 25, it is re- marked: ‘‘Clearwater (the stockholder) could have prevented this consolidation had he chosen to do so; instead of that, he gave his assent to it, and merged his own stock in the new adventure. If a majority of the stockholders of the corporation of which he was a member, had un- dertaken to transfer his interest against his wish, they would have been enjoined. There was no power to force him to join the new corporation, and to receive stock in it on the surrender of his stock in the old com- pany.” See, also, Nugent v. Supervisors, 3 Biss. 105; s. c. 19 Wall. 241; Mc- Mahan 2. Morrison, 16 Ind. 172; Mowry »v. Ind. & Cin. R. RB. Co. 4 Biss. 78. It thus appears that the dissent of a single stockholder may prevent a consolidation consented to by the legislature. In corporations having duties.to perform to the public, however, this hindrance may be removed by the exercise of the right of eminent domain. The stock of an indi- vidual is just as much subject to this right as any other property (see ante, pp. 279, 284, note). In Black v. Del. & Rar. Canal Co. 9 C. E. Green, 455, the court says: ‘‘From the conclusions thus far reached, does it result that one unwilling stockholder may obstruct the growth and development of every enterprise of this character in which he may have participated, and thus hinder the union under one management, of these important public highways, which have been constructed at different periods and under separate charters, when the necessities of interstate commerce, and the convenience of public travel may unite in urging it? The, necessity for rapid and speedy transit seems to demand imperatively,. that this difficulty shall not be insurmountable. In the exercise of the right of eminent domain, the legislature may authorize shares in corporations, and corporate franchises, to be taken for public uses upon just compensation. The title to this species of property is no more secure against invasion, when the public use requires it, than is the ownership of real estate under this 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 presumption flows from the fact of the enactment being made, that the legislature decided upon its necessity. This results from the familiar rule, that every intendment will be made in support of the constitutionality of the acts of a co-ordi- nate branch of the government.” In case of such exercise of the right of eminent domain, provision must of course be somehow made for com pensation to dissenting stockholders, and they can enjoin until such com- ® B4g CONSOLIDATION. pensation is made; Lauman 2. Lebanon Valley R. R. Co. 30 Penn. St. 42, When, also in such case, the authority to consolidate is permissive only, the act should provide how the option shall be made, whether by a majority, two-thirds, or some other number. For if it be left without qualification to the stockholders, in a matter so extraordinary, the major- ity have no powerto bind the minority, according to the contract between the stockholders. In the case of Black v. Del. & Rar. Canal Co., the au- thority was permissive only, but it was provided that it should be lawful for the united companies to consolidate, “ by and with the consent of two- thirds in interest of the stockholders in each.” In regard to the different effect given to reservations of power in the legislature to alter, repeal, or amend charters, and the consequent difference of opinion in the States upon the necessity of unanimity of action on the part of stockholders see ante, pp. 83, 84, notes. In any case, consolidation without consent of a stockholder, relieves him from liability on his subscription, or gives him the right to recover his interest. Carlisle x. Terre Haute &c. R. R. Co. 6 Ind. 316; Fisher 2. Evansville R. R. Co. 7 Ind. 407; McCray ». Junction R. R. Co. 9 Ind. 358; State o. Bailey, 16 Ind. 46; Shelbyville &c. T. Co. 0. Barnes, 42 Ind. 498; Lauman v. Lebanon Valley R. R. Co. 30 Penn. St. 42; Il. Grand Trunk R. R. Co. v. Cook, 29 Ill. 287. Where, however, at the time of subscrib- ing, the subscriber knows that a consolidation may take place, as when authority is given in the charter, or in an act passed before the subscrip- tion, the preceding principles would not apply. Thus, in Nugent ». Supervisors, 19 Wall. 241, where an attempt was made to avoid a sub- scription by a county to a company which became consolidated with another, on authority existing at the time of the creation of the com- pany, it is said: ‘‘It must be conceded as a general rule, that a subscriber to the stock of a railroad company is released from obligation to pay his subscription by a fundamental alteration of the charter. 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 in- duced 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 subscription; 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 organization to any project not contemplated by it. But while this is true as a general rule, it has no applicability to a case like the present. The consolidation * * was no departure from its original design. The general statute of the State (Ill.], approved, Feb. 28th, 1854 [the subscriptions were made in 1869 and later], authorized all railroad companies, then organized or thereafter to be organized, to consolidate their property and stock with each other, CONSOLIDATION, 543 and with companies out of the State, whenever their lines connect with the lines of such companies out of the State. * Nor is this all; the special charter of the K. & I. R. R. R. Co., contained an express grant to the company of authority to unite or consolidate. * The con- solidation, therefore, wrought no change in the organization or design of the company to which they [the voters of the county] subscribed, other than they contemplated at the time as possible and legitimate. It cannot be said that any motive for their subscription has been taken away, or that the consideration for it has failed. Hence the reason of the general rule we have conceded does not exist in this case, and consequently the rule is inapplicable. * The American authorities uniformly assert that the subscriber for stock is released from his subscriptions by a subse- quent alteration of the organization or purposes of the company, only when such alteration is both fundamental, and not provided for or con- templated by either the charter itself or the general laws of the State.” In Hanna ». Cincinnati & Ft. W. R. R. Co. 20 Ind. 30, one who sub- scribed to the stock of a corporation, formed under a general law which reserved the power to amend or repeal, was held bound by his subscrip- tion, although a consolidation took place on authority subsequently given, for the reason that the articles of association showed that such consolida- tion was one of the purposes for which such association was organized, and the alteration was one which the subscriber might have reasonably an- ticipated at the time he subscribed. See Hamilton Ins. Co. v. Hobart, 2 Gray, 543; Gardner». Hamilton Ins. Co. 33 N. Y. 421; Sparrow o, Evans- ville &c. R. R. Co. 7 Ind. 369; Bish v. Johnson, 21 Ind. 299; Mowry ». Ind, & Cin. R. R. Co. 4 Biss. 78; see also ante, pp. 79, 83, 84, 151, notes. Where the articles of association of a company prohibited the union or con- solidation of the company with any other, without the consent of a majority of the stockholders, but contained a clause providing for an amendment to the articles, by a concurrent vote of two-thirds of the executive commit- tee, and a majority of the trustees; it was held that this authority to amend, gave no power to take away from the stockholders the power to prohibit merger, which they had expressly reserved. Blatchford v. Ross, 54 Barb. 42. In order to obviate in some cases the necessity of unanimous consent of stockholders, and to enable a majority merely to enter into a consoli- dation, the following argument has been urged. The contract which alone stands in the way is the contract between the stockholders. That contract is to the effect that the property of the stockholders shall be de- voted to the purpose for which it was given, and shall not be diverted to any other. It can never be diverted to a different purpose without his consent. But must it always be devoted to the particular purpose? Is there anything in the contract which compels the particular business to be carried on perpetually, or as long as any one stockholder may desire ? If there is in the original agreement a specified time during which the corporation must continue, the case is clear. But it is not such cases 544 ‘ CONSOLIDATION. which are here spoken of. If the contract is indefinite as to this point, is there anything to prevent the majority, with consent of the State, from giving up the business entered upon, whenever it seems to them desir- able ? Zabriskie, C., in Black v. Del. & Rar. Canal Co. 7 CO. E. Green, 404, says: ‘But there is no case that holds that a majority of corporators, where a time is not specified for which the enterprise must be continued, may not abandon the enterprise and sell out the property of the company. The dictum of Parker, Master, in Kean v. Johnson, 1 Stockt. 418, is the only authority which I find in support of the doctrine. The dictum in my own opinion, in Zabriskie ». Hack. & N. Y. R. R. Co. 3 C. E. Green, 193, that a single stockholder can prevent all others from changing or abandoning the work, must be taken with the qualification annexed to it in the former part of the opinion, p. 183, that is, ‘where they became members for definite purposes specified in their charter, and for a time settled by it.’ * * * Becoming incorporated for a specified object, without any specified time for the continuance of the business, is no cqn- tract to continue it forever, any more than articles of partnership without stipulation as to time. * * * A doctrine that all the stockholders but one may be compelled to continue a business which they find undesirable and unprofitable, and wish to abandon, is so unreasonable and unjust that it will not be held to arise by implication unless that implication is a necessary one.” If, then, a corporation may, by a majority vote, give up its business and bring about a dissolution, and if consolidation is the dis- solution of the old corporations and the creation of a new one, it is asked, why is not a majority competent to make such consolidation against the will of the minority ? The dissenters are not forced to enter into the new corporation. Their property is not devoted to another purpose against their will. They may refuse to enter into the new venture, and enjoin until they receive the value of their shares. They are only forced to choose whether they will take their property back or join with the others in a new investment. If there was no obligation upon the company to continue in the business entered upon, and if the shareholder has received his share of the property, he has no cause of complaint and no ground” for interfering with those stockholders who prefer to transfer their prop- erty to the new company, taking its shares rather than receiving the value in money. But it is submitted, in answer to this argument, that the contract between the stockholders includes the idea, that whenever the corporation shall give up its business, each stockholder shall receive his share of the property, determined in the ordinary way of winding up, by a public sale in the manner recognized by law. McVicker »v. Ross, 55 Barb. 247. In this way alone can the value of the whole property, and consequently of each interest, be legally determined. A dissolution in which there is no such valuation of the several interests, therefore, vio- lates the implied contract with the stockholders; and no authority of the legislature, unless through the exercise of the right of eminent domain, | CONSOLIDATION, 545 can be set up as justification for an act resembling spoliation. So, too, in those States in which it is held that the reservation by the legislature of power to repeal, alter, or amend, enables a majority to accept an amend- ment or dissolution authorized by a permissive act of the legislature, it might be urged that a majority vote would be sufficient to effect consoli- dation, The same answer is pertinent here. The power to repeal means the power to put an end to the corporation merely, and in no way does the provision authorize the assenting corporators to appropriate the prop- erty at an estimated value, or affect the implied contract that, in case of dissolution, the property shall be divided in the regular way. IIL. The effect of consolidation, generally speaking, is to put an end to the old corporations and create a new one. A new entity is created, to which pass the combined rights and obligations of the old ones. The general rule as to the effect of consolidation is laid down in Paine 0, Lake Erie & Louisville R. R. Co. 81 Ind. 283, where it is said: ‘It is clear to our minds that the new company succeeded to the rights of the old cor- porations. 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 required. It only required a commingling of the ele- ments of which the old was composed. The new assumed the liabilities and succeeded to the rights of the old.” The court, therefore, decide that the new company may compromise and settle a claim against one of the original companies and sustain an action to enforce a settlement. Similarly, in Miller 0. Lancaster, 5 Coldw. (Tenn.) 514, after citation of many authorities, it is said: “The foregoing authorities suffice, if any were needed, to establish the position, that where such consolidation and merger of corporations are made, and such transfer of rights and properties and assumption of liabilities between the old and new com- panies are effected, the new company stands in the stead of the old com- panies, and may enforce the rights of the old companies and be subjected to their liabilities.” See also Columbus R. R. Co. 2. Powell, 40 Ind. 87. It would seem, therefore, that all choses in action belonging to the old companies could be enforced by the new, in the same way and to the same degree, And indeed it might be said that all the rights were transferred and could be exercised as before. But rights such as a franchise, or special privilege, will not in all cases be possessed by the consolidated body as by one of the original bodies. This would in some cases be ex- tending the privilege, not merely transferring. Thus it has been decided, that in case of the consolidation of three companies, two of which were exempted from taxation, while the third was not, the exemption would still apply to the property originally belonging to the former, but would not be extended to cover that of the latter. Phil. Wilm. & Balt. R. R. Co, 0. Maryland, 10 How. 376; Tomlinson 2. Branch, 15 Wall. 460. Similarly, where two booms were owned by separate companies, and each was bound 35 546 CONSOLIDATION. to deliver the logs at its own boom, in which they were caught, they were held bound still to do so after they had been consolidated, the court say- ing: “We are to interpret the two statutes authorizing the two booms separately, though both booms now belong to one company.” Gould 2, Langdon, 43 Penn. St. 865. In case of consolidation, the new company may lawfully use a patented axle-box which both of the old corporations had. been licensed to use. Lightner ». Boston .& Albany R. R. Co. Lowell's Dec. 338; see also Farnum ». Blackstone Canal Co. 1 Sumner, 46; Shaw 0. ‘Old Colony R. R. Co. 16 Gray, 407; Bishop ». Brainerd, 28 Conn. 289; Fisher » New York Central & Hud. R. R. R. Co. 46 N. Y. 644; New ‘Jersey Midland Railway Co. ». Strait, 6 Vroom, 322; Commonwealth »v. Atlantic & G. Western R. R. Co. 53 Penn. St. 9; Hubbard ». Chappel, 14 Ind, 601; Robertson v. Rockford, 21 Ill. 457. IV. As to the creditors of the original corporation.—The obligations of ‘the original companies also become binding on the new one, either by express assumption (Prouty ». Lake Shore & M. 8. R. R. Co. 52 N.Y. 368), or by reason of the property and effects of the old company being -considered as a trust fund in the hands of the consolidated company for the payment of creditors, and being followed by courts of equity and charged therewith. Eaton & Hamilton R. R. Co. ». Hunt, 20 Ind. 463; Powell ». North Missouri R. R. Co. 42 Mo. 63. The rights of creditors cannot prevent consolidation; but they can be ‘protected and enforced, notwithstanding the consolidation. Provisions as to the debts of the old companies, and methods of enforcing them, are usually inserted in the special or general statutes authorizing consolida- ‘tion (see statutes cited, post, p. 550), and generally it is provided by the Jaw under which the companies are consolidated, that separate existence ‘shall continue as to all outstanding obligations to third parties, including ‘those arising out of torts (see Selma, Rome & D. R. R. Co. ». Harbin, 40 ‘Ga. 706); and actions begun before the consolidation against one of the ‘companies are not abated by the consolidation. Baltimore & Susq. R. R. Co. v. Musselman, 2 Grant’s Cases, 346; Prouty 0. Lake Shore & M. 8. R. R. Co. supra; see also Philadelphia, Wil. & B. R. R. Co. », Howard, 18 How. 307; The Key City, 14 Wall. 653; Taggart . Northern Central R. -R. Co, 29 Md. 557; Ketchum ». Madison, Ind. & P. R. R. Co. 20 Ind. 260; Indianapolis, Cin. & L. RB. R. Co. v. Jones, 29 Ind. 465; Columbus _R. R. Co. 0. Powell, 40 Ind. 37; Bruffett ». Great Western R. R. Co. 25 Ill, 353; Racine & Mississippi R. R. Co. 0. Farmers’ Loan & Trust Co. 49 Ti. 831; Mitchell v. Leeds, Zbid. 417; Miller 0. Lancaster, 5 Cold. 514; Carey ». Cincinnati & Chicago R. R. Co. 5 Ia. 357; Selma &c. R. Co. v. Harbin, +40 Ga. 706. V. Questions somewhat complex in their character and difficult of decision, have arisen upon the consolidation of corporations created by ‘several States, and upon acts permitting the corporations of one State to become quasi corporations of another State—principally as to the domicile CONSOLIDATION. 547 of the corporations and the jurisdiction of the Federal courts over them. The case of Ohio & Miss. R. R. Co. ». Wheeler, 1 Black, 286, arose on demurrer to a plea to the jurisdiction of the Circuit Court of the United States for the district of Indiana, The declaration described the plaintiff as a corporation created by the laws of the States of Ohio and Indiana, having its principal place of business in the State of Ohio, and being a citizen of that State. The plea set up that the defendant was a citizen of Indiana, and that the plaintiff was created a corporation by the laws of that State. Taney, C. J., says: ‘‘It is true, that a corporation by the name and style of the plaintiff's appears to have been chartered by the States of Indiana and Ohio, clothed with the same capacities and powers, and intended to accomplish the same objects, and it is spoken of in the laws of the States as one corporate body, exercising the same powers and fulfilling the same duties in both States. Yet it has no legal existence in either State, except by the law of the State; and neither State could confer on it a corporate existence in the other, nor add to or diminish the powers to be there exercised. It may, indeed, be composed of and represent, under the corporate name, the same natural persons. But the legal entity or person, which exists by force of law, can have no existence beyond the limits of the State or sovereignty which brings it into life or endues it with its faculties and powers. The O. & M.R. R. Company is, therefore, a distinct and separate corporate body in Indiana from the corporate body of the same name in Ohio, and cannot be joined as one and the same plaintiff, nor maintain a suit in that character against a citizen of Ohio or Indiana in a Circuit Court of the United States.” But in Railroad Company v. Harris, 12 Wall. 65, the court expressly rules that anything in 1 Black, 286, in conflict with the opinion in 12 Wall. 65, is intended to be restrained and qualified by the latter case, which holds that there is ‘‘no reason why several States cannot, by competent legisla- tion, unite in creating the same corporation, or in combining several pre- existing corporations into a single one. * * * The jurisdictional effect of the existence of such a corporation, as regards the Federal courts, is the same as that of acopartnership of individual citizens residing in different States.” In Railroad Company v. Whitton, 18 Wall. 270, how- ever, the court considered that there was no conflict between the case in 1 Black, 286, and that in 12 Wall. 65, and supported the jurisdiction of the Federal courts of the district of Wisconsin, in an action brought by a citizen of Illinois against a railroad corporation, which was created by, and existed under, the laws of Illinois, Wisconsin and Michigan. In Bishop ». Brainerd, 28 Conn. 288, the court say: ‘‘It appears that by the terms of the charters of the Rhode Island and Connecticut corporations, a new consolidated cor- poration has been created, provided it was competent for those two States, by such united action, to create, under their joint authority, such a corpora- tion, It is not questioned by thé plaintiff, and indeed could not be in view of the authorities, that a State may create a corporation which shall 548 CONSOLIDATION. be composed of two or more corporations created by the same State, as well as of two or more natural persons, or that a State may create a cor- poration composed of natural persons belonging to different States. And there is substantially no more objection to a State creating a corporation to be composed of corporations chartered by different States, than of natural persons belonging to those States. Nor do we see any objection, technical or otherwise, to the parting, by two or more States unitedly,. in the exercise of their sovereign authority, with such of their respective powers as shall be necessary, in order to confer upon persons, natural or artificial, the franchise or privilege of being a corporation, and with such powers and privileges as they shall deem it proper to grant to them. And. this power has been not unfrequently exercised by States without objection or question. These views do not conflict with the case of Farnum », Black- stone Canal Co. 1 Sumn. 46, in which the court held only, as a matter of con- struction, that in that particular case it was not the intention of the legislatures of Massachusetts and Rhode Island to consolidate or amalga- mate the two corporations there in question, or to do more than to em- power them to unite for the promotion of their common interests. No question was there made as to the competency of those legislatures to consolidate those corporations into one, or even to extinguish their orig- inal individual existence.” The Richmond and Miami Railroad Company, created under the laws of Indiana, and owning a railroad running from Richmond, Indiana, to the state line of Ohio, and the Eaton and Hamilton Railroad Company, created under the laws of Ohio, and owning a railroad running from Eaton, Ohio, to the state line of Indiana, in the direction of Richmond, were consolidated into one company, called the Eaton & Hamilton R. R, Co. The law in neither State, in terms, sur- rendered to the other any jurisdiction over the property of said com- panies. Prior to the consolidation, the Indiana company issued bonds. By the articles of consolidation, it was agreed that the companies should become united as one, under the name of E. & H.R. R. VCo.; that the cor- porate name, franchises, &c., of the E:& H.R. R. Co. should be preserved and remain intact, except so far as modified by the enlarged interest of the company and a compliance with the laws of Indiana; that all the prop- erty and franchises of the Indiana company were thereby transferred to and merged in the Ohio company, and the organization and name of the former should cease. Action was brought against the consolidated com- pany to enforce the payment of the bonds issued by the Indiana company, by foreclosure of the mortgage on the Indiana road. Held, (1), that the E. & H. R. R. Co. was the proper party defendant; (2), that the Ohio company took the Indiana road subject to the mortgage; (3), that the courts of Ohio had no jurisdiction to foreclose. Eaton & Hamilton R. R. Co. v. Hunt, 20 Ind. 457. In Racine & Miss. R. R. Co. v. Farmers’ Loan & Trust Co. 49 Til. 381, which concerns 2 mortgage on the road in Illinois, belonging to a company consolidated with another of the same name in CONSOLIDATION. 549 Wisconsin, the court say: ‘‘Our view of the effect of the consolidation contract between the Rockton company and the Wisconsin company, which we hold to have been legally made, is briefly this. While it created ‘a community of stock and of interest between the two companies, it did not convert them into one company in the same way and to the same de- gree that might follow a consolidation of two companies within the same State. Neither Illinois nor Wisconsin, in authorizing the consolida- tion, 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. * * * In dismissing this question of consolidation, it may ‘be remarked that where continuous lines of road, passing through dif- ferent States, are consolidated by legislative authority, as we believe is not unfrequently the case, although the consolidated company must, from the very nature of a corporation, be regarded as a distinct entity in each State, yet the objects of consolidation would be very liable to be de- feated, unless the entire line should be placed under one board of direct ors. The principle that a single corporation cannot be created by the joint legislation of two States, while an irresistible inference from the es- tablished law in regard to corporate bodies, is nevertheless a technical and abstract principle, and when adjoining States authorize consolida- tions, as in the present instance, and the consolidated lines are placed un- der a common board, with a common name and seal, such board will naturally act as if the consolidated lines made but one company; and when their contracts assume that form, the courts must, for the protection of the public, and to enforce good faith, hold, as we have done in this case, that the contract is to be construed as made by the corporation of each State in which the subject-matter of the corporation lies, ut res magis waleat quam pereat.” ‘A corporation may have a twofold organization, and be, so far as its relation to one State is concerned, both foreign and domestic. It may have a corporate entity in each State, yet in its general character be of a bifold organization.’ Per Bedle,J.; McGregor 2. Erie R. R. Co. 6 Vroom, 115; see Phillipsburg Bank ». R. R. Co. 8 Dutch. 206; State v. Del. L. & W. R. R. Co. 1 Vroom, 473; 8. c. 2 Vroom, 581; State ». Metz, 8 Vroom, 199; Richardson ». Vermont & Mass. R. R. Co, 44 Vt. 618; Att’y General ». Boston & Maine R. R. Co. 109 Mass. 99; Sprague o. Hartford Prov. & F. R. R. Co. 5 R.I. 288; Dennistoun v. New York & New Haven R. R. Co. 1 Hilt.62; Allegheny County ». Cleveland & Pittsburg R. R. Co. 51 Penn. St 228; Cleveland & Pittsburg R. R. Co. ©. Speer, 56 Penn. St. 325; Commonwealth ». Pittsburg & Connelsville R. R. Co. 58 Penn. St. 26; Binney’s Case, 2 Bland, 99; Canal Co. 2. R. R. Co. 4 Gill & J. 1; State ». Northern Central Rwy. Co. 18 Md. 193; Balt. & Ohio R. R. Co. 0. Glenn, 28 Md. 287; Balt. & Ohio R. R, Co. o, Gallahue 12 Gratt. 658; Goshorn v. Supervisors, 1 West Va. 808; Balt. & Ohio R. R. Co. 0. Supervisors, 8 West Va. 319; Farmers’ Bank 0. Gettinger, 4 West 550 CONSOLIDATION. Va. 805; Aspinwall v. Obio & Miss. R. R. Co. 20 Ind. 482, 498; Unior Branch R. R. Co. v. East Tennessee R. R. Co. 14 Ga. 327; Atty. General v. Railroad Companies, 35 Wis. 425; Northwestern R. R. Co. 0. Chicago & Pacific R. R. Co. 8 Chic. Leg. News, 57. VI. One of the chief reasons which led to the formation of the Federal Constitution was, the necessity of the freedom of interstate commerce, and of the removal of all obstructions to, and burdens upon, traffic (see Federalist, No. 22). American policy has tended towards the proper ob- literation of State lines, so as to permit the transportation of property without breaking bulk, and of passengers without the delay incident to the change of vehicles. Consolidation of railway interests, whether by actual amalgamation of corporate existence or by leases of the lines of one company to another, has thus come to be the rule rather than the ex- ception, and the legislatures of the several States, sometimes by special authority to individual corporations, but more frequently by general laws, have granted the requisite power to consolidate connecting lines of rail- way. See, for example, Webb’s Railroad Laws of Maine, p. 87 e¢ passim; 7N. Y. Stat. at Large (Edmond’s ed.) p. 529; Laws of N. J. 1873, chap. 413, § 17, p. 98; Brightley’s Purdon’s Dig. Penn. 1222-1226; Battle’s Revis. N. C. p. 749; Rev. Stat. 8. C. p. 368; Session Laws, Ala. 1869-70, p. 818; Rev. Stat. Ky. (Stanton), vol. 2, p. 548; Stat. of Tenn. 1140, a; Rev. Stat. Ohiv (Curwen), pp. 1882, 2791; Wilcox R. R. Laws of Ohio, p. 184; Gen. Stat. Ind. vol. 3 (Davis’ Supplement), p. 399; Rev. Stat. Ill. (1874), pp. 294, 295; Gilbert’s R. R. Law of Ill. p. 229; Compiled Laws. of Mich. chap. 75, p. 812, § 41; Minn. Revision, chap. 34, p. 269; Edger- ton’s R. R, Law of Minn. p. 19; Code of Iowa (1878), p. 238, § 1275; Wagner’s Missouri Stat. p. 314, § 56; Laws of 1869, p. 75; Gen. Stat. Neb. p. 196, § 114; Compiled Laws ‘of Nev. 1878, vol. 2, p. 301, § 3465; Laws of Kansas, 1870, chap. 92, § 1, p. 195; Gen. Laws of California, 1850-1864, p. 186; Rev. Stat. Colorado, chap. 18, § 57, p. 187. PART IV. THE RIGHTS AND LIABILITIES OF PERSONS CONCERNED IN OR OTHERWISE AFFECTED BY TRANSACTIONS WHICH ARE ULTRA VIRES, AND THE LEGAL PROCEEDINGS WHICH MAY BE TAKEN IN RESPECT THEREOF. CHAPTER I. THE INTERFERENCE OF THE COURTS IN THE INTERNAL AFFAIRS OF CORPORATIONS. Tue majority of an ordinary partnership have, while acting dona fide and apart from express provisions, full power over the operations and property of the firm. They cannot enter into engagements foreign to the pur- poses for which they have combined, nor employ the joint funds in support of such; but within the scope of the partnership they can compel the concurrence of a dissentient minority. The minority must, however, be fairly consulted, and have an opportunity of expressing their objections to any proposed scheme, and these reasons the majority must duly weigh and consider. On this point there are some well known observations by Lord Eldon, in Const v. Harris:* “I call that act the act of all which-is the act of the majority, provided all are consulted, and the majority are acting bona jide, meeting not for the purpose of negativing what any one may haveto offer when they are met together, but for the purpose of negativing what they may, after due consid- 1Turn. & Russ. 496, 525-527. 552 INTERNAL AFFAIRS OF CORPORATIONS. eration, think proper to negative. For a majority of partners to say, we do not care what one partner. may say, we being the majority will do what we please, is, I apprehend, what this court will not allow. * * * In all partnerships, whether it is expressed in the deed or not, the partners are bound to be true and faithful to each other; they are bound to act upon the joint opinion of all, and the discretion and judgment of any one cannot be excluded. What weight is to be given to it is another question. The most prominent point on which the court acts in appointing a receiver of a partner: ship concern, is the circumstance of one partner having taken upon himself the power to exclude another part- ner from as full ashare in the management of the partner- ship as he who assumes that power himself enjoys. * * * The lessees of the seven-eighths could not, without consulting the parties interested in the one- eighth, take upon themselves, merely because they were lessees of seven-eighths, to do those acts which could: only be done by the body, or by a majority of the body representing the whole of the body; and the majority of the body never represents the whole of the body, except where there has been a voice called for from the majority, and submitted to and fairly overruled by the majority.” His lordship accordingly held “that the proprietors of seven shares out of eight in a theater had not power to alter the manner in which it had been originally agreed that the profits should be dis- bursed.” * * The rule of the common law was, that in associations of a public or general nature the choice of the majority governed in regard to the man- agement of the interior concerns of the partners among themselves; but in private associations the majority could not conclude the minority. 38 Kent’s Com. 45; see Story on Partnership, §§ 128, 125; Abbott ». John- INTERNAL AFFAIRS OF CORPORATIONS. 553 The principle here so strongly enunciated applies to corporations, though perhaps with lessened force on ac- count of the difference in the nature and purposes of these associations. So Kindersley, V. C., in his judg- ment in Grissell’s case, laid down that a company is only a large partnership, modified in many important particulars by special enactment, but still in essence a partnership ; and that where statutes do not expressly or impliedly vary the principles to be applied, those principles which applied to an ordinary partnership are applicable to a company.* Consequently, one of the principles of the law of partnerships being that none of the partners can claim any debt owing to him from the partnership estate till all the creditors have been paid in full,t he held that a shareholder in a company, who was also a creditor under a contract, was not in the event of the company being wound up entitled to set off the debt due to him against the calls, nor to set off against the calls a dividend which might, afterwards come to him.{ The judgment was affirmed upon some- what different grounds by the lord chancellor. The doctrine put forth by the vice chancellor does not hold with regard to all corporations, but with proper qualitfi- cation and within limits it applies to trading corpora- 1 Re Overend, Gurney & Company, Grissell’s Case, L, R. 1 Ch. 528. son, 32 N. H. 9; Hodges ». Harris, 6 Pick. 360; Ormsbee v. Davis, 5 R. I. 442; Welles », Marsh, 30 N. Y. 344; Fisher 0. Murray, 1 E. D. Smith, 341; Kirk 0. Hodgson, 3 Johns. Ch. 400; McCullough ». Somerville, 8 Leigh, 415; Johnston v. Dutton, 27 Ala. 245; Western Stage Co. ». Walker, 2 Ia. 504; Stein v. Ladow, 13 Minn. 412. * See Livingston 2. Lynch, 4 Johns, Ch, 578; Hartford & N. H. R. R. Co. ». Croswell, 5 Hill, 383; Kean ». Johnson, 1 Stockt. 401. t See Kendall ». Rider, 35 Barb. 100. { See ex parte Henry Winsor, 3 Story, 411; Cutler v. Middlesex Factory Co. 14 Pick. 488; McLaren », Pennington, 1 Paige, 102; Osgood ». Ogden, 4 Keyes, 70. 554 ‘INTERNAL AFFAIRS OF CORPORATIONS. tions, at least in so far as it concerns the business to be engaged in, the management of the same, and the au- thority of the majority of the members. A corporation is, of course, theoretically distinct from its members, but both it and a partnership are after all made up of natural persons. A corporation moreover, though in the eye of the law it may have an actual and separate existence, can manifest its existence and commit torts, engage in contracts, and direct othér proceedings only by and through the individuals com- posing it. Lastly, a corporation generally, and a com- mercial corporation almost invariably, consists of a great number of members, a partnership of but few; it is therefore comparatively easy to find in the former a few factious individuals ready to oppose any change or inno- vation, and the results ot such opposition can seldom be so disastrous to them personally as it would be were they members of a small firm. Consequently , for all. these reasons we must be careful how we apply Lord Eldon’s reasoning to public companies; observing this caution, however, we shall find it applicable in the main. ; I. The majority of the members of a corporation may manage its affairs, and modify its constitu-> tion in any way they please, so long as they act with bona fides, and do not go beyond the powers of the corporation.* * The rule as stated in the text must be limited, so far as modifications of the ‘‘ constitutions” of corporations are concerned, to matters not fixed or controlled by the charter or other legislative act. Within the purpose’ of the corporation, according to the implied contract between the cor- porators, where the organic law is silent, the voice of the majority is su- preme, so long as they act with bona jides. ‘The fundamental principle of every association for the purposes of self-government is, that no one INTERNAL AFFAIRS OF CORPORATIONS. 555 In the first place it must be repeated, by way of caution, that what the corporation itself, as a united whole, cannot do, a fortiori a majority however great of its members cannot do; what is ultra vires of the constitued whole must manifestly be equally so of any and each of the constituent parts. But within the scope of the corporate affairs, the majority not merely represent but actually are for most purposes the corporation. Contracts entered into, and arrangements made or sanctioned by them, with due re- gard to formalities, and being authorized by the consti- tution of the corporation, are valid, notwithstanding the opposition or dissent of some of the members. shall be bound except with his own consent, expressed by himself or his representatives; but actual assent is immaterial, the assent of the majority being the assent of all; and this is not only constructively, but actually true; for that the will of the majority shall in all cases be taken for the will of the whole, is an implied but essential stipulation in every compact of the sort; so that the individual who becomes a member, assents before- hand to all measures that shall be sanctioned by a majority of the voices.” Re St. Mary’s Church, 78. & R. 517, “It is not to be doubted that, as a general rule, the acts of a majority of a corporation are binding on the whole, when confined to its ordinary transactions, and consistent with the original objects of its formation.” Mowrey v. Ind. & Cin. R. R. Co. 4 Biss. 78; Troy & Rutland R. R. Co. 2. Kerr, 17 Barb. 581; see Horton ». Baptist Church, 34 Vt. 316; Gifford». N. J. R. R. Co. 2 Stockt. 171; Zabriskie ». Hackensack & N. Y. R. R. Co. 3C.E. Green, 193; Black 2. Delaware & Rar. C. Co.7 C. E. Green, 130; Lauman 2. Lebanon Val. R. R. Co. 30 Penn. St. 46; East Tennessee & Va. R.R. Co. », Gammon, 5 Sneed, 567; Sprague v. Illinois River R. R. Co. 19 Ill. 174. Courts of equity, therefore, will not restrain corporations in the exercise of their powers, where there is no fraud or breach of trust alleged. Treadwell v. Salisbury Mfg. Co. 7 Gray, 398; see also Newby ». Oregon Central R. R. Co. 1 Saw. 68; Durfee v. Old Colony &c. R. R. Co. 5 Allen, 230; Bailey v. Power St. Church, 6 R. I. 491; Bayless 7. Orne, 1 Freeman Ch. 161; State of Louisi- ana v. Bank of Louisiana, 6 La. 745; Dudley 2. Kentucky High School, 9 Bush (Ky.) 576; Southern Plank-road Oo. v. Hixon, 5 Md. 165; Newhall % Galena & Chic. Union R. R. Co. 14 Ill. 273. 556 INTERNAL AFFAIRS OF CORPORATIONS. Lord v. Governor and Company of Copper Miners* is an illustrative case. The bill was filed by one share- holder on behalf of himself and the others, against the company, the members of the governing body and other parties; and it impeached several transactions of that body which had been sanctioned by majorities at gen- eral meetings of the shareholders, and amongst which was a project to vest all the property of the company in trustees for the purpose of liquidating its affairs. The defendants demurred, and the demurrer was al- lowed, notwithstanding some vague and general charges of fraud and misconduct on the part of the defendants, and an allegation that, by the constitution of the com- pany, no one but the governing body could convene a general meeting. The court held, that the specific acts complained of primarily concerned the internal ad- ministration of the company, and were not clearly such as it was incompetent toa majority of shareholders to sanction. Similarly, in Stupart v. Arrowsmith,’ a railway scheme having proved abortive, the majority of the subscribers, at a public meeting duly convened, ap- proved of the accounts, and dissolved the company. A bill filed subsequently by one shareholder to set aside the arrangement and open the accounts, was dismissed with costs on the ground that—apart from the plaintiff being bound by acquiescence—the proceedings having been sanctioned and adopted by the majority of the shareholders could not afterwards be disturbed. The broad rule is that in all matters of purely in- ternal economy the majority are supreme, and the courts will not interfere whether before to prevent the doing 19 Phill. 740. 3 Sm. & G.176; Kent v, Jackson, 2 D. G. M. & G. 49. INTERNAL AFFAIRS OF CORPORATIONS. 557 of acts, or subsequently to relieve from the consequences thereof.* The leading, and perhaps the earliest case upon this point is Foss v. Harbottle, and the principle there laid ‘down has not since been departed trom or qualified. + The bill was filed by two shareholders in a statutory corporation .on behalf of themselves, &c, against the five directors (three of whom had become bankrupt), and against a proprietor who was not a director, and the solicitor, and architect of the company, charging the defendants with concerting and effecting various fraud- ulent and illegal transactions, whereby the property of the company was misapplied and wasted, that there had ceased to be a sufficient number of qualified directors to constitute a board; that the company had no clerk or office; that in such circumstances the proprietors had 19 Hare, 461. Kent v. Jackson, 2 D, G. M. & G. 49; ? See Mozley v. Alston, 1 Phill. 790; Inderwick v. Snell, 2 Mac. & G, 216, * Courts of equity will not interfere unless the corporation is about to do some act outside of the scope of its authority, or in disobedience to the provisions of its constitution. Each and every stockholder contracts that the will of the majority shall govern in all matters coming within the limits of the act of incorporation; and in cases involving no breach of trust, but only error or mistake of judgment upon the part of the di- rectors who represent the company, individual stockholders have no right to appeal to the courts to dictate the line of policy to be pursued by the corporation, even where such error may result in loss to the stockholders. Dudley ». Kentucky High School, 9 Bush, 576. In Newhall ». Galena & Chic. Union R. R. Co. 14 Til. 278, the court refused to enjoin the company from building lateral roads, which the com- pany in their discretion had power to build, at the suit of a shareholder claiming that by such construction his divjdends would be diminished, and the resources of the company impaired. Barnard o. Vermont & Mass, R. R. Co. 7 Allen, 512; Thompson ». Erie Rwy. Co. 11 Abb. N. S. 188; Joslyn v. Pacific Mail 8. 8. Co. 12 Abb. N. 8. 329; Bach ». Same, 12 10. 373; Howell v. Chicago & N. W. R. R. Co, 51 Barb. 378; State of La. v. Bank of La. 6 La. 745. tSee Gregory v. Patchett, 33 Beav. 595; Gray v. Lewis, L. R. 8 Eq. 526. 558 INTERNAL AFFAIRS OF CORPORATIONS. no power to take the property out of the hands of the defendants, or satisfy the liabilities, or wind up the affairs of the company. It prayed that the defendants might be decreed to make good to the company the losses and expenses occasioned by the acts complained of; and for the appointment of a receiver to take and apply the property of the company in discharge of its liabilities, and to secure the surplus. The defendants demurred, and the demurrers were allowed, chiefly upon the grounds that upon the facts stated the continued -existence of a board of directors de facto must be in- tended; that the possibility of convening a general meeting of proprietors capable of controlling. the acts of the existing board was not excluded by the allegations of the bill; and that in such circumstances there was nothing to prevent the company from obtaining redress in its corporate character in respect of the matters com- plained of. The rationale of this decision is simple enough, viz., that the corporation, being the best judge, must be held the only judge of what concerns its own interests, and that consequently so long as it is acting—that is to say, the majority are acting—with bona fides, and a due con- sideration for the opinions of dissentients, no appeal lies from its domestic forum. It makes no difference what is the nature of the corporation, for public or private, for religious * or secular purposes; nor what the dis- pute, if the question be one upon which the general body is competent to determine; and if they have deter. mined after a fair hearing of objection, the courts will not rehear the case. Thus in Neate v. Denman,! where 1W.N. 1874, p. 65; L, R. 18 Eq. 127, * See as to interference in affairs of religious corporations, ante, pp. 47, 48. INTERNAL AFFAIRS OF CORPORATIONS. 559 the plaintiff wished to withdraw from an inn of court, but refused to accede to the conditions imposed by the inn upon withdrawal, Hall, V. C., decided that this was unquestionably an affair of internal jurisdiction, and that consequently he was unable to interfere to compel the inn to give up or modify the conditions. But in several cases the principle has been some- what misconceived, and consequently extended to mat- ters not coming within its application. It has to do only with such transactions as are intra vires, but it has been applied to, and held to disqualify persons from ob- taining relief in respect of proceedings done or contem- plated which certainly approach to, if they are not actually ultra vires. Yetts 7. Norfolk Railway Company’ is a case in point. An incorporated railway company issued new shares in pursuance of a resolution declaring the pur- pose of such new issue to be the raising of a sufficient amount to pay off the existing mortgage and bond debts .of the company. The holder of some of the new shares filed a bill, on behalf of himself and other holders of the shares, against the directors and the company, alleg- ing facts to show, and charging that they were about to apply the money paid in respect of the shares otherwise than in conformity with the resolution, and praying for a declaration that the money ought to be applied ac- cording to the terms of the resolution, and for a specific performance of the agreement thereby entered into, and for an injunction. The court allowed demurrers of the directors and the company, holding that the case fell within the principle laid down in Mozley v. Alston.* 13D. G. & Sm, 293. * The counsel in support of the demurrers argued, first, that the in- tended acts with which the defendants were charged, if wrong, were wrongs 560 INTERNAL AFFAIRS OF CORPORATIONS, Edwards v. Shrewsbury and Birmingham Railway Company’ is another case where this principle was strictly applied. Here a shareholder in an incorporated railway company filed a bill on behalf of himself and other shareholders to restrain the directors from issuing preference shares, on the ground that they were about to be issued contrary to the company’s acts, and for the purpose of constructing the original line instead of the branch (for which alone additional shares were to be created), and were intended to be distributed in a man- ner contrary to the directions of the act which author- ized the creation of additional shares. The bill, filed on the 22d of September, stated that the plaintiff, on the 17th of September, became aware of resolutions passed on the 12th of September, under which the preference shares were to be offered to the shareholders on the 23d. of September, but the bill did not otherwise show that the plaintiff had not the means of procuring a suit to be instituted in the name of the corporation. The corpora- tion and the directors demurred to the bill, and Knight- Bruce, V. C., decided that their demurrers could not be overruled consistently with the principles stated in, or 22D. G. & Sm. 587; Inderwick ». Beav. 4838. Compare Bagshaw v. Hast- Snell, 2 Mac. & G. 216; Bailey v.,Bir- ern Union Railway Company, 7 Hare, kenhead &c. Railway Company, 12 114; and 2 Mac, & G. 389, to the company generally, and therefore not the proper subjects of a suit framed as the one at bar; and secondly, that the suit was defective as re- gards the parties to it. The vice chancellor’s opinion was as follows: ‘‘T give no opinion as upon the question as to the parties to the suit. Upon the question of equity, I am not sure that, independently of recent authorities which have been cited at the bar, I should not have held the demurrers sustainable; but those decisions, and the judicial opinions ex- pressed with reference to them, are, as it appears to me, inconsistent with sustaining the bill, What course I should have taken, in a different state of the authorities, itis needless to say. As it is, I allow the de- murrers.”’ INTERNAL AFFAIRS OF CORPORATIONS. 561 to be extracted from Mozley v. Alston, and Exeter and Crediton Railway Company v. Buller, whether the pro- ceedings sought to be restrained were legal or not. On the bill being amended, and stating that a ma- jority of the shareholders supported the views of the directors, and refused to authorize the plaintiff or any other person to institute a suit in the name of the com- pany, the vice chancellor again allowed a demurrer, considering that the case as amended was still within the influence of the above authorities,* It admits of reasonable doubt whether either of the two cases last cited fell within the rule now in consid: eration. The matters there complained of—viz., the employment of the proceeds of shares to improper pur- poses—would seem rather to come under the head of ultra vires, strictly so called, than of mere internal ar- rangement. Foss v. Harbottle, as it has been judicially stated, “does not go further than this: that if the act, though it be the act of the directors only, be one which a general meeting of the company could sanction, a bill by some of the shareholders, on behalf of themselves * The several acts of parliament, seem to justify the construction con- tended for by the counsel for the demurrants, namely, that the new shares were to be a part of the general capital of the company, applicable to the purposes of the original undertaking, and that it was the intention of the legislature to invest the company with the most absolute power, as to the terms upon which they should issue the new shares. Inderwick v. Snell, turned on the construction of a deed of settlement, giving power toa meeting to censure directors for negligence, misconduct in office, or any other reasonable cause; and it was held that this was a subject for the consideration of the meeting solely, and that as no fraud had been ‘shown, the court would not interfere. In Bailey ». Birkenhead &c. Rw. Co., Lord Langdale said, the case could only be considered as an at- tempt to induce the court to interfere in the internal management of the affairs of the company, and to take upon itself to determine a question, which might well and ought to be determined by the shareholders them- selves at general meetings, 36 562 INTERNAL AFFAIRS OF CORPORATIONS. and others, to impeach that act cannot be sustained, because a general meeting of the company might im- mediately confirm and give validity to the act of which the bill complains.” * Accordingly in the case of Bag.- shaw v. Eastern Union Railway Company’—from the judgment in which this extract is taken, Wigram, V.C., determined that the application of moneys derived from a particular issue of shares was not a pure question of internal administration. Here the defendants were au- thorized by several acts of parliament to make railways from Colchester to Ipswich, Ipswich to Bury St. Ed- munds and Norwich, and from Ipswich to Harwich, and for those purposes to raise moneys by shares and loans, not exceeding certain sums in the whole. The same company was also, by a distinct act, authorized to purchase and complete the Hadleigh Junction Railway, and for that purpose, by shares or loans, to raise a sum not exceeding £100,000. A suit was instituted by the proprietor of a scrip certificate for stock, forming part of the capital raised in pursuance of the acts authoriz- ing the company to purchase the Hadleigh Junction Railway and make the Harwich line, charging that the company was about to misapply the £100,000. raised 1] Hare, 114; 2 Mac, & G. 389. * In regard to Foss 0, Harbottle and Mozley ». Alston, ‘‘it is apparent from the opinion of the court in the case of Gray v, Lewis, L. R. 8 Eq. Cases, 526, 541, that those cases are regarded by the Court of Chancery in England only as holding that a shareholder cannot maintain a suit, on behalf of himself and other shareholders, where the acts complained of are capable of being released or confirmed by the corporation, and that in such a case the corporation itself is the only proper plaintiff; but that those cases are not regarded as holding, and that it is not the law in the Court of Chancery in England, at this day, that a shareholder cannot maintain a suit, on behalf of himself and the other shareholders, where the acts complained of are ultra vires of the corporation.” Per Blatchford, J., in Heath », Erie Railway Co. 8 Blatch. 347, ' INTERNAL AFFAIRS OF CORPORATIONS. 563 under the Hadleigh act in the construction of the Nor. wich line, and seeking to restrain such misapplication. To this suit the company and the directors demurred for want of equity, but Wigram, V. C., overruled the demurrers. On appeal, the lord chancellor affirmed this decision. He said: “The question really is, whether the law will permit money advanced for one purpose to be applied contrary to the wish of the owner of that money to another, and whether the bill states such a case as brings it within that principle.” And after examining the facts and authorities, he decided that “the plaintiff was in equity entitled to the interposition of the court for the purpose of keeping the company, in the application of his money, to those purposes for which it was said to be advanced.” It manifestly fol- lows that the majority from time to time may make such modifications as they think fit in the business and other matters of the corporation.’ * II. The court will interfere for the general benefit of the corporation when disputes have arisen which prevent its affairs being properly carried on. + See Att. Gen. v. Gould, 28 Beav. 485. * This broad statement must be qualified by the previous limitations expressed in this chapter. + Statutory provisions are found in many, if not all, the States, regu- lating in some degree the mode in which disputes affecting the orderly continuance of corporations are to be settled. Thus, in California, on application of any person or corporation, that may be agerieved by or may complain of any election, held by any cor- porate body, the district judge of the district in which the election is held is authorized, upon hearing affidavits, proofs and allegations, to es- tablish the election, or order 4 new election, or make such order, or give such relief in the premises, as right and justice may seem to him to re- quire. Gen, Laws Cal. vol. 1, p. 117, § 760; see Brewster ». Hartley, 37 Cal. 15, In New York the Code provides (sec. 422), that an action may be - 564 INTERNAL AFFAIRS OF CORPORATIONS. This was so decided in Featherstone v. Cooke. Here the board of directors of a company divided intos&two parties in reference to the mode of conducting the com- pany’s business. Each endeavored to exclude the other party from the government of the company, the result being the stoppage of the company’s works, and serious consequent losses to the company. Finally, one of the directors filed a bill against the company and the direct- ors adverse to him, to restrain the latter from interfer- ing in the management. Upon motion made, Malins, V. C., granted a temporary injunction, and appointed a receiver and manager, excluding all the directors from 1L, R. 16 Eq, 298. brought by the attorney general, in the name of the people, upon his own information, or upon the complaint of any private party, against the par- ties offending, when any person shall usurp, intrude into, or unlawfully hold or exercise any office in a corporation created by the authority of the State; and (sec. 440) that where several persons claim to be entitled to the same office or franchise, one action may be brought against all such per- sons, in order to try their respective rights to such office or franchise See People v. Albany & Susquehanna R. R. Co. 55 Barb. 344; s. c. 1 Lans.. 808; 57 N. Y. 161; People v. Hills, 1 Lans. 202; also 2 N. Y. R. 8. (Ed- monds’ ed.) p. 602. That mandamus will lie to compel an election of the officers of a cor- poration, in the absence of statutory provisions on the subject, see Angell & Ames on Corp. sec. 700; People v. Albany Hospital, 61 Barb. 397. A court of chancery in New Jersey has no jurisdiction to determine the validity of an election of directors of a private corporation. The only adequate remedy is in the courts of law, which have power to adjudge the office vacant, and to compel the admission of a person properly elected, by means of the remedies of quo warranto and mandamus. Owen v. Whitaker, 5 C. E. Green, 122. When, however, the question comes up incidentally, and must be decided to obtain equitable relief, such court is competent to inquire into and decide the validity of an election for the purpose of the suit. Johnston v. Jones, 7 C. BE. Green, 216. On the subject of quo warranto against officers claimed not to have been legally elected, by reason of illegal votes, see Hoppin v. Buffum, 9 R. I. 518; and High on Extr. Rem. ch. XV. INTERNAL AFFAIRS OF CORPORATIONS. 565 any voice in the management until a general meeting of the shareholders had been called; after which he discharged the receiver, and left the management in the hands of the new governing body chosen at such meet- ing.* As to the jurisdiction, the vice chancellor ob- aerved: “With regard to private partnerships, nothing is of more frequent occurrence than the quarrels of partners. If parties quarrel, oust each other from the management, or so conduct themselves that the partner. ship cannot go on with advantage, it is every day’s practice for the court to interfere by injunction, and ap- point a receiver if necessary. With regard to public companies, I apprehend the same principle is applicable. If a state of things exists in which the governing body are so divided that they cannot act together, and there is the same kind of feeling between the members as there frequently is in the case of private partnerships, it is clearly within the rule of this court to interfere, and it will do so.” III. The court will interfere to protect any individual member, if the proceedings of the majority con- stitute a fraud upon him. + * “Tf a stockholder is aggrieved by the refusal of the board of direct- ors to accept his views, his remedy is to unite with other stockholders and change those directors. But if irreparable mischief to his interests may ensue in the mean time, equity will administer preventive justice until ‘such time as the will of the body of stockholders can be ascertained.” Samuel v. Holladay, Wool. 400. + Jackson v. Ludeling, 21 Wall. 616; Heath 2. Erie Railway Co. 8 Blatch. 406; Marsh ». Eastern R. R. Co. 40 N. H. 548; 8. c. 43 N. H. 415; Abbott ®, Merriam, 8 Cush. 590; Peabody 2. Flint, 6 Allen, 52; Sears ». Hotch- kiss, 25 Conn. 175; Robinson o. Smith, 3 Paige, 222; Cunningham». Pell, 5 Paige, 607; Wood o. Draper, 24 Barb. 187; Butts v. Wood, 38 Barb. 181; s.c. a7 N. Y. 317; Taylor ». Miami Co. 5 Ohio, 162; Neal 2. Hill, 16 Cal. 145; Smith v. Payne, 17 Cal. 178; Mussina 2. Goldthwaite, 34 ‘Tex. 135. 566 INTERNAL AFFAIRS OF CORPORATIONS, The majority must act with regularity and bone jides. They must be duly summoned, and all usual formalities must be observed in the conduct of their meetings. The minority are, of course, also entitled to notice of any meeting, and of the matters to be there transacted. * More than that—they can demand a fair hearing, and that their wishes and arguments should be listened to and duly weighed.’ A fortiori, if the conduct of the majority amounts to a fraud upon, or to undue influence with respect to,. the minority, the court will protect the interests of the latter.+ In Ae London and Mercantile Discount Com- pany,’ after a resolution to wind up the company vol- untarily, several of the shareholders presented a petition complaining of certain transactions by the directors which they alleged to be fraudulent and improper, and to have caused great loss to the company, and praying that proceedings might be directed to be taken, at the risk of the company, in respect of such improper trans- actions. Page-Wood, V. ©., in the first instance, or- dered the petition to stand over, to enable the sense of the company to be taken on the question of such fur- ™See the judgments of Lord Eldon ler, 5 Rail. Cas. 211; and East Pant du in Natusch v, Irving, and Const v. Har- Lead Mining Company ». Merry weather, ris, ubi supra. Compare Blisset », Daniel, 2H. & M. 254, both which were suits. 10 Hare, 493. by members of a minority, and which 2L,R. 1 Eq. 277; see also Exeter were ordered to stand over till the sense- and Crediton Railway Company v. Bul- of the whole body could be taken. * Ante, p. 350, note. , + Equity will interfere on application of minority to prevent the misap- propriation of funds, or the commission of any fraud against stockholders, or breach of trust by corporators or officers of corporations. See cases cited in notes to this chapter. But it may be doubted whether there is any power in a court of equity, to protect against the effects of undue in- fluence in regard to corporate affairs, unless such influence is “ corrupt and improper,” amounting to actual fraud. The case cited in the text must be considered with reference to the provisions as to winding up of the companies act, 1862, §§ 147-153 (Buckley, pp. 281-287). INTERNAL AFFAIRS OF CORPORATIONS. 567 ther litigation. The petitioners, however, did not call any meeting, asserting that their votes would be over- borne by the votes of the parties implicated in transac. tions complained of and their friends; and thereupon the petition was dismissed.'’ The vice chancellor ob- served: “The legislature has thought that the share- holders should meet and regulate that part of their own business, as they would regulate any other part of it, by the views of the majority; and, provided the votes of the majority are given fairly and reasonably, there is no ground whatever for the interference of the court. At the same time, no doubt, it was foreseen that there might arise cases of such decided undue influence, and such a cause of overbearing authority by those whose acts were sought to be impeached, as would render it desirable that the court should interfere, and therefore in such cases there was reserved to the court the power of superintending a voluntary winding up, by putting in force its coercive jurisdiction where anything im- proper should be attempted on th® part of those who might endeavor to screen their own actions by procur- ing a voluntary winding up. It is only by bringing the case as near as possible to the latter alternative that the petitioners could be entitled to entertain any hope of success in the attempt to obtain the order sought. I have diligently sought to ascertain, there- fore, whether in truth this minority, or apparent mi- nority, of shareholders have been overborne by im- proper or corrupt influence; if such a case were proved, no doubt the court would interfere. That is one of the very objects which the legislature had in view when it 1 But without prejudice to the peti- prevent acts or to obtain compensation tioners at their own risk filing a bill, for acts which are either ultra vires or which—as will be seen, post, Chap. ii, a fraud upon the company. sect. 1—any single individual can do to 568 INTERNAL AFFAIRS OF CORPORATIONS. declared that, notwithstanding a voluntary winding-up, there should be a power of interference; but I cannot find any trace of that.” The vice chancellor accordingly, being of opinion that the applicants had not satisfactorily proved their allegations, dismissed the petition. But this, as he said, simply left them in their original position. “By abstaining from interference I throw no obstacle in the way of the petitioners’ prosecuting any litigation they may think right at their own risk—I only throw on them the risk of such litigation.” Fraser v. Whalley’ is another case somewhat in point. Here directors of a railway company, proposing to. issue shares in pursuance of an old resolution passed for a particular purpose, were restrained from so doing at the suit of a shareholder, although it was asserted that he belonged to a small minority, and that the ma- jority were favorable to the issue of shares proposed.* 19 H.& M.10; compare Hattersley R. 881; Bluck v. Mallalue, 27 Beav. v, Shelburne, 31 L. J. Ch. 878; 10 W. 3898. * That courts will interfere to prevent acts which are beyond the corporate powersis clearly settled. Thatin like mannerthey will restrain @ majority from doing acts which, though within the power of the corporation, require the unanimous consent of the stockholders, is equally well established. The suit however must be brought by a party having a legal interest, that is by a stockholder or creditor of the corporation. See Dodge ». Woolsey, 18 How. 331; Samuel o. Holladay, Wool. 400; March », Eastern R. R. Co, 40 N. H. 548; Same parties, 43 N. H. 515; Kean 2. Johnson, 1 Stockt. 401; Gifford o. N. J. R. R. Co. 2 Stockt. 171; Manderson v. Commercial Bank, 28 Penn. St. 379; Lauman 2, Lebanon Valley R. R. Co, 30 Penn. St. 46. ‘‘It 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 doing 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 stockholders HOW REDRESS MAY BE. OBTAINED. 569 SECTION II. HOW REDRESS MAY BE OBTAINED BY ONE OR MORE MEMBERS COMPLAINING OF THE PROCEEDINGS OF THE MAJORITY. But though we must consider it as fully established, that the court will interfere on behalf of and protect a 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 jaw denominated a breach of trust; and the jurisdiction extends to inquire into and to enjoin, as the case may require, any proceedings 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 aright growing out of it, for which there is not an adequate remedy at law.” Dodge v7. Woolsey, 18 How. 331. In French v. Gifford, 30 Ia. 148, Day, J., after an elaborate review of authorities, says: ‘‘ Those cases in which the jurisdiction of equity is denied, are cases in which that jurisdiction was invoked for the purpose of depriving the corporation of its franchises, winding up its affairs, and distributing its assets; those in which it is recognized, are cases in which proceedings were instituted on behalf of stockholders, against the officers of the corporation, for fraudulent misapplication of funds, or breach of trust in the discharge of official duties. They are not only consistent with themselves, but in harmony with the general doctrines of equity jurisprudence which forbid the interposition of courts of equity in cases where the law affords ample relief, but always concede it for the enforcement of trusts and the prevention of frauds. The doctrine best sustained by authority, and most in consonance with reason and justice, seems to be that courts of equity, aside from statutory provisions, do not exercise a jurisdiction over a corporation, as over a partnership, to dissolve it and distribute its assets; but that it will afford a stock- holder relief from the malfeasance of those intrusted with the man- agement of the corporate business.” ‘The corporate authority is con- sidered to have been conferred by the stockholders upon the trust and confidence that it will be exerted at least with a view to advance the interest of the stockholders, and not used with a purpose to injure and destroy that interest; and it is settled, that courts of equity in this country will, at the instance of a stockholder, control acorporation and its officers, and restrain them from doing acts even within the scope of corporate authority, if such acts, when done, would under the particular circum- stances amount to a breach of the very trust upon which, as we have seen, 570 INTERNAL AFFAIRS OF CORPORATIONS. minority against proceedings amounting to fraud on the part of the majority, yet it is by no means clear when and how, under what precise circumstances, and by what mode of application its interference can be invoked. Perhaps, however, the following statement, as far as it goes, will be found correct and borne out by the au- thorities. First.—In respect of what Matters. (a) When the Matters in Question are a Fraud on the Corporation. First, the majority may confirm and condone such, provided they are not ultra vires,* thereby relieving the guilty parties of their liability; but, in determining the majority, the votes of the guilty parties themselves must be excluded. This was done in Atwool v. Merry- weather,’ where the number of votes for rescinding a fraudulent contract was 324, and for upholding it 344, but of the latter 106 belonged to the persons impli- cated. Secondly, the minority complaining, who by thus striking off improper votes form the acting majority, ‘EL, R. 5 Eq. 464; compare Re Lon- don and Mercantile Discount Company, ‘ ubi supra. 4 the authority itself has beenconferred.” Wright 2. Oroville M. Co. 40 Cal. 20. ‘‘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 shrewdness to be required of or exercised by the directors and other officers or agents. As a consequence, 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 fora final winding up of the affairs of the corporation.” Hedges v. Paquett, 3 Oregon, 77. * Ante, p. 462. Can a majority confirm or condone a fraudulent act so as to affect the rights of dissenting shareholders ? HOW REDRESS MAY BE OBTAINED. 571 and consequently are competent in respect of the mat- ters in question to act for and represent the corporation, may then file a bill to obtain redress, either in the name of the corporation against the wrong-doers simply, or in their own behalf—~. ¢., one or more members on be- half of themselves and all the shareholders except such as are defendants thereto, who will include both the guilty parties and the corporation itself, as a formal de- fendant.* Under some circamstances it would appear from the decision in Gregory v. Patchett,’ * that a suit may be instituted by one or more of the members aggrieved, on behalf of himself and all others, &c., against the wrong-doers only. But'it is submitted that such a suit would be defective, and that in every case where the question, whether of ultra vires or of fraud, is one which concerns the corporation itself, the corporation must be a party either as plaintiff or as defendant. A decision in the absence of the corporation—which, be it remembered, is distinct from even the whole body of its members—would be a decision affecting the rights and liabilities of an individual not before, and not heard by, the court.+ ? Atwool v. Merryweather, ub: supra. 238 Beav. 595; See Hichens w. Congreve, 4 Russ. 562. * See Heath 0. Erie Rwy. Co. 8 Blatchf. 347, 401. + “That a stockholder may bring a suit when a corporation refuses, is settled in Dodge v. Woolsey, but such a suit can only be maintained on the ground that the rights of the corporation are involved. These rights. the individual’shareholder is allowed to assert in behalf of himself and associates, because the directors of the corporation decline to take the proper steps to assert them. Manifestly the proceedings for this purpose should be so conducted that any decree which shall be made on the merits shall conclude the corporation. This can only be done by making the corporation a party defendant. The relief asked is on behalf of the cor- poration, not the individual shareholder, and if it be granted, the com- 572 INTERNAL AFFAIRS OF CORPORATIONS. Thirdly, a minority, and any member thereof on its behalf, may file a bill asking for leave to institute pro- ceedings in the corporate name and at the corporate risk ;1 and this, perhaps, was till recently the more proper method, whenever it was doubtful either whether the acts in dispute were fraudulent, or whether the per- sons favoring the same and not implicated therein, if held to be fraudulent, formed the majority.* However, since the decision in Atwool v. Merryweather—“it would be idle to go through the circuitous course of saying that leave must be obtained to file a bill for the company ”—it seems that this course is unnecessary, and that, if the bill be framed in either of the forms above indicated, all and every ‘question arising therein and calling for decision will be decided. + 'See Page-Wood V.C.,in Atwool 339; Bank of Gibraltar and Malta, L. v. Merryweather, ubi supra. Thisisnot R. 1 Ch. 69; Downes». Ship, L. R. 3 H. unseldom done in winding up—see Im- L. 343; and compare 25 & 26 Vict. vu. perial Bank of China d&c. L. R. 1 Ch. 88, 8s. 91, 139. plainant derives only an incidental benefit from it. It would be wrong, ‘in case the shareholder were unsuccessful, to allow the corporation to renew the litigation in another suit, involving precisely the same subject- matter. To avoid such a result, a court of equity will not take cogni- zance of a bill brought to settle a question in which the corporation is the essential party in interest, unless it is made a party to the litigation.” Davenport »v. Dows, 18 Wall. 626; Hersey v. Veazie, 24 Me. 456; Smith ». Hurd, 12 Metc. 371; Allen ». Curtis, 26 Conn. 456; Robinson o. Smith, 3 Paige, 222; Cunningham 2. Pell, 5 Paige, 618; Western R.R. Co. v. Nolan, 48 N. Y. 513; Charleston Ins. Co. 2. Sebring, 5 Rich. Eq. 342. * Bronson v. La Crosse R. R. Co. 2 Wall. 283; Brown v. Van Dyke, 4 Halst. Ch. 795; Bayless ». Orne, 1 Freem. Ch, 161; Gotham ». Gilson, 28 Cal. 479. + The leading case in this country on this subject is Dodge ». Woolsey, 18 How. 331, where it is held, that a stockholder may institute a suit in his own name, in equity, against a wrong-doer, whose acts operate to the prejudice of the interests of the stockholders, where the directors, on ap- plication made to them, refuse to institute a suit in the name of the com- pany. In Memphis City o, Dean, 8 Wall. 64, Nelson, J., commenting on HOW REDRESS MAY BE OBTAINED, 573 (b) What Matters will be Considered a Fraud on the Minority. It is often extremely difficult to discriminate fraud on a corporation from fraud upon a section only of this decision, says: ‘‘This refusal of the board of directors is essential in order to give the stockholder any standing in court, as the charter con- fers upon the directors representing the body of stockholders, the general management of the business of the company. There must bea clear de- fault, therefore, on their part, involving a breach of duty.” See also Davenport 0. Dows, 18 Wall. 626; Samuels 0. Express Co McCahon, 214; 8. ¢. 1 Woolw. 400; Hersey ». Veazie, 24 Me. 12; Peabody v. Flint, 6 Allen, 52; Hodges », N. E. Screw Co. 1 R. I. 312; Allen ». Curtis, 26 Conn. 456; Robinson 0. Smith, 8 Paige, 222; House v. Cooper, 30 Barb. 157; Rochester v. Barnes, 26 Barb. 657; Bayless ». Orne, 1 Freem. Ch. 161; Gardiner 2. Pollard, 10 Bosw. 677. That a bondholder may in like case bring suit, see Newby v. Oregon Cent. R. R. Co. Deady, 609; 8. 0. 1 Saw. 68. It is held, however, that such refusal is not necessary when it appears that application would have been useless, as when the guilty parties are the directors who control the corporate action. Brewer ®. Boston Theater, 104 Mass. 878; Mussina 0. Goldthwaite, 34° Tex. 125. If the acts complained of are ultra vires, the application to directors is unnecessary. In Heath v. Erie Rw. Co. 8 Blatch. 347, which contains a very full discussion of the principles and authorities bearing on this sub- ject, it is said: ‘Now so far as the bill sets out acts ultra vires, in issu-~ ing stock, and breaches of trust, which are frauds on the stockholders, such acts and breaches of trust are -beyond the power of the corporation or its directors to affirm, or sanction, or make good; and in such case, the authorities agree, that the reason of the rule for an application to the corporation, or its board of directors, to bring the suit, does not exist. Such reason is, that while the stockholder is prosecuting his suit, the corporation, through its board of directors, may affirm and make good the acts complained of. But the rule ceases when the reasonceases. The bill is, therefore, clearly maintainable, in respect to the acts ultra vires which it sets forth, and the preventive relief it seeks, founded thereon, without reference to anything else contained in it.” Tn Samuel v. Holladay, 1 Woolw. 400, Justice Miller holds, that this rule, allowing stockholders to bring suit, is entirely confined to preventive remedies. Commenting on the decision in Dodge v. Woolsey, he says: “ But no case is cited” (in that case) ‘‘nor does any dictum in the opinion of the court go to the length of asserting, that when a corporation has been injured by a tort or a breach of contract, or has any right of action, legal or equitable, against a party, a shareholder can come into court and 574 INTERNAL AFFAIRS OF CORPORATIONS, the members thereof. What concerns, what militates against the rights of the whole body, will generally, to a greater or less degree, similarly concern and mili- tate against the rights of individuals, But it is not, on the other hand, equally true that the interests of the members separately are synonymous with those of the members collectively. What prejudices one particular corporator or class of corporators may not be prejudicial—indeed, may even be beneficial—to the rest of the community. Ora certain transaction may be harmful in a proportionate degree to every member and advantageous to none, but some may desire to pass it over, while others may wish to seek redress for the same. Or, without raising any question of loss or bene- fit, the many may actively urge or passively acquiesce in the prosecution of certain matters to which the few ob- ject, and if they have the power, decline to engage the corporation in. The exact point to be determined is— when will the courts interfere on behalf of the minority thus refusing to submit to arrangements and proceed- ings of which they disapprove? It is, of course, as- sumed that the affairs in question are intra vires, are affairs of internal government only, and prima facie within the scope of corporate authority. If ultra vires, a prosecute that cause of action, because the corporation fails or refuses to doso. * * * Inthe case before us we have no attempt to transcend the powers of the corporation, nor any breach of trust on the part of the directors, butsimply a neglect to bring a suit which one of the stockholders thinks should be brought. * * * Ifa stockholder is aggrieved by the refusal of the board of directors to accept his views, his remedy is to unite with other stockholders and change those directors. But if irre- parable mischief to his interests may ensue in the mean time, equity will administer preventive justice, until such time as the will of the body of stockholders can be ascertained.” See also Allen v. Curtis, 26 Conn. 456; Abbot v. Merriam, 8 Cush. 588; Smith o. Hurd, 12 Metc. 871; McAleer v. McMurray, 58 Penn. St. 126. HOW REDRESS MAY BE OBTAINED. 575 the difficulty of decision is far simpler, as will be seen in the next chapter. As far as can be gathered from cases not always reconcilable, and sometimes even conflicting, it appears that the minority will be protected under the following circumstances : =, it First. When there is a direct and unjustifiable attack upon, and violation of the rights of some one member or class of members.* Thus, at the suit of preference shareholders, companies and their directors have been repeatedly restrained from paying dividends in deroga- tion of the contracts entered into with them.1 What are the exact privileges of such shareholders may not be altogether clear, and call even for judicial determination,’ -but whatever they are, it is beyond the power of the cor- poration to vary them.t So powers of making by-laws and of disfranchising must be employed in a proper manner. In Adley v. Whitstable Company,’ a mem- ber had been, in pursuance of a by-law, excluded from participation in the company’s profits, but Lord Eldon, holding the exclusion to be under the circumstances not only uncalled for but unlawful, decreed that the plaintiff should upon terms be restored to his original rights. And as already seen, powers to forfeit shares and the like must be put in force dona fide, and, when the cir- ' Henry v, Great Northern Railway 2 See especially Maughan ». Leam- Company, 4K. d& J.1; and 1 D.G.d& ington Gas Company, 15 W. R. 333. J. my and cases cited ante, pp. 145- 5 19eVes, 304; 1 Mer. 107. 147, * Gray v. Portland Bank, 3 Mass. 385; Jackson v. Newark Plank Road Co, 2 Vroom, 277; Gifford v. N. J. R. R. Co, 25 Stock. 171; Nazro »v. Merchants’ Mut. Ins. Co. 14 Wis. 295; ex parte Booker, 18 Ark. 388; Barnstead 0. Empire Mining Co. 5 Cal. 299. Tt Bailey ». R. R. Co. 1 Dill. 174; 8. c. 17 Wall. 96; ante, p. 147, note. 576 INTERNAL AFFAIRS OF CORPORATIONS. cumstances require, not for the purpose of punishing or damaging a shareholder.’ * Secondly. When the corporation is doing acts of such a kind or in such a way as to affect unduly and unfairly some of its members only, when these acts can be so done, and consequently if done at all ought to be so done, as to affect in a proportionate degree every member. This chiefly occurs in the making of calls.+ It has already been pointed out that this is a trust to be exercised for the general benefit. Consequently it necessarily follows that calls must be levied alike, as to time, convenience, and amount, and every other circum- stance, upon every shareholder. In Preston v. Grand Collier Dock Company,’ nine persons had subscribed for 1,000 shares each under special circumstances and to: benefit the company, and afterwards they made a dec- laration that they held these shares in trust for the company. Subsequently the company in public meeting unanimously resolved that these shares should be trans- ferred to the secretary, and calls were made omitting these subscribers. Shadwell, V. C., however, on bill filed by one of the other shareholders to render these nine liable, held that the calls must be made upon them: “This court never would allow the directors of a company so to proceed as to require some shareholders to pay a deposit and calls, and not to require others to make similar payments. It is quite obvious to me that ? Hart v. Clarke,6 D.G. M. & G. peculiar to the shareholder concerned, 232; Stubbs v. Lister, 1 Y¥.&C. C. C. buta matter affecting the whole corpo- 81; Watson v. Eales, 23 Beav. 294; ration, and to annul which such share- see Sweny v. Smith, L. R. 7 Eq, 324, holder may consequently file a bill on where it was decided that an illegal behalf of himself and all other, &e. forfeiture of shares is not a wrong 711 Sim. 326, # * Ante, p. 151, note. t Ante, p. 150, note; Germantown Pass. Rw. Co. 0. Fitler, 60 Penn. St. 124. HOW REDRESS MAY BE OBTAINED. : 577 no fraud was intended, and that the thing really meant was a benefit to all the subscribers—namely, that the subscribers should get the act of parliament they wished for. But, nevertheless, as that purpose was accomplished by these nine gentlemen becoming share- holders of 1,000 shares each, my opinion is that there has been an error which this court will set right— namely, that when the directors thought proper to make the calls as they did, they stopped short of that which was their duty, and that they ought to have gone on to direct the same sums to be paid upon each of those shares as had been directed to be paid upon the other shares which were held by those who were called the registered shareholders. Therefore it is evident that, in whatever manner it is to be done, this court will rectify the error that has been made, and will take care that all the shareholders shall be put upon the same footing with respect to the liability to pay calls.” Thirdly. When the corporation, and more frequently the governing portion thereof, are employing powers vested in them for the general good to the special detri- ment of particular individuals. Perhaps the best illustrations of this principle occur in connection with the transfer of shares.* The direct- ors of companies have not impliedly any discretion as to refusing to register a transfer of shares, even in cases where the proposed transfer would be contrary to the interests of the shareholders! Very frequently such a 1 Re Smith, Knight & Company, refuse to be partakers in any such fraud- Weston’s Case, L. R. 4 Ch. 20. Butas ulent or fictitious transaction.” L. R. 4 was observed by the Lord Justice Sel- Ch. 80; and compare re National and wyn, “No doubt, if the directors had Provincial Marine Insurance Company, reason to believe that the transaction ex parte Parker, L., R. 2 Ch. 685, was fraudulent or fictitious, they might * See Angell & Ames on Corps. §§ 355, 567; United States ». Vaughan, 3 Binn, 394; Sargent o. Franklin Ins. Co. 8 Pick. 90. 37 578 INTERNAL AFFAIRS OF CORPORATIONS. discretion is expressly conferred on them by the articles. of association. The discretion so given must, however, be exercised reasonably—for instance, a refusal to make any transfer at all to anybody would not be reasonable, and the court would control such an improper exercise of the power.* It should also here be mentioned by way of caution that however harshly or cruelly, judged by the stand- ards of morality or the customs of society, a corpora- tion, or a guasi-corporate body, or a majority of its members—acting, it may be, against the wish of a minority—are proceeding with respect to an employee or other person not a member of their body, the courts cannot interfere on behalf of the aggrieved party upon any ground connected with the internal administration. The person so complaining must apply to the courts upon some ground of law or equity, some right peculiar to himself which has been infringed. Moral considera- tions are insufficient. A corporate body had not in Coke’s time, and it has not now, a soul, and therefore it may, and not unseldom does, deal with its servants and others compelled to trust to its good faith with great harshness, but the courts can only censure such proceed- ings, and not interfere to prevent them. If the party damnified thereby cannot allege some fraud or legal in- justice to himself personally, or some legal abuse or misuse of the corporate powers which may affect the public, the decision of the corporate tribunal will, as against himself, be final, and not examinable by any ulterior authority.’ * ? Robinson v. Chartered Bank, L, R. 1874, pp. 78, 74; Whiston v, Dean and 1 Eq. 32. Chapter of Rochester, 4 Hare, 632; 17 2Hayman v. Governing Body of Q. B. 1. Heh School, L. R. 18 Eq. 28; W. N. * See Bbramaele o. Union Pass. Rw. Co. 54 Penn. St. 401. HOW REDRESS MAY BE OBTAINED. 579 - Secondly— Nature of Proceedings when the Minority are Complaining. Assuming it established that the proceedings— whether styled fraud, undue influence, or what not— are of such a description as to entitle the parties specially aggrieved to some relief in respect thereof, the | next and main question is as to the means by which the relief can be obtained. The suit must usually, -perhaps invariably, be brought in chancery. A court of law recognizes the corporation only, not its members as distinct from and having rights against it, nor @ fortiort one class of mem- bers as endued with powers and privileges, or subject to duties and liabilities, not in their ordinary capacity of citizens, but by virtue of their status as corporators, against or with respect to another class or section of members.* And even if a common law tribunal could, under peculiar circumstances, take cognizance of such rights and duties and of disputes arising therefrom, the only redress it could afford the sufferers would be a money compensation by way of damages, But what they need is, not so much recompense for wrong already inflicted, as a security against future frantactions similar to the past; and for this redress the intervention of equity must be sought. The Frame of the Suit.—Plaintiffs. If only one individual be aggrieved, then that one * Hodsdon v. Copeland, 4 Shepley, 814; Smith v, Hurd, 12 Met. 371; Allen o. Curtis, 26 Conn. 456; see Hinsdale v. Larned, 16 Mass. 69; Dale % Grant, 5 Vroom, 142; Hartridge 2. Rockwell, R. M. Charlt. 265, 580 INTERNAL AFFAIRS OF CORPORATIONS. alone will be plaintiff,, and the corporation—and if deemed advisable the acting members—the defendants. The relief asked for must, of course, vary with the cir- cumstances, but usually includes a prayer for an injunc- tion to restrain the continuance or a repetition of the conduct complained of. But when the wrong is actually or potentially to a class or number of the members, then one or more of these will be the actor or actors, the proceedings being instituted by him or them on behalf of all.* But how ? Compare Fawcett v. Laurie, 1 Dr. to restrain directors from paying a divi- & Sm. 192, where one shareholder dend already declared, with Sweny 2. was not allowed to sue on behalf, &c., Smith, ante, p. 576,n.; and see Stevens * In Smith vo. Swormstedt, 16 How. 302, the bill was filed by the com- plainants for themselves and in behalf of the traveling and worn-out preachers in connection with the Society of the Methodist Episcopal Church South. An objection was taken on the argument to the bill for want of proper parties to maintain the suit. Mr. Justice Nelson said: “The rule is well established that, where the parties interested are numerous, and the suit is for an object common to them all, some of the body may maintain a bill in behalf of themselves and all the others; and a bill may also be maintained against a portion of a numerous body of de- fendants representing a common interest. Story, J., in his valuable treatise on Equity Pleadings, § 97, after discussing this subject, arranges the exceptions to the general rule as follows: 1st, where the question is one of a common or general interest, and one or more sue or defend for the benefit of the whole. 2d. Where the parties form a voluntary asso- ciation for public or private purposes, and those who sue and defend may fairly be presumed to represent the rights and interests of the whole. 3d. Where the parties are very numerous, though they have, or may have, separate and distinct interests, yet it is impracticable to bring them all before the court. Where the parties interested in the suit are numerous, their rights and liabilities are so subject to change and fluctuation by death and otherwise, that it would not be possible, without very great in- convenience, to make all of them parties; and it will oftentimes prevent the prosecution of a suit to a hearing. For convenience, therefore, and to prevent a failure of justice, a court of equity permits a portion of the parties in interest to represent the entire body, and the decree binds all of them the same as if all were before the court.” See also 1 Daniell’s Chancery Practice, 4th Am. ed. p. 238; 48th Equity Rule U. 8. Sup. Ct.; HOW REDRESS MAY BE OBTAINED. 581 to express this common interest is scarcely yet deter. mined. In Edwards v. Shrewsbury and Birmingham Railway Oompany,’ the plaintiff sued “on behalf of himself and all other the shareholders in the Shrews- bury and Birmingham Railway Company, except such of the other shareholders of the said company as are respectively represented by those shareholders herein- after named as defendants hereto ;” but the vice chan- cellor, though he did not decide this point, doubted whether this described with sufficient clearness and pre- cision the persons on whose behalf the suit was brought. In Bailey v. Birkenhead Railway Company,? the title was “on behalf of himself and all others the holders of shares of £31 each in the company, except such (if any) of the defendants as were holders of such shares.” Some of the holders of the £31 shares had paid their calls and some had not, and the vice chancel- lor considered the bill defective as to parties in thus suing on behalf of all such holders (it being alleged that the calls were made for an improper. purpose) and v. South Devon Railway Company, 9 lisle v, Southeastern Railway Company, Hare, 313.* 1 Mac, & G. 689. 12D. G. & Sm. 587; see White v. 712 Beav. 433. Similarly in Yetts Carmarthen &c, Railway Company, 1 v. Norfolk Railway Company, 3 D. G. H. & M. 786; 33 L. J.Cb.93; and Car- & Sm. 293. Beatty ». Kurtz, 2 Pet. 566; West 0. Randall, 2 Mason, 181; Heath o. Erie Railway Co. 8 Blatchf. 847; Moore v. Veazie, 32 Me. 855; Mason v. York & Cumberland R. R. Co. 52 Me. 107; March o, Eastern R. R. Co. 40 N. Hamp. 548; Crease v. Babcock, 10 Met. 525; Heath o. Ellis, 12 Cush, 601; Peabody ». Flint, 6 Allen, 52; Williston 0. M. 8. & N.1.R. R. Co. 18 Allen, 406; Sears o. Hotchkiss, 25 Conn. 175; Hallett o. Hallett, 2 Paige, 14; Robinson v. Smith, 3 Paige, 222; Cunningham 2. Pell, 5 Paige, 607; Morgan 7. New York & Alb. R. R. Co. 10 Paige, 290; Mann ». Butler, 2 Barb. Ch. 362; Willis 2. Henderson, 4 Scam. 20; Whitney v. Mayor, 15 Ill. 251; Putnam vo. Sweet, 1 Chand. (Wis.) 286. * Allen o. Talbot, 30 Law Times, 816; Henry o. Great Northern Rw. Co. 4K. & J. 1; Carpenter v. New York & New Haven R. R. Co. 5 Abb. Pr. 277, 582 INTERNAL AFFAIRS OF CORPORATIONS. in not sufficiently alleging that the holders of the other shares were represented by the defendants. In Bag- shaw v. Eastern Union Railway Company,’ the suit was “on behalf of himself and all other the proprietors of scrip certificates for perpetual six per cent. stock, 1849, in the Eastern Union Railway Company, who should come in and seek relief under and contribute to the ex- penses of the suit, other than and except the eighteen defendants.” It was objected that, as there might be a conflict of interests between the parties whom the plaintiff affected to represent, the suit could not be thus brought, but the vice chancellor held that the bill was properly framed.* 14 Hare, 114. *In Black v. Del. & Rar. Canal Co. 7 C. E. Green, 130, the bill was filed by the complainants as well for themselves as for any other of the stockholders as might choose to cause themselves to be made parties, ex- cept those stockholders who, by reason of their assent to any of the acts complained of, might be deprived of a right to complain of those acts. In Heath v. Erie Railway Co. 8 Blatchf. 347, the bill was filed by eight complainants, six of whom were common stockholders, one was a prefer- red stockholder, and the remaining one was an owner of preferred shares not standing in his own name, but which he had been wrongfully pre- vented from having transferred to him. The bill alleged that the holders of the preferred stock, as well as the holders of the common stock, were very numerous as well as constantly changing, and that it was impracti- cable to make them parties, either plaintiff or defendant, in the suit, and that the bill was, therefore, filed on behalf of the plaintiffs and all other bona jide shareholders who should elect to unite in the suit and contribute to the expenses thereof. The usual allegation of the bill is that it is filed on behalf of the complainants and all others similarly situated. This is asufficient averment so far as the complainants or plaintiffs are concerned. The N. Y. Code of Procedure, § 119, provides that ‘‘ when the question is one of common or general interest of many persons, or when the parties are very numerous, and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole.” But the right to be enforced must be common to all. Reed ». The Ever- greens, 21 How. Pr. 319; see Brooks v. Peck, 38 Barb. 519, and cases collected in Voorhies’s N. Y. Code, 10th ed. p. 108. ‘ 4 HOW REDRESS MAY BE OBTAINED, 583 Tn the above cases it will be observed that though many persons were affected by the acts in question, they were not necessarily affected to the same degree, or even in the same way, so that some of them might even have approved of the arrangements. Whenever this is so, it is necessary to make the latter parties defendants, nam- ing one or more amongst them as representatives of the others,* and to use such language in specifying the plaintiffs as clearly limited them to the parties com- plaining.' In every suit of this kind, the persons upon whose behalf itis brought must be necessarily inter- ested in obtaining the relief sought modo ac forma; none having conflicting claims can be joined with them,’ t+ while the defendants will include actually, or by representation, all the opposing interests. +As in Kent v. Jackson, 2D.G.M. Waterworks, 1 J. & W. 358, 370; Car. .& G49; and Cramer v. Bird, L. R. 6 lisle v. Southeastern Railway Company, Eq. 148; see Williams v. Salmond,2 K. 1 Mac. & G. 689; Thomas v, Hobler, 4 & J.463. D. G. F. & J. 199; Hallows», Fernie, 37 See Jones », Garcia Del Rio, T, & L. R. 8 Ch, 467. R. 297, 300; Weale v. West Middlesex *Tt will not be necessary to make any parties defendants against whom no relief is sought; nor where the bringing them in will oust the -court of jurisdiction, unless their presence is absolutely requisite for determining the cause. See Russel v. Clarke, 7 Cranch, 98; Shields ». Barrow, 17 How. 130; Wood 2. Davis, 18 How. 467; Bank 2. Carrolton R. R. Co. 11 Wall. 624; Samuel v. Holladay, 1 Wool. 400, 414. And the decree will be without prejudice to the rights and claims of all absent parties. See U. S. Sup. Ct. Equity Rule 48. The principle upon which all these classes of cases stand, is, that the court must either wholly deny the plaintiffs an equitable relief to which they are entitled, or grant it with- ‘out making other persons parties, and the latter it deems the least evil, as it can consider other persons as quasi parties to the record, at least for the purpose of taking the benefit of the decree, and of entitling themselves to other equitable relief, if their rights are jeoparded. The same doctrine is applied, and with the same qualification, to cases where a material party is beyond the jurisdiction of the court, as if the party be a partner with the defendant and resident in a foreign country, so that he cannot be reached by the process of the court. West v. Randall, 2 Mason, 181. + See Grant ». Van Schoonhoven, 9 Paige, 255. i 584 INTERNAL AFFAIRS OF CORPORATIONS. Sometimes the wrong is by its very nature a wrong to a definite class, or to a group of shareholders bearing a particular description—for instance, when a company is doing or about to do acts in derogation of the rights of its preference shareholders. In such case, evidently one member of the class or group may represent the others, and there will be none to oppose. Thus, in Henry v. Great Northern Railway Company,! the suit. was by the plaintiffs “on behalf of themselves and all others the holders of preference stock in the Great. Northern Railway Company.” So in Coates v. Not- tingham Waterworks Company,’ it was by one person “on behalf of himself and all others the holders of shares in the Nottingham Waterworks Company, cre- ated previously to the 12th May, 1854, or issued in lieu of shares so created, except the defendants.” Whenever the injury is of this description, any member of the class may thus sue, although he stand alone in his complaint,* and although some even take a contrary view, but in this latter case they must be represented among the defendants. Moreover, if the actual plaintiff on the record be himself precluded from. suing, the proceedings cannot be, as it were, revived and continued by others in the same position, and de- sirous to continue them. “As on the one hand a plaintiff who has a right to complain of an act done toa numerous society, of which he is a member. is entitled effectually to sue on behalf of himself and all others 14K. 43.1; 1D.G. & J. 606, and and Enniskillen Railway Company, 29 27 L, J. Ch. 1; Corry v. Londonderry Beay. 268. * 30 Beay, 86.- * An individual member of a corporation cannot bring a suit in the name of the corporation for his individual benefit, or to protect his own rights or interests, without the consent of a legal majority of the stock- holders, Silk Mfg. Co. ». Campbell, 3 Dutch. 539, HOW REDRESS MAY BE OBTAINED. 585, similarly interested, though no other may wish to sue, so although there are a hundred who wish to institute a suit and are entitled to sue, still if they sue by a plaint- iff only who has personally precluded himself from suing, that suit cannot proceed.” ! * It must be clearly borne in mind that it is only when the wrong is actually or potentially toa class that a shareholder can thus sue on behalf of himself and others, the “others” being either some particular group of mem- bers or the whole of them, according as a portion or the whole are in exactly the same position and interest as himself. It is by no means clearly established what will constitute such a community of interest. Thus with regard to persons induced by fraud to become shareholders in existing companies or subscribers to inchoative companies, it was decided in Croskey v. Bank of Wales,?+ that a bill will not lie by one sub- scriber on behalf of himself and others to obtain a return of their subscriptions, while in Macbride »v. Lind- say, * { the exact contrary was determined—it being there Burt v. British Nation Life Assur- y. Carmarthen &c, Railway Company, 1 ance Association, 4 D. G. & J. 158,174; H. & M. 786. 28 L. J. Ch. 731; compare Scarth v. 24 Giff. 314; 9 Jur. N.S, 595. Chadwick, 14 Jur. 800; and see White 89 Hare, 574, Similarly decided in * See Hubbell ». Warren, 8 Allen, 173. t See Jones ». Garcia del Rio, T. & R. 297; Hallows ». Fernie, L. R. 3 Ch. 467; Ross». Estates Investment Co. L. R. 8 Eq. 122; L. R. 3 Ch. 682. ¢ Turner, V.C., held, that either the plaintiff had or had not a common interest with other parties; if he had, then he only had a right to sue on behalf of himself and all others similarly interested; if he had not, then all the other parties interested must be made parties defendants to his suit. The plaintiff has made himself a member of this company, and there is no sufficient ground made by the bill for granting the relief prayed (é. ¢., for a decree that the directors repay the sums paid for calls, and be enjoined from proceeding with business in the name of the company), in the absence of the other shareholders. If it be out of the scope of the deed of settlement, that the business of the company should be carried on at all under the circumstances in which the company is placed, then the, remedy is at common law. See Ship v. Crosskill, L. R. 10 Eq. 73, 83. 586 INTERNAL AFFAIRS OF CORPORATIONS. held that a shareholder induced by the fraudulent rep- resentations of the directors of a company to become a member could not sue, on his own behalf merely, the company and the directors for a rescission of his con- tract and the necessary incidental relief, but must make the others who had been similarly defrauded parties to his suit. So also a bill may not have a double aspect—it may not pray relief on behalf of all the shareholders, or failing that, on behalf of himself.'* But in Sweny v. Smith,” an objection of this kind was overruled. The plaintiff was a shareholder in a company whose shares had been forfeited, as he contended, improperly. He filed his bill on behalf, &c., first to be relieved from the forfeiture, and secondly to set aside a contract entered into by his company for the purchase of certain patents. Lord Romilly, M.R., overruled the objection of multi- fariousness, mainly upon the ground that the suit was occasioned in the first instance by the forfeiture, and that till the validity of this had been determined, it could not be decided whether or not the plaintiff was entitled to raise the other question raised in the suit.+ As to the Defendants. Among the defendants, as has been just observed, Seddon v. Connell, 10 Sim. 58; and L,R.4 H. Lds. 64; see also Menier v. Beeching v. Lloyd, 8 Drew. 314; but Hooper’s Telegraph Works, L. R. 9 Ch. these cases must be now considered 350, overruled by Kisch v, Venezuela Rail- >Thomas v. Hobler, 8 Jur. N. 8. way Company, L, R. 2H, Lds.99; and 125; 4D.G.F. & J. 199. Smith v, Reese River Mining Company, °L, R. 7 Eq. 324. * See Story Eq. Plead. § 40; Shields ». Barrows, 17 How. 180; Colton ®. Ross, 2 Paige, 396; Lloyd v. Brewster, 4 Paige, 537. + As to power of plaintiff to dismiss bill, see 1 Daniell’s Ch. Pr. (4th Am. ed.) 244; Hubbell 0. Warren, 4 Allen, 178; Atlas Bank », Nahant Bank, 23 Pick. 480; Updike ». Doyle, 7 R. I. 446; Collins », Taylor, 3 Green Ch. 163; Mass. Gen. St. 1862, c. 218, § 8. HOW REDRESS MAY BE OBTAINED. 587 must appear personally or by representatives all the parties concerned in objecting to thesuit.! Consequently we must have first the corporation itself;?* secondly, the governing body, or at least those of them who are implicated in the objectionable proceeding, they being ex- cepted from the description of the plaintiffs ;*+ thirdly, representatives of other sections, if any, of the mem- bers who favor the proceedings in question ;‘ lastly, representatives of that portion of the class which, if any, similarly favor the said proceedings,} that portion being by proper words also expressly excepted from the description of the plaintiffs.’ i.e, when it is merely an internal the persons to be affected by the decree matter. If it be a question of ultra inthe first instance. Compare Winch vires, any one member may sue onhis y. Birkenhead cc. Railway Company, 5 own behalf alone. D. G. & Sm, 562. : 7 See, however, Gregory v. Patchett, 45 Kent vw. Jackson, 2 D. G. M. & ante, p. 571; and Daugars v, Rivaz,28 G. 49; and the cases cited ante, pp. Beav. 233. 580-584, * Because the governing body are * Davenport vo. Dows, 18 Wall. 626; Heath ». Erie Rw. Company, supra; Hersey v. Veazie, 24 Me. 9; Allen 2. Curtis, 26 Conn. 456; Cunningham ® Pell, 5 Paige, 607; Gray v. N. ¥.& Va. 8.8. Co. 5 N.Y. Sup. Ct. (T. & C.) 224: Greaves v. George, 49 How. Pr. 79; Gardiner ». Pollard, 10 Bosw. 674. tIt is doubtful whether the governing body are necessary or even proper parties, unless for purposes of discovery; see Hatch v. Chic. R. I. & Pac. R. R. Co. 6 Blatch. 105, 115; Heath v. Erie Rw. Co. 8 Blatch. 347. 412. There is no need of directors being parties in order to prevent the consummation of a contemplated fraud, ultra vires act, or other illegality. The effect of an injunction or decree restraining any acts of a corporate body, and addressed in the ordinary way to it, or its agents, &c., is to bind not only the intangible artificial being, but also all the individuals who act for the corporation in the transaction of its business, to whose knowledge the injunction or decree comes. Unless this be so, it would be necessary, in order to effectually bind a corporation by an injunction, to make every person a party to the suit, who could by any possibility be its agent in doing the prohibited act. People v, Sturtevant, 9 N. Y. 263; 8.¢. 1 Duer, 451, and cases cited. — } As to representative defendants, see 1 Daniell’s Ch. Pr. (4th Am. ed.) 236, 266, 272; Mandeville v. Riggs, 2 Pet. 482; Ogilve v. Knox, 22 How. 880; 8. c. 2 Black, 589; Johnson ». Candage, 31 Me. 28. CHAPTER II. PROCEEDINGS TO RESTRAIN ULTRA VIRES PROCEEDINGS. SECTION I. BY THE MEMBERS OF CORPORATIONS. I. Any one member of a corporation may sue to restrain acts which are ultra vires.* Tuis proposition is now so completely admitted, that it is needless to cite authorities in support. The only points necessary to be adverted to are, first, the amount of interest which will constitute membership ; and, secondly, the frame of the suit. Lirst.—The Amount of Interest. 1. In the case of corporations other than joint stock companies, any member may sue;’+ but he must bea 1 See for example Ward v. Society of v. Crystal Palace Company, 4 K. & J. Attorneys, 1 Coll. 370; Adley v. Whit- 326, stable Company, 19 Ves. 304; Rendall * Zabriskie 0. Cleveland 0. & C. R. R. Co. 28 How. 381; Memphis 2. Dean, 8 Wall. 64; Belmont o. Erie Rw. Co. 52 Barb. 637; Bliss 0. Ander- son, 81 Ala. N. 8. 613; and cases cited ante, p. 79, note. + It 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, and inquire into and enjoin, as the case may require that , BY THE MEMBERS OF CORPORATIONS. 589 full and complete member for all purposes, and not simply a person having an inchoative right of mem- bership.* * 2. As regards joint stock companies, any complete shareholder or stockholder may be a plaintiff, but he must actually be a member of the company, and there- fore a person who has sold his shares, even though he may still remain under liabilities, cannot institute pro- ceedings.” So may many other persons have analogous in- terests—a shareholder who has not complied with all the requisite formalities ;* or the equitable owner of shares ;* or a scrip holder;® or a policy holder. But it has been said that a trustee cannot sue, since he is not act- ually concerned in the company.’+ 3. Any one who ‘Compare Whiston v. Dean and ° Bagshaw »v, Eastern Union Rail- Chapter of Rochester, 7 Hare, 532; see, way Company, 7 Hare, 114; 2 Mac. & however, Spackman v. Lattimore, 3 G. 389. Giff, 16, ® Kearns v. Leaf, 1 H. & M. 681; 7See Doyle v. Muntz, 5 Hare, 509; Aldebert v. Leaf, 12 W.R. 462; 3 N. Scarth », Chadwick, 14 Jur, 300. R. 455; compare Evans v. Coventry, 5 * Spackman »v. Lattimore, 3 Giff.16. D.G. M. & G. 911. ‘Great Western Railway Company 7 Doyle y, Muntz, 5 Hare, 509. v. Rushout, 5 D, G. & Sm. 290. to be done, any proceedings by individuals in whatever character they may propose to act, if the subject of complaint is an imputed violation of a corporate franchise or a denial of a right growing out of it for which there is no adequate remedy at law. * Therefore a shareholder may maintain a bill in equity against the directors, and compel the company to refund any of the profits improperly applied. And the powers of a court of equity may be put in motion at the instance of @ single shareholder, if he can show that the corporation were applying their powers for purposes - Dot within the scope of the institution. Dodge v. Woolsey, 18 How. 831; Samuel v. Holladay, 1 Wool. 400. * See Walker v. Devereaux, 4 Paige, 229. + Spackman », Lattimore can hardly be said to be a case where the plaintiff had not complied with requisite formalities in order to become a shareholder. §. was a shareholder in the N. & E. Company. By act of parliament, all persons and corporations, who were shareholders in the N. & E. Company, were reincorporated by the name of the N. & A. Company; and it provided that all persons holding shares in the old company, on which £9 had been paid, should be deemed instead thereof to hold a share 590 RESTRAINING PROCEEDINGS ULTRA VIRES. would be liable, upon a dissolution, to contribute to the expenses thereof, or to the liquidation of the debts of £10 in the new company, subject to a call of £1, and should be entitled to receive a certificate in the new company, upon presenting, within one month from the passage of the act, his certificate in the old company. 8. had never presented his old certificate. The court held that he was a shareholder in the N. & A. Company. The principle is the same with that of the American cases which hold that the certificate is only evidence of the fact of membership, and its possession is not necessary, in order to constitute membership. See ante, p. 141, note. In Great Western R. W. Co. v. Rushout, the court simply held that under the circumstances of the case, the cestui gue trust of shares, the legal title of which was in trustees, who were made defendants, could sue to prevent. injury to the trust estate. Kearns 0. Leaf was compromised after argument, but before judg- ment. Aldebert v. Leaf was was an application for injunction against any sale or transfer of assets to another company. The injunction was refused. The only point involved was, whether the relief asked for was not too broad. These cases turned upon the peculiar language of deeds of settlement, which bore no resemblance to any provisions in charters or general acts, under which insurance companies are organized in the United States, It is to be observed also, that the courts expressly repudi- ate the power of policy holders to interfere with the management or in- ternal affairs, as paralyzing the company to the prejudice of shareholders and policy holders alike. ‘‘ The policy holders have no right to meddle with anything, wise or unwise, which the company may do in accordance with the deed; for example, if the company invest in a hazardous or even Tuinous security, the policy holders are not entitled to interfere. It would be extremely mischievous to allow such interference.” There were some unguarded expressions of Turner, L. J., and Page-Wood, V.C., in Law ». Indisputable Company, 1 K. & J. 228, and in Evans v. Coventry; (cited in note supra), that liens or charges were created by the language of the policies and deeds of settlement, upon the funds of the corporations, and to enforce which the chancery jurisdiction was sought to be invoked, but the courts perceived that the result would be, that the business of compa- - nies could not possibly be carried on, and that every claim on a policy might be made the foundation of a suit in equity, and therefore withdrew their assent to the broad propositions founded on such expressions, and limited the interference in such cases, to restraining waste or breach of _ trust, See also In re State Fire Ins. Co. 2 New Rep. 565; 34 L. J. Ch. 436; 1H. & M. 457; 1D. G.J. & 8. 634; Jn re International Life Ass. Soc. L. R. 5 Ch, 424; Lindley on Partn. (3d ed.) 893. The statement in the text from Doyle v. Muntz is a mere dictum, not BY THE MEMBERS OF CORPORATIONS. 591 of the company. Numerous individuals there are who can repudiate their membership, but who till such repu- diation are to all intents and purposes members, These, on a dissolution, if their names still remain upon the corporate roll, are placed on the list of contributors. Amongst such will be included, (a) Persons induced by fraud to become members;* (b) The holders of shares ? See Oakes v. Turquand, L. R, 2H. Lds. 325, and similar decisions. necessary to the decision of the case. The suit was not brought by the plaintiff in the character of trustee. The bill was filed by the plaintiffs on their own behalf and on behalf of all other shareholders; and the court threw out the suggestion that in such case (the other) shareholders must be represented by parties having the same interest as themselves, adding that the rule allowing one of a numerous class to sue for the benefit of all ‘‘would not permit a mere trustee, who has no beneficial interest, to represent the absent shareholders, and thereby, in fact, enable ‘him to represent his own cestui gue trust, who is not before the court.” 7 The general rule in suits by and against strangers, as well as in suits between parties interested in’a trust inter se, is that all the trustees and all the cestuis que trust, as together constituting one interest, must be made parties; but this rule is subject to much qualification, and is sub- ordinated to the other rule, that where there are numerous parties having the same interests, one or more of such parties may sue or be sued on behalf or for the benefit of all parties so interested. Lewin on Trusts, (6th ed.) 796; 1 Daniell’s Ch. Pract. (4th Am. ed.) 220; compare N. Y. Code § 118, with Supreme Court of Judicature act, 36 & 37 Vict. c. 66, Schedule, rule 10. ' / Where a mortgage is made to trustees to secure bonds held by many parties, the individual bondholders cannot sue independently of the trustees, unless, after demand and refusal of trustee to sue, or in case of vacancy in the office of trustee, or violation of duty by trustee, or action by or position of trustee prejudicial or inimical to the rights or interests of the cestuis que trust. See Coal Co. v. Blatchford, 11 Wall. 172, 177; Galveston 0. Cowdrey, 11 Wall. 459; Knapp . Railroad Co. 20 Wall. 117; Alexander o, Central R. R. Co. (U. 8. Circuit Ct.) Iowa, 1 Cent. L. J. 543; Sturges o. Knapp, 31 Vt.1; Shaw 2 Norfolk County R. R. Co. 5 Gray, 162; Ashton v, Atlantic Bank, 3 Allen, 217; Western R. R. Co. 2. Nolan, 48 N. Y. 618; N. J. Franklinite Co. v, Ames, 1 Beas, 511; Van Doren ». Robinson, 1 0. E. Green, 256; Williamson v, New Jersey Southern R. R. Co, 10 C. E. Green, 1; Coe v. Columbus &&. R. R. Co. 10 Ohio St. 410. 592 RESTRAINING PROCEEDINGS ULTRA VIRES. or stock improperly issued ;+ (c) The owners of shares nominally paid up, but which have not been paid up in a manner satisfying the requirements of the law;? (d) Transferrers, whose transfers have been made under cir- cumstances which enable the company, or the liquidators, to set aside and cancel such transfers ;* (e) Semble per- sons liable to be placed upon “B ” or other supple mental lists of contributories, and all persons whose responsibility for the corporate transactions does not cease ipso facto with their loss of membership, but only after the lapse of a period of longer or shorter duration. No authorities can be quoted where a person coming within the classes (d) or (e) had sued to prevent ultra vires proceedings, but as such proceedings tend directly to add to his liability, and as in neither case, and more especially in the former, has the person ceased abso- lutely to be a member, it is submitted that he is enti- tled, like ordinary members, to the protection of the courts. 4. A company which is the owner of shares in another company may sue in respect of these shares.‘ 5. The smallness of the plaintiff’s interest is no objec- tion,* and it would seem that where he is suing on behalf of himself and all other shareholders, the ordi- nary rule as to suits for a subject-matter less than £10 does not apply.’ ' 1See, for instance, Worth’s Case, 4 ‘Great Western Railway Company Drew. 629; 28 L. J. Ch. 589; Feiling v, Oxford &c. Railway Company,3 D. and Rimington’s Case, L. R. 2 Ch. 714; G. M. & G. 341; Bank of Switzerland Sewell’s Case, L. R. 3 Ch. 181. v, Bank of Turkey, 5 L. T. N.S, 549; ? See Forbes and Judd’s Case, L, R. compare Great Western Railway Com- 5 Ch. 270; Fothergills Case, L. R. 8 pany v. Rushout, 5 D. G. & Sm. 290. Ch, 270. Seaton v.. Grant, L. R. 2 Ch. 459; * See especially Williams’ Case, L. McDonell », Grand Canal Company,'3 R, 9 Eq, 225, 2. Ir. Ch, 578. * Kean». Johnson, 1 Stock. 401. BY THE MEMBERS OF CORPORATIONS. 593 Secondly.—As to the Frame of the Suit. What has been said in the last chapter as to the power of one person, member of a class, to institute legal proceedings to redress an injury to that class, will apply with qualifications to injuries arising from ultra vires transactions, as to such as are caused by the un- lawful acts of a majority. The chief differences in the two cases arise from the fact that every proceeding which is ultra vires gives to any corporator a right to sue to prevent its repetition, even though every other member were arrayed against him. This being so, the chief points to be noticed in re- spect of the frame of such a suit are, first, that the per- son suing must really and bona fide be applying for redress upon his own behalf, and, secondly, that when the acts in question compromise, directly or indirectly, public interests, the public must be represented (which matters are considered more fully in the following pages); thirdly, that the third parties, if any, concerned in the ultra vires proceedings must be made parties as defendants ;1 and fourthly, that the proceedings may be instituted by the plaintiff either on behalf of himself and all other the members of the corporation or, at his option, simply in his own name and behalf.’ * IL The suit must really be that of the nominal plaintiff. *Salomons v. Laing, 12 Beav. 377; Company, L. R. 8 Ch. 262, 272; Menier Hodgson v, Powis, 1D. G. M. & G.6; v. Hooper’s Telegraph Works, L. R. 9 21 L, J, Ch. 17;° Hare v, London and Ch. 350; and Bird v. Bird’s Patent Northwestern Railway Company, 1 J. d&c. Sewage Company, L. R. 9 Ch. & H, 262. See cases in next note. 358. * Hoole v. Great Western Railway * Quere? See Samuel v. Holladay, 1 Wool. 400; Allen 2. Curtis, 26 Conn, 456; McAleer v. Murray, 58 Penn. St. 126. 38 594 RESTRAINING PROCEEDINGS ULTRA VIRES, The mere fact that the plaintiff is a member of another company, or upon other grounds is opposed to the defendant company, will not debar him from taking proceedings. A corporation may not engage in matters. which are ultra vires, and any bona fide member may for any reason whatever decline to permit the corpora- tion to do so. A person may even buy shares with the open and avowed object of instituting proceedings to restrain the company from committing unauthorized acts, and so to compel them to buy off his litigation ;* but the plaintiff on the record must be the person urg- ing on the suit; he cannot be the mere nominee and tool of others in the background;® and in one case Malins, V. C., directed a bill filed under such circum- stances to be taken off the file.® * ‘Seaton v. Grant, L. R. 2 Ch, 459; 40; 7 Jur. N.S. 887; Rogers v, Oxford Bloxam v. Metropolitan Railway Com- dc. Railway Company, 2 D. G. & J. pany, L. R. 3 Ch, 337, See Orr v. 662; Filderv. London, Brighton &c. Rail- Glasgow cc, Railway Company, 3 Macq, way Company, 1H. & M, 489, Compare 799, and cases cited in the next note. Thomas v. Hobler, 4 D. G. F. & J. 199. 2 Forrest v. Manchester &c. Railway * Robson v. Dodds, L. R. 8 Eq. 801. Company, 4D. G. F, & J. 126; 30 Beav. * In Sparhawk v. Union Pass. Rw. Co, 54 Penn. St. 401, the court had refused an injunction against the running of cars on Sunday at the suit of 8., astranger. Thereupon one K. bought five shares of the stock of the defendant corporation, at the suggestion of 8. and attempted to obtain the injunction as a stockholder, on the ground that his stock was endangered. Woodward, C. J., held that though the acts complained of, were clearly illegal, and a stockholder might be admitted to sue for an injunction, yet it ought not to be granted, for the reason that the suit was not a bona Jide stockholder’s bill, but only a bill in aid of the private bill of 8S. He says: ‘‘ A chancellor will always look to the genuineness of the character in which a party comes before him. A stockholder is bound to come with clean hands, with a sincere complaint, free from all false pretenses, as much as every other party who comes into a court of equity. Injunction is not of right, but of grace, and to move an upright chancellor to inter- pose this strongest arm of the law, he must have not a sham case, but a well-grounded complaint, the bona jides of which is unquestioned, or capa- ble of vindication, if questioned,” See Sandford v. R. R. Co. 24 Penn. St. 373; First Parish in Sutton ». Cole, 3 Pick. 282; Occum Co. a PROCEEDINGS BY THE PUBLIC, 595 SECTION II. PROCEEDINGS BY OR ON BEHALF OF THE PUBLIC. It may be laid down as a general and unqualified proposition that when ultra vires acts of any description Sprague Co. 34 Conn. 529; Cambloss v. Phil. & Reading R. R. Co. 4 Brews. 563; Belmont 2. Erie Rw. Co. 52 Barb. 637. Waterbury o. Mer. Un. Exp. Co, 50 Barb. 157, was brought to obtain a decree dissolving the company, and for the appointment of a receiver to wind up its affairs, The answer alleged that the plaintiff was not the real party in interest, but that the suit was prosecuted at the instigation of, and in the interest of rival companies. This was not denied in the plaintiff’s affidavit, and was, therefore, taken as true. ‘‘ And taking it to be true,” says the court “it is fatal to the suit. An illusory suit in the name of a shareholder, but really prosecuted by and in the interest of a rival and competing company, cannot be maintained for the purpose of dissolving or restrain- ing another association or company, of which the nominal plaintiff may bea member.” In Ffooks v0. Lond. & 8. W. Ry. Co. 1 Sm. & G. 142; 17 Jur. 365, it is said: “ If it had been established that the real object of seek- ing this injunction had been to serve the interests of a rival company, I should have considered that a circumstance of great importance in deter- mining the rights of the plaintiffs to any relief. No doubt it has been held in several cases, that the mere fact that the plaintiffs are shareholders in a rival company is no reason for the court in a proper case refusing its aid to prevent the violation of contracts. But when the fact is established that, under pretense of serving the interests of one company, the share- holders in a rival company, by purchasing shares for the purpase of liti- gation, can make this court the instrument of defeating or injuring the company, into which they so intrude themselves, in order to raise ques- tions and‘ disputes on matters as to which all the other members of the company may be agreed, I cannot consider that in such a case, it is the province of this court ordinarily to interfere.” But in Ramsey v Erie R. R. Co. 8 Abb. Pr. N. 8. 174, the following language is used: “It is argued by defendant’s counsel, also, that this suit is brought in bad faith ; that, inasmuch as the plaintiff made himself the holder of stock and bonds of this company, for the very purpose of complaining that his rights, as such, were invaded, and with full knowl- edge that the very acts of which he complains had been done, when he made the purchase, he is to be regarded rather as a mover and promoter of strife than a bona fide suitor; and that he does not come into court 596 RESTRAINING PROCEEDINGS ULTRA VIRES. prejudicially affect the interests of the public, the. at- torney general must be a party to the suit. Under many circumstances, the Court of Chancery has, on public grounds, jurisdiction to prevent corpora- tions acting in various ways, or contrary to the intent for which they have been created. The public, how- ever, must be represented in all applications relating to such matters, and this is done by the intervention of the attorney general. No single person, whether a member of the corporation in question’ or not, is able on his own account, and of his own motion, :to call upon the court to interfere for his special protection.* The wrong he complains of is not confined to himself—no 1 Evan v. Corporation of Avon, 29 Beay. 144. with clean hands, as the familiar rules of equity require, and should therefore be dismissed. I do not see that the equity rule invoked has any application here. That has reference to the relation of the parties in respect to the matter in controversy. If there is any abuse of that rela- tion by the plaintiff, he does.not come with clean hands to enforce an advantage thus obtained. Here the plaintiff has no inequitable advan- tage, which he is seeking to enforce against the defendants, His buying the stock and bonds was no wrong done to them, with whatever intent it was done. The relative rights of the parties are the same as if the suit was brought by plaintiff's vendor. The intent with which he purchased : does not affect those rights or raise any equities respecting them in favor of the defendants. In regard to them his hands are clean, and'the rule requires no more. His bringing the suit, after having become invested with the bonds and stock, as he did, is not bad faith, such as*the courts will relieve against. I do not tind any cases where the courts have per- petually stayed proceedings as against good faith, except where the suits are brought in violation of some arrangement or understanding between the parties.”’ ' The same principles would seem to apply to illusory suits as to ficti- tious suits, to bring which is a contempt of court. See Fletcher o. Peck, 6 Cranch, 87; Lord v. Veazie, 8 How. 261; Cleveland o. Chamberlain, 1, Black, 419; Butterworth v. Stagg, 2 Johns. Cases, 291; Smith ». Junction Rw. Co. 29 Ind. 546, i * See Dillon on Mun. Corp. ch. 22. PROCEEDINGS BY THE PUBLIC, 597 right or privilege peculiar to himself is violated—the wrongs inflicted and the rights invaded affect the pub: lic, and the public consequently must be a party to the proceedings.t The occasions upon which the court will exercise jurisdiction to restrain the doing of acts of this kind, seem to fall under the three following heads: First. When a corporation, or quasi-corporate body, has been created for the accomplishment or carrying ait of public objects. In all such cases the powers pos- sessed by the corporation have been conferred upon it, not for the advantage of itself or its individual mem- bers, but for the public weal. Any employment of such powers, save and except for the public purposes, and those special public purposes for the advancement of which they were designed, is consequently ultra vires. Under this head will be included river, harbor, dock, navigation, fishery, and other similiar commissioners; turnpike trustees; drainage, sanitary, sewage, and fhe like authorities; boards of health; guardians of the poor; and analogous bodies.* 1Stockport District Waterworks pany v. Corporation of Bradford, L. R. Company v, Corporation of Manchester, 15 Eq. 167. 9 Jur. N.S, 267; Pudsey Coal-Gas Com- * “Upon a survey of decisions in Great Britain and the United States, while they discover some diversity of opinion, it seems to us, in view of the nature of municipal powers, the danger of -abuse, the necessity for prompt remedy on the part of those most interested in the proper ad- ministration of municipal affairs, to wit, the taxable inhabitants, that the following conclusions rest upon reason; and have, perhaps, also, the sup- port of the preponderance of judicial authority: 1. The proper parties may resort to equity, and equity will entertain jurisdiction of their suit against municipal corporations and their officers, when these are acting ultra vires, or assuming or exercising a power over the property of the citizen, or over corporate property or funds, which the law does not con- fer upon them, and where such illegal acts affect injuriously the property owner or the taxable inhabitant. But if in these cases the property own- ers or the taxable inhabitants can have full and adequate remedy at law, 598 RESTRAINING PROCEEDINGS ULTRA VIRES. Secondly. When the corporation holds its funds and property, whether the whole or a portion thereof, in trust for public purposes. The basis of the jurisdic. tion here is rather the trust that has been impressed on the corporate assets, than the public purposes to which they are to be applied. It is on this ground, as has al- ready been seen, that the Court of Chancery supervises many coclestastical and eleemosynary corporations, where usually its jurisdiction is excluded by that of the visitor.* Within his own province—that is to say, in matters of internal arrangement—the decisions of the equity will not interfere, but leave them to their legal remedy. 2. That in the absence of special controlling legislative provision, the proper pub- lic officer of the commonwealth which created the corporation and. pre- scribed and limited its powers, may, in his own name, or in the name of the State on behalf of residents and voters of the municipality, exercise the authority, in prover cases, of filing an information or bill in equity, to prevent the misuse of corporate powers, cr to set aside or correct illegal corporate acts, 8. That the existence of such a power in the State, or its proper public law officer, is not inconsistent with the right of any taxable inhabitant to bring a bill to prevent the corporate authorities from transcending their lawful powers, where the effect will be to impose upon him an unlawful tax, or to increase Ais burden of taxation. Much more clearly may this be done when the right of the public officer of the State to interfere is not admitted or does not exist; and in such case, it would seem that a bill might properly be brought in the name of one or more of the taxable inhabitants for themselves and all others similarly situated, and that the court should then regard it in the nature of a public pro- ceeding to test the validity of the corporate acts sought to be impeached, and deal with and control it accordingly.” Dillon on Mun. Corp. § 736 a.; See cases cited in notes to ch. 22, 7b.; Roosevelt v. Draper, 23 N. Y. 318; Atty. Gen. ». City of Salem, 103 Mass. 188; New London ». Brainard, 22 Conn. 552; Baltimore ». Gill, 31 Md. 875; Conklin v. Com- missioners, 13 Minn, 454; see also Davis . Mayor, 2 Duer, 668; People ». Lowber, 7 Abb. Pr. 158; People ». Miner, 2 Lans. 396; People 2. R. R. Co. 5 Lans. 25; People », Tweed, 18 Abb. Pr. N. 8, 25; Supervisors v. Tweed, Ib. 152; People v. Booth, 82 N. Y. 898; People ». Ingersoll, 58 N. Y.1; Atty. Gen. v. Detroit, 26 Mich. 268. * Bes ante, pp. 49, 59. PROCEEDINGS BY THE PUBLIC. 599 visitor, mala fides apart, are final ;1 but his jurisdiction does not extend to, or at least does not oust, that of chancery in the case of trusts.* Therefore if a trust can be shown to exist, whether for secular or religious matters,’ and whether there be or be not a visitor, the court will take cognizance of such trust, and will, if duly called upon, enforce the observance of the same, and restrain proceedings inimical thereto as being ultra vires. Thirdly. When any corporation is doing acts detri- mental to the public welfare, or hostile to public policy.+ *See Whiston ». Dean and Chapter L. J. Ch. 625; Rex v, Bishop of Ely, 2 -of Rochester, 7 Hare, 682; 17Q.B.1; T. RB. 290. Thompson v. University of London, 33 ? See Daugars v. Rivaz, 28 Beav. 233. * Dartmouth College ». Woodward, 4 Wheat. 518; State v. Adams, 44 Mo. 570. t In Atty. Gen. v. R. R. Companies, 35 Wis. 425, the court sustained the jurisdiction to enjoin a corporation from abuse or excess of franchise -or other violation of public law to public detriment, on information in equity filed ex officio by the attorney general. The court reviews the au- thorities, English and American, and says: ‘There are more cases to the same effect (i. ¢., that the remedy by injunction can be sustained at suit of private parties, to restrain corporations from committing irreparable injury to the parties complaining), an unbroken line of decisions of the most re- ‘spectable authority covering some half of a century, most of them going on excess or abuse of corporate franchises, and all fully sustaining equitable jurisdiction in case of private wrong. They seem to establish the juris- diction of courts of equity in this country, as conclusively as it is estab- lished in England, of private suits to restrain private wrong arising from excess or abuse of power by corporations. In such cases public wrong may be considered only as an aggregation of private wrongs. And the jurisdiction once established to enjoin private wrong in each case at the suit of the person wronged, it is almost a logical necessity to admit the other branch of the jurisdiction, to enjoin at the suit of the State such a wrong, common to the whole public, as interests the State, and could be remedied by private persons by a vast multitude of suits, only bur- densome to each and impracticable for very number; more conveniently, effectually, and properly represented by the attorney general as parens patrie, But jurisdiction of informations of this nature has sometimes been denied, here; courts of equity in this country, singularly enough, 600 RESTRAINING PROCEEDINGS ULTRA VIRES, The right of the attorney general to intervene on these grounds was fully established in Att’y Gen. v, Great being sometimes more timid to control corporate power, and less willing. to protect the public against corporate abuses than the English Chancery. In both branches of the jurisdiction, it proceeds as for gwast nuisance, and it is difficult to understand why the jurisdiction should be asserted as to. private nuisance and denied as to public nuisance; why, for the same cause, individuals should have a remedy denied to the aggregate of indi- viduals called the public. But, as we remarked before, in this regard’ the judicial voice in America is less certain in tone than in England. We should be willing to follow the English rule in this State, unless there were a preponderance of American authority against it. But fortunately we find this wholesome jurisdiction sustained here by the great weight of authority, and with modern experience we deem it only a question of time when it must be universally asserted and exercised. In Atty. Gen. ». Tudor Ice Co. 104 Mass. 239, it is said: ‘‘ The only cases in which infor- mations in equity in the name of the attorney general have been sus- tained by this court are of two classes, The one is of public nuisances, which affect or endanger the public safety or convenience, and require immediate. judicial interposition, like obstructions of highways or nav- igable waters. District Attorney». Lynn & Boston R. R. Co. 16 Gray, 242; Atty. Gen. v. Cambridge, 7}. 247; Atty. Gen. ». Boston Wharf Co.. 12 Gray, 553; Rowe v. Granite Bridge Co. 21 Pick. 344, 847. The other is of trusts for charitable purposes, where the beneficiaries are so numer- ous and indefinite that the breach of trust cannot be effectively redressed except by suit in behalf of the public. County Attorney v. May, 5 Cush. 836; Jackson v. Phillips, 14 Allen, 539, 579; Atty. Gen. 2. Garrison, 101 Mass. 223; Gen. Sts. chap. 14, § 20. If there are any other cases to which this form of remedy is appropriate, that of a private trading cor- poration, whose proceedings ‘are not shown to have injured or endangered any public or private rights, and are objected to solely upon the ground that they are not authorized by its act of incorporation and are therefore: against public policy, is not one of them.” See Atty. Gen. o. City of Salem, 103 Mass. 138. The cases in New York have been much criticised, and are pronounced. by high authority conflicting and not resting on distinct and settled princi- ples. It is contended that, inasmuch as the courts will restrain public nuisance, including pourpresture, at the suit of the attorney general, therefore, where corporations, by unlawful excess or abuse of corporate franchises, encroach upon or injure public rights, the remedy by injunc- tion at the suit of the people ought to be sustained. Compare Atty. Gen. ». Utica Ins. Co. 2 Johns. Ch. 871; Atty. Gen. 0. Bank of Niagara, Hopk. 354; Atty. Gen. o, Cohoes Co. 6 Paige, 183; Verplanck v. Mercantile Ins. Co. 1 Edw. Ch. 88; People v. Albany & Vt. R. R. Co. 24. N. Y. 2613. PROCEEDINGS BY THE PUBLIC. 601 Northern Railway Company,! where the defendants had engaged in an illegal trade in coals. It was objected that it was not competent for him to file an informa- tion, but Kindersley, V.C., said: “On this point I entertain no doubt whatever. Wherever the interests of the public are damnified by a company established for any particular purpose by act of parliament, acting illegally and in contravention of the powers conferred upon it, I conceive it is the function of the attorney general to protect the interests of the public by an in- formation ; and that where, in the case of an injury to. private interests, it would be competent for an individual to apply for an injunction to restrain a company from using its powers for purposes not warranted by the act creating it, it is competent for the attorney general, in cases of injury to public interests from such a cause, to file an information for an injunction.” The above then being the grounds of the jurisdic- tion of the Court of Chancery in this behalf, the next point is when can the attorney general direct proceed- ings on behalf of the public? He may do so whenever public interests have been damnified, or will manifestly be damnified, in the result by transactions which are now taking place. And it would seem from the judgment in Ware v. Regent's Canal Company,’ that he may do so 41 Dr. & Sm. 154. 23D.G. & J, 212, 228, 8. Cc. 87 Barb. 216; People v. Vanderbilt, 26 N. Y. 287; Smith 0. Lock-- wood, 13 Barb. 219, and other N. Y. cases, cited in note post, p. 602. As to the rule in other States, see Bigelow o. Hartford Bridge Co. 14 Conn. 578; Atty. Gen. v, N. J. R. RB. Co. 2 Green Ch. 136 ;. Atty. Gen. 0. Hudson R. R. R. Co. 1 Stockt. 526; Commonwealth v. Railway Co. 24 Penn. St. 159; Buck Mt, Coal Co. 0. Lehigh Coal & Nay. Co. 50 Penn. St. 91; Sparhawk o. Union Pass. R. R.Co. 54 Penn. St. 401; see also George- town v, Alexandria Canal Co. 12 Pet. 91: Penn.» Wheeling Bridge Co.. 18 How. 518; Spooner o. McConnell, 1 McLean, 337. © 602 RESTRAINING PROCEEDINGS ULTRA VIRES, whenever a corporation is going beyond its special powers, even though no definite injury has been done or is likely to be done to the public. “Where there has been an excess of the powers given by an act of parlia- ment, but no injury has been occasioned to any indi- vidual, or is imminent and of irreparable consequences, I apprehend that no one but the attorney general, on behalf of the public, has a right to apply to this court to check the exorbitance of the party in the exercise of the powers confided to him by the legislature.” * As has been said, the attorney general must always be a party when the matter is one affecting the public generally, and not any one person in particular; and if he refuses to be plaintiff, either ew officio or at the rela- tionship of persons complaining, the parties applying to the court must make him a defendant.’ Any person specially aggrieved by the wrongs or otherwise interested in or affected by the transactions in question, may proprio motu, and without adding the attorney general, sue for his own protection and to en- force his own rights.? He may also, if public interests are directly or indirectly affected by the matters com- plained of, join the attorney general as plaintiff, and file a compound bill and information.? + 1 Lang v, Purves, 8 Jur. N.S. 524; *See Att. Gen. », Vivian, 1 Russ. ‘Temple v. Flower, 41 L. J. Ch. 604. 226, 233; Skinners’ Company v. Irish 7 See per James, V.C.,in Wilson v. Society, 12 Cl. & Fin. 425; Att, Gen. ». Furness Railway Company, L. R.9 Eq. Wilson, 1 Cr. & Ph. 1; Att, Gen. v. Earl 28, 84; compare Cook v. Mayor &c. of of Lonsdale, L. R. 7 Eq. 877. Bath, L. R. 6 Eq. 177, and the similar -cases, * Approved in Attorney General o. Railroad Cos. 35 Wis. 425. t See Story Eq. Pl. § 8; Parker v. May, 5 Cush. 386; Attorney General v. Proprietors of Meeting House, 3 Gray, 1; Attorney General ». Merri- mack Mfg. Co. 14 Gray, 586; Attorney General 2. Paterson & Hudson R. R. Co. 1 Stock. 526; Newark Plank Road Co. v. Elmer, 1 Stock. 754; Commissioners v. Andrews, 10 Rich. Eq. 4. ‘There are many authorities PROCEEDINGS BY THE PUBLIC. 603 The corporation itself ought always to be a party, but in Daugars v. Rivaz,' where the plaintiff complained that he had been wrongfully dismissed from his post, and filed his bill for restoration thereto against the gov- ertfing body only, an objection that the corporation ought to have been made a defendant was overruled, for the reason that the corporation had not for a long series of years been kept up by the appointment of the members necessary to constitute it.* 7 28 Beav. 233; See also Gregory v. Patchett, ante, p. 571. in England and in this country which deny the right of private parties in their own names (in the absence of special laws), when their interests are only in common with the public, to compel the performance of a duty to the public. The reason is, that if one individual may interpose, any other may, and as the decision in an individual case would be no bar to any other, there would be no end to litigation and strife. The general laws of order, so necessary to good government, forbid anything like this.” Per Thompson, J., in Buck Mountain Coal Co. v. Lehigh Coal & Nav. Co. 50 Penn. St. 91; but see United States ». Union Pacific Rw. Co. 1 Cent. L. J. 288, where Dillon, C. J., holds that private persons may be relators in mandamus proceedings to enforce a public duty; see ante, p. 316, note. Judge Dillon observes: ‘‘It deserves consideration whether a judgment inasuit in which the attorney general appears, concludes the public to any greater extent than a similar judgment would in a mandamus proceed- ing instituted by a private relator, as in each case it is the suit which makes the government formally a party, and the form of proceeding is the same.” * This is an exceptional case, and cannot be considered as militating against the rule now well settled in America, that the corporation must be @ party to the suit. The plaintiff bad been dismissed from his office of pastor of the French Protestant Church, in London, by the defendants, who were the elders and deacons of the church, having control of the funds of the institution, and who had practically the power of withholding from the plaintiff the emoluments assigned to and accepted by him as pastor. This constituted the relation of trustees and cestui gue trust between the defendants and the plaintiff. In 1550, ‘‘ The Superintendent and Ministers of the Church of the Germans and other foreigners, of the foundation of King Edward VI, in the city of London,” were created a corporation by letters patent. The German and French Protestants soon separated and built and occupied different edifices. The charter of King Edward VI, 604 RESTRAINING PROCEEDINGS ULTRA VIRES. Finally, it should be observed that lapse of time is no bar—the public cannot, like a private individual, be bound by acquiescence in a breach of trust or other illegal act.* SECTION III. PROCEEDINGS BY THIRD PARTIES. Upon this point little need be said. The whole of’ the law, in so far as the present subject is concerned, may be summed up in the two statements—first, that as no person can institute legal proceedings on account of illegal acts, however great their detriment to the public or to others than himself, whether to obtain damages for them or to restrain their repetition, unless he has been personally damnified, so neither can he do so if the acts are ultra vires of a corporation instead of a private individual. Secondly, if on the other hand a private person be wronged by such acts, he may in every case sue for damages or to restrain them, and that although the matter complained of would not have been a tort if done by an ordinary citizen. In a word, torts committed made no provision for the government of the institution, or the distribu- tion of its funds, and the corporation had not been kept up by the ap- pointment of a superintendent, which office was, on a vacancy occurring, to be filled by election and presentation to the king. It appeared also that the funds from which the pastor of the French church was to be sup- ported, had been bequeathed to the separate use of such church. It was this original corporation of ‘‘ The Superintendent, é&c.,” which the Master of the Rolls decided was not a necessary party (the minister, elders, and deacons of the French church, who were the trustees of the fund, and the consistory of the church, being all parties to the suit), holding the objec- tion, that the original corporation in its corporate capacity should be a party, at once technical and insuperable. * See U. 8, Rev. Stat. § 1047, p. 193; N. Y. Code, § 75. PROCEEDINGS BY THIRD PARTIES. 605 by corporations stand, as regards legal proceedings by aggrieved parties in respect thereof, in exactly the same position as torts by private: persons, with the single ‘ qualification arising from the doctrine of ultra vires, that every act directed or concurred in by a corpora- tion in excess of its powers will, if it causes harm to any third party, be a tort, and give to such party a right of action.* * A bill in equity will not be entertained for an injunction against a public nuisance, unless it show that the plaintiff will sustain a special or peculiar damage from it—an injury distinct from that done to the public at large. Bigelow », The Hartford Bridge Company, 14 Conn. 565; O’Brien v. Norwich & Worcester Railroad Company, 17 Conn. 372. An individual cannot maintain a suit to restrain a nuisance, which injures him only in rights enjoyed by him as one of the public. In such case an information must be filed for the public, in the name of the attorney gen- eral, on behalf of the State. Higbee & Riggs . Camden & Amboy Rail- road Co, 4 C. E. Green, 276. In Del. & Rar. Canal Co. ». Rar. & Del. Bay R. R. Co. 1 C. E. Green, 321, the chancellor says: ‘‘An injunction is the proper remedy to secure to a party the enjoyment of a statute privilege of which he is in the actual possession, and when his legal title is not put in doubt. And if corporations go beyond the powers which the legislature has given them, and in a mistaken exercise of those powers interfere with the right of property of others, equity is bound to interfere by in- junction, if the exigency of the case require it. The powers of a court of equity in regard to nuisances, are corrective as well as preventive. It may order them to be abated, as well as restrain them from being erected. In order to justify the issuing of an injunction to restrain the erection of a nuisance, or to abate it after it is erectcd, it must appear not only that the complainant’s rights are clear, but that the thing sought to be enjoined is prejudicial to those rights. The fact of the nuisance must be clearly established. Mohawk Bridge Co. v. Utica & Schenec. R. R. Co. 6 Paige, 554. §o far as the complainants are concerned, the erection complained of is no nuisance, however unlawful, unless it occasion injury to them.” The ground of relief is thus stated by Mr. Justice Baldwin (Bonaparte 2. Camden & Amboy R. R. Co. Baldwin’s R. 231): ‘‘If the complainant’s rights of property are about to be destroyed without authority of law, or if lawless danger impends over them by persons acting under color of law, when the law gives them no power or when it is abused, misapplied, ex- ceeded, or not strictly pursued, and the act impending would subject the party committing it to damages in a court of law for a trespass, a court 606 RESTRAINING PROCEEDINGS ULTRA VIRES. of equity will enjoin its commission. So of any act of peculiar trespass, occasioning grievous mischief or lasting injury, destructive of property, aright or franchise.” This case was affirmed on appeal (4 C. E. Green, 546), on the ground that “when the complainants obtained from the State the right to establish their road that, by the intrinsic force of such grant, such franchise was exclusive against all persons but the State, and that a competing road set up without a legislative license, is a fraud upon such grant, and is a plain public nuisance.” In Mississippi & Missouri R. R. Co. v. Ward, 2 Black, 485, the court hold ‘‘ that a public nuisance may be abated on a bill in equity, brought by a private party who has suffered special damage. It is necessary for the plaintiff in such a bill to show that he has sustained, and is still sustaining individual injury by the nuisance. But where the bil] is brought in a Federal court, it is not necessary to show, that the plaintiff's damage amounts to the sum which is required to give the courts of the United States jurisdiction, The juris- diction is tested by the value of the object to be gained by the bill, and that object is the removal of the nuisance. The private party, though nominally suing on his own account, acts rather as a public prosecutor, on behalf of all who are or may be injured. If he has partners in the particular business affected by the nuisance, he need not join them as plaintiffs, any more than he need join other persons who have suffered similar injuries.” See Hud. & Del. Canal Oo. v. N. Y. & Erie R. R. Co. 9 Paige, 323; in re Long Island R. R. Co. 3 Edw. Ch. 487; Sand- ford o. R. R. Co. 24 Penn. St. 8378; Jarden ». Phil. Wil. & Balt. R. R. Co. 3 Whart. 502; Moorehead 2. Little Miami R. R. Co. 17 Ohio, 340; 1 Hil- liard on Torts, ch. XTX. ‘ CHAPTER III. LIABILITY FOR PROCEEDINGS WHICH ARE ABSOLUTELY ULTRA VIRES. THE question arises, what, if any, liability is in- curred by a corporation or its officials in respect of ultra vires transactions? And under what circum- stances, and in what manner, can such liability, if any ever arises, be enforced against the parties so liable? While any such transaction is merely executory,* it is evident that neither the one nor the other party dealing with it can have as against each other any cause of action. Very possibly the officials may, on the ground of an implied warranty of their authority, or of the corporation’s powers, incur some-kind of responsibility. But as regards the corporation, it is clear that by no possible legal process can they sue or be sued, render the other party, or be themselves rendered, liable to carry out an unperformed ultra vires arrangement. Suppose, however, the arrangement is not altogether im posse, that it has been to some extent acted upon, other considerations arise, and under certain circum- stances it is established that some degree of liability may attach to the corporation, and that the other party will be entitled upon equitable grounds to a certain amount of redress. * See notes, ante, pp. 372, 378, 375, 464, 467; State Board of Agricul- ture v. Citizens’ Street R. R. Co. 47 Ind. 407; Township of Pine Grove v. Talcott, 19 Wall. 666. 608 PROCEEDINGS ABSOLUTELY ULTRA VIRES. SECTION I. LIABILITY OF A CORPORATION IN RESPECT OF ULTRA VIRES TRANSACTIONS, I. The mere fact that a corporation has received the consideration of; or otherwise derived advantage from, a contract ultra vires, does not involve it in any liability upon such contract.* * ‘¢ Where corporations have received the benefit of a contract, if there is nothing in it that is contrary to public policy, there can be no just rea- son why they should not be required to perform it.” Chicago Building Soc. v. Crowell, 65 Ill. 458. ‘‘If it be conceded that the defendants had no power to enter into the contract of sale in this case and bind the com- pany to perform the obligations assumed, viewed as a mere question of corporate power, yet having undertaken to do so, and having received the full consideration agreed to be paid by the plaintiff, and he having ful- ‘filled his entire contract, they cannot now be permitted to set up that ex- cess of authority to excuse them from that part of the contract which imposes an obligation upon them. This principle has been repeatedly held as applicable to an individual attempting to screen himself from lia- bility when contracting with a corporation, and in the case of a corpora- tion when seeking to escape responsibility on the plea of wléra vires for acts deliberately done with all usual and needful formalities, and where they have received the entire benefit they contracted for, such a defense should no longer be tolerated in our courts. Where the question is merely as to the capacity to contract, 4 party who has had the benefit of the contract should not be permitted, especially where there is no unlaw- ful intent charged upon the other party, and he is in no sense in pari. delicto, to question its validity. To deny relief to a plaintiff tbus situated would be substantially to secure to the party, deliberately violating one of the laws of its existence, and where no guilty complicity can be charged upon the other party, the fruits of an illegal transaction, and operate as a premium upon repudiation and fraud.” De Groff 0, Am. Lin. Th. Co, 21 N. Y. 127, 128. ‘I think it would be very absurd to say that the corpo- ration itself, or the defendant standing in its situation, can repudiate the transaction, the benefit of which was received in the manner stated. In my judgment, when a sale of a chattel, made to a corporation, is executed and complete in all things, except the performance of its own promise to pay the price, a plea that it ought not to have made the purchase is not LIABILITY OF A CORPORATION, 609 The liability of corporations, as of partnerships, in respect of contracts and other analogous matters, is founded upon the fact that the contract is one into which the corporation could enter, and which has actu- ally been made by the corporation or by its constituted agents. This principle, as far as concerns partnerships, has been established by a long series of authorities.* It can scarcely be stated in terms too general and rigid. Whatever be the nature of the partnership, each mem- ber has an implied authority to bind the firm for certain purposes only. If he goes beyond that authority—if, purporting to act on behalf of the firm, he enters into engagements alien to the objects of the firm or exceed- ing his powers—the firm will not be responsible for those engagements, even though they have derived ad- vantage therefrom, unless, indeed, they have ratified the same. This non-liability exists as strictly in chan- cery as at common law. Thus in Fisher v. Tayler, + it 12 Hare, 218. to be entertained, especially so long as it retains, and insists upon retain- ing, all the benefit of the contract. If the purchase of the steamboat in- volved any breach of the public law, the corporation alone was guilty, because all the restraints of the statute or the common law affecting the transaction are imposed upon it alone. There is certainly no moral turpi- tude if a railroad corporation buys a steamboat or builds a church; nor is there any legal turpitude. It may be an excess of power, or a private breach of trust in respect to its stockholders. The latter may complain, or the State may interpose; but corporations themselves, like individuals, in dealing with other parties, must live up to the rules of common honesty.” Per Comstock, C. J., Parish v. Wheeler, 22 N. Y. 503. See Bissel » Mich. South & N. I. R. R. Co. 22 N. ¥. 258; Hazlehurst 2. Savannah &c, R. R. Co. 48 Ga. 54; Bradley 2. Ballard, 55 Ill. 413, *See 1 Lindley on Part. 8d ed. 248; Story on Part. §§ 110, e¢ seg. + See Jaques v. Marquand, 6 Cow. 497; Ketchum v. Durkee, Hoffm. 538. In Fisher ». Tayler, the transaction was one of borrowing to pay off the share of a deceased partner in an old partnership, which was tu be succeeded by a new partnership at the time of the borrowing in an 39 610 PROCEEDINGS ABSOLUTELY ULTRA VIRES. was laid down that the implied authority of a partner to bind his copartners for the repayment of money borrowed for partnership purposes, in the ordinary course of partnership transactions, does not necessarily extend to raising money for the purpose of increasing the fixed capital of the firm ; and, therefore, a party ad- vancing money to one partner, knowing that it was for the latter purpose, cannot as a matter of course charge the other partners with the loan, unless the transaction took place with their express or actual authority. It applies alike to money borrowed on behalf of the firm,’ and to materials supplied to and work done for the _firm under similar circumstances. It applies, @ fortiort, to contracts relating to matters not within the partner- ship purposes. In considering this principle with reference to cor- porations, we have merely to bear in mind the meaning of the doctrine of ultra vires. Corporations can be bound, whether by their own proceedings or those of their agents within certain limits only. Outside those limits they are not bound. Neither at law nor in equity 1 In Chancery, see the case last cited, Exchange Company, 3 D. G. M. & G. and Bevan v. Lewis, 1 Sim. 876; ez 180, At law, see’Dickinson v. Valpy, parte Apsey, 3 Bro. C, C. 265; ex parte 10 B. & 0. 128; Hawtayne »v, Bourne, Emly, 1 Rose, 64; ex parte Agace,2 7M. & W. 595; Emly »v. Lye, 15 East, Cox, 312; and see ve Worcester Corn 17; Lloyd v. Freshfield, 2 C. & P. 333. incipient state. See Story on Part. § 146; Gow on Part. 3d ed. p. 153. If a sole trader borrow money for the purposes of his trade, his capital is not increased. If one partner borrows money on his separate credit, and makes it part of the partnership capital, the capital isincreased. Ifa firm borrows money as a partnership obligation, the capital of the firm is not increased by incurring a debt. ‘‘ When, therefore, it is said that one partner has no implied power to borrow on the credit of the firm for the purpose of increasing its capital, what is meant is, that one partner, as such, has no power to borrow, on the credit of himself and copartners, money which each was to obtain on his individual credit, and then to bring into the common stock. Unless the expression means this, it means nothing.” 1 Lindley on Part. 3d ed. 287, 376. LIABILITY OF A CORPORATION. 611 will the other contracting party obtain any redress, in any form of suit, upon the engagement itself, from the corporation, whatever be the fraud or however unjust the refusal of such redress. Some of the harshest of these decisions have been those entered into with pro- moters, which have already been noticed, and in several of which the corporation has owed its very existence to the agreement which it has afterwards repudiated. In many of the cases, however, falling within this principle, there has been nothing like fraud nor even harsh treatment. The suffering party must be supposed to know the law,* and therefore like one who deals with *See Balfour v. Ernest, 5 C. B. N. 8. 601; Royal British Bank o. Turquand, 5 Ell. & B. 248; s. c. 6 Ell. & B. 327; Ridley 0. Plymouth Co. 2 Exch. 711; Monument National Bank »v. Globe Works, 101 Mass. 57; see notes ante, pp. 159,427. In Miners’ Ditch Co. 0. Zellerbach, 37 Cal. 548, 579, it is said “that the term ultra vires, whether with strict propriety or not, is used in different senses. An act is said to be ultra vires when it is not within the scope of the powers of the corporation to perform it under any circumstances or for any purpose. An act is also, sometimes, said to be ulira vires with reference to the rights of certain parties, when the corporation is not authorized to perform it without their consent; or with reference to some specific purpose, when it is not authorized to per- form it for that purpose, although fully within the scope of the general powers of the corporation with the consent of the parties interested, or for some other putpose. When an act is ultra vires in the first sense men- tioned, it is generally, if not always, void in toto, and the corporation may avail itself of the plea. But when it is ultra vires in the second sense, the right of the corporation to avail itself of the plea will depend upon the circumstances of the case. When the act in question is one which the corporation is not authorized to perform nnder any circumstances, the defense is available to the corporation against all persons, because they are bound to know from the law of its existence, that it has no power to perform the act; but when the act is authorized for some purposes but not for others, the defense may or may not be available, depending upon the question, whether the party dealing with the corporation is aware of the intention to perform the act for an unauthorized purpose, or under circumstances not justifying its performance. And the test, as be- tween strangers having no knowledge of an unlawful purpose and the Corporation, is, to compare the terms of the contract with the provisions 612 PROCEEDINGS ABSOLUTELY ULTRA VIRES. an infant, or a feme covert, to have entered into agree- ments which he was aware were simply void as against the corporation. * The most recent decision is that of Fe National Permanent Benefit Building Society, ev parte Williamson. The directors of the building so- ciety, the rules of which gave no power to borrow money, borrowed a sum of money for the purpose of advancing it to their members on the security of their shares. The lender of ‘the money afterwards presented a petition for an order to wind up the company. Gif- fard, L. J., reversing the decision of the master of the rolls, held that the transaction was ultra vires, and that, as it was not shown that the building society had thereby been benefited, the petitioner had no legal or equitable debt against the society such as would support the petition, which was accordingly dismissed.f Il. The mere fact that a corporation has received the consideration of, or has otherwise derived ad- vantage from a contract entered into on its be- half by an agent, but ultra vires of that agent, 1L, R. 5 Ch, 309. of the law from which the corporation derives its powers, and if the court can see that the act to be performed is necessarily beyond the powers of the corporation for any purpose, the contract cannot be enforced; other- wise it can.” * But see In re German Mining Co. 4 D. G.M. & G. 19; In re Cork & Youghall Rwy. Co. L. R. 4 Ch. 748; Marlow »®. Pitfield, 1 Pr. Wms. 558. + It may be doubted whether this case supports the proposition (1) in the text; it seems rather to imply the contrary doctrine. Giffard, L. J., after stating that the company not only had no power to borrow money, but that it was contrary to the constitution to borrow, and after consider- ing cases where corporations were held liable on ultra vires contracts of which they had the benefit, disposes of the cause in the language quoted post, p. 620, . LIABILITY OF A CORPORATION. 613 does not involve it in any liability upon such contract. * This is a corollary from the last proposition, and is founded upon the same reasoning. Indeed, the non-lia- bility of corporations on contracts made by their agents in excess of their powers, is the conclusion which di- rectly follows from the non-liability of partnerships upon analogous ‘contracts made by their individual members. This principle has already been indicated in examining the extent of the powers of directors, and of their liability in respect thereof! The agent of a cor- poration, whether he be a member of the governing body or a mere servant, is the agent for certain purposes only. However wide his powers, they cannot exceed those possessed by the corporation, and will generally be much inferior. + Whatever they are, the corporation will be bound only when such agent keeps within them, 1 See ante, pp. 431-440. * Ante, pp. 879, 442,467. Receiving the consideration of, or otherwise de- viving benefit from, an unauthorized contract entered into on behalf of a principal by an agent, after full knowledge of the facts, operates as a ratifi- cation of the whole contract by the principal, and therefore makes the latter liable upon the contract as fully, to all intents and purposes, as if direct au- thority had been originally given, Story on Agency, §§ 289, et seg. And the same rules apply to unauthorized acts of partners and of agents of corpora- ‘tions as to like acts of agents of individuals. 1 Lindley on Partn, 3d ed. 278, 805; notes ante, pp. 462, et seg. If, therefore, the acts are intra vires of the corporation, though not authorized to be performed by the agent, the act of taking the benefit of them will impose upon the corporation every lia- bility equally as if it had originally fully empowered the agent. ‘‘It isa general tule, applicable to all persons and corporations, and is a dictate of plain honesty, that whoever, knowing the facts of the case, retains and uses money received by an agent for his account, cannot repudiate the contract on which it is received.” Per Hunt, J.,in The Mayor ». Ray, 19 Wall. 468. / t See Downing ». Mt. Washington Rwy. Co. 40 N. H. 230. 614 PROCEEDINGS ABSOLUTELY ULTRA VIRES. just as a partnership is bound by the acts of its mem- bers separately, when these do not go beyond: the im- plied authority given them by law, or the express au- thority vested in them by the partnership deed. III. Sometimes, if not always, where in pursuance of ultra vires agreements, money has been lent or : paid to a corporation, and there has been a total failure of the consideration for which the loan or payment was made, the lender or payer is held entitled to be recouped by the corporation to- to the extent to which it has benefited thereby.* This principle, if not acknowledged and established, has been put in force in a few cases for the benefit of persons having claims of the description therein men- tioned. A person enters into an arrangement with a corporation bona fide, believing that it also possesses the necessary powers for rendering the arrangement * As to municipal corporations, see Dillon, §§ 381, 749; The Mayor ». Ray, 19 Wall. 468. In Allegheny City o. McClurken, 14 Penn. St. 81, the court say: ‘I take it for granted that it (é. ¢., the charter of the plaintiff) contains no express authority to the corporation to issue such notes as those embraced in this action. But it does not follow that the corporators are therefore: not answerable for them in their corporate capacity. They have received. value for them in the various public works and improvements erected and made in the city through their instrumentality, and it hardly comports. well with fair dealing that they should seek to exonerate themselves from a debt on this account, contracted by and through their accredited agents, and with their silent acquiescence.” Underwood v. Newport Lyceum, 5 B. Mon. 129, holds that, though a charter of a corporation may not confer the power of banking, or issuing checks to pass as 9 currency, and it may be a penal offense to issue such. notes or checks, yet the corporation is bound to pay for plates and notes. or checks procured to be made by the officers of such corporation. See. Kneeland v. Gilman, 24 Wis. 39; Albert o. Savings Bank of Baltimore, 1 Md. Ch. Dec. 407; Ohio Life Ins. Co. ». Merchants’ Ins. Co. 11 Humph, 1.. LIABILITY OF A CORPORATION. 615 binding, but it turns out that the matter is ultra vires of the corporation. What, then, is the position of the party so contracting? Evidently as nothing has been done under the contract, it is not enforceable by or against the corporation, and the whole proposal falls to the ground. Suppose, however, that something has been done—that the person so dealing has gone to expense or done acts whereby advantage has resulted to the corporation—is he not to be repaid to the extent at least of this advantage? It seems that he is not enti- tled as a general rule, but only so under particular cir- cumstances.* In the Anglo-Australian Assurance Company v. British Provident Assurance Company,’ where one in- surance company, A., transferred all its property, effects and liabilities to another company, B., on the terms of A. shareholders being indemnified, on a bill by A.-for specific performance of the agreement, the court decreed such indemnity. The other company, which was or- dered to be wound up, having by its official manager filed a cross bill alleging fraud and misrepresentation, and that such agreement was ultra vires, it was held that the B. company, having had the benefit of the agreement, was not entitled to object that the agreement 13 Gifk 521; see4 NV. RB. 48. * Tt is the general doctrine, that corporations possess ‘the powers ex- pressly conferred by law, and such implied powers as are necessary to enable them to exercise the powers expressly granted, and no others; yet although there may be a defect of power in a corporation to make a con- tract, if a contract made by it is not in violation of the charter of the corporation, or of any statute prohibiting it, and the corporation has by its promise induced a party, relying upon such promise and in execution of the contract, to expend money and perform his part of the contract, the corporation is liable on the contract. State Board of Agriculture ». Citizens’ Street Railway Co. 47 Ind. 407. 616 PROCEEDINGS ABSOLUTELY ULTRA VIRES, was ultra vires, and the cross bill was dismissed.’ This case is obscurely reported, but power to make such purchase seems to have been contained in the deed of settlement of each company. Moreover B. had had the benefit of the contract, and being now bankrupt, A. could not be replaced in its original position—a circum- stance which ever greatly influences the decision of a court of equity. Ae Sea, Fire and Life Assurance Society, ex parte Port of London d&c. Company,’ is another decision illus. trative of the liability of corporations in respect of ultra vires transactions of which they have had the benefit. The directors of each company had very wide powers of management, and those of the Sea, Fire and Life Assurance Society had, in addition, “full power and authority to purchase and lease, as may seem expedient, at such price, &c, the business of any other fire, life or marine insurance company;” but those of the Port of London Company were not thus expressly authorized. By deed duly sealed, the latter company transferred its business to the former com- pany, which also covenanted to indemnify it against all claims. In a short time the purchasing company failed ; both companies were ordered to be wound up; and the official manager of the selling company tendered a proof against the purchasing company in respect of claims which the selling company had been compelled to satisfy. It was held by the lords justices—who did not go‘into the question of the validity of the amalga- mation—that the claim must be allowed, and that al- though one part of the deed was not forthcoming. “Where a purchaser has taken possession of, and en- joyed the subject-matter of, a contract, it is in my * Affirmed with variation on appeal, 75D. G. M. & G. 465, 4D.G. F. &J. 841; 8 Jur. N.S. 628. LIABILITY OF A CORPORATION. 617 opinion the duty of this court to make every reasonable presumption in favor of the validity of the contract.” * On appeal to the House of Lords,! the decision of the lords justices was reversed, and the claim disallowed upon the short ground that section 29 of 7 & 8 Vict. c. 110, invalidated every contract in which a director was concerned, unless made in accordance with certain regulations, and that in the contract out of which the claim arose one of the directors of'the Sea, Fire &e. Society was interested, and: moreover that the statutory regulations had not been observed.+ In Burges and Stock’s Case,’ policy holders were al- lowed to prove in winding up in respect of premiums, which they had paid to a company upon insurances which that company was not authorized to undertake. A life assurance company extended its business to ma- rine insurance. Shortly after the company was wound up, and the extension being determined to be ultra vires, the holders ‘of the marine policies were not al- lowed to prove for the value of them. As to the pre- miums, however, Page-Wood, V. C., said: “They have had no consideration for the premiums they paid. The di- rectors, it is true, had no power to issue marine policies, but they had power to receive money and apply it for the benefit of the company. It is proved that they did 1 Sub nom, Ernest v. Nicholls,6 H. pany, Burges and Stock’s Case, 2 J. & Ids. 401. H. 441, 7 Re Phenix Life Assurance Com- * As to presumption in favor of validity of corporate acts, see notes, ante, pp. 40, 430. + The contract was absolutely void on the ground of illegality. The point on which the reversal was based, was not raised in the court below. Though the point decided below was not passed upon in the House of Lords, the opinion of Lord Wensleydale was plainly against the rule, that a corporation is made liable on ultra vires contracts by receiving benefit from them. See, however, remarks as to this learned judge, ante, p. 366. 618 PROCEEDINGS ABSOLUTELY ULTRA VIRES. so receive and apply these premiums, and the amount might have been recovered, even at law, as money had and received. The proof must, therefore, be allowed for the amount of the premiums paid.” There seems to be no substantial reason whatever for not extending the principle here involved to ‘all analogous cases. If liable in one case, why should not a corporation be always liable to refund the money or property of a person which it has obtained improperly and without consideration, or if unable to return it, to pay for the benefit obtained thereby? To say that a corporation cannot sue or be sued upon an ultra vires arrangement is one thing. To say that it may retain the proceeds thereof which have come into its posses- sion without making any compensation whatever to the person from whom it has obtained them, is something very different, and savors very much of an inducement to fraud.* * See cases cited ante, notes to this chapter. In the North American Trust and Banking Company’s case of Leavitt v. Palmer, 8 Comat. 19, 84, Bronson, J., says, ‘‘As the issuing of notes was expressly prohibited by law, it is impossible to maintain that they are valid securities. To hold that they can be enforced against the bank, would be going very far towards defeating the end which the legislature had in view. That they are void has been adjudged in several of the cases already cited, and [ am not aware of any authority tothe contrary. The legal liability on account of which the notes were issued still remains ; but the notes themselves are voids” See Curtis . Leavitt, 15 N. Y. 9, 94. ‘Tt may well be conceded that a contract entered into by the agents of a corporation, which, either in substance or form, transcends its powers, creates no legal obligation and cannot be enforced. But it is one thing to say that a void or forbidden contract cannot be enforced, and quite another to hold that both the parties are involved in moral guilt, so that neither can disaffirm it, and recover upon an implied assumpsit the money or value which he has advanced. A general distinction of this kind has been universally recognized, although the cases do not all agree as to the yore LIABILITY OF A CORPORATION, 619 In Hall v. Mayor, &c., of Swansea; it was decided that the proprietor of tolls wrongfully taken and with- held from him by a corporation, could sue the corpora- tion in assumpsit for money had and received. Lord Denman, C. J., said, “If the corporation have helped themselves to another’s money, it would be absurd to say they must bind themselves under seal to return it.” If absurd in one case, why not so always? As Page- Wood, V. C., pointed out in Burges and Stock’s case,* “the directors have power to receive money and apply it for the benefit of the company.” Legal and equitable principles would therefore seem to require, as certainly common justice does, that a corporation shall account 15 Q. B. 526, has passed into their hands. Whether 7 Ubi supra. See also the same this gentleman could recover against Vice Chancellor in L. R. 2 Eq. 755. them im an action for moneys had and “But it is said that the contract was received, I know not.” with the company, and that the money conditions under which it is to be applied.” Per Comstock, J., in Tracy 0. Talmage, 14 N. Y. 162, 216. : The question of ultra vires sometimes arises in suits by corporations to recover money loaned, and the defense is interposed of want of power in the company to make the loan. This unconscionable shift is thus summarily disposed of by the court in Steam Navigation Co. v. Weed, 17 Barb. 878. “Tt ill becomes the defendants to borrow from the plaintiff one thousand dollars for a single day, to relieve their immediate necessities, and then to turn around and say, ‘I will not return you this money, because you had no power by your charter to lend it.’ Let them first restore the money, and. then it will be time enough for them to discuss with the sovereign power of the State of Connecticut the extent of the plaintiff’s chartered privileges. We shall lose our respect for the law when it so far loses its character for justice as to sanction the defense here attempted.” See ante, p. 375, note, and Silver Lake Bank ». North, 4 Johns. Ch. 370; Potter 0, Bank of Ithaca, 5 Hill, 490; Suydam ». Morris Canal and Banking Co. Z0, 491, n. ;. State of Ind. ». Woram, 6 Hill, 33; Sacketts Harbor Bank 2. Lewis Co. Bank, 11 Barb, 218; Steamboat Co. v. McCutcheon, 13 Penn. St. 13; Bank o Hammond, 1 Rich. Law, 281; Southern &. Co. v. Lanier, 5 Fla. 110;, Argenti 2. City of San Francisco, 16 Cal. 255. 620 PROCEEDINGS ABSOLUTELY ULTRA VIRES. for whatever advantage it may derive from an ultra vires agreement. The received opinion is that, special circumstances apart, it is not so liable. In addition, however, to the decision already cited, an account has been directed in some other cases of an analogous nature. Thus, in Athenzum Life Assurance Company v. Pooley,’ where debentures issued in fraud of the company were held invalid in the hands of an assignee for value without notice, the lords justices gave the assignee permission to have an inquiry as to whether the company had derived any benefit from these debentures. So in Wood’s Claim,’ and Brown’s Claim,’ similar accounts were directed to be taken for the benefit of the injured party. Again, in ev parte Key,‘ where a company took a lease from one of their directors under a void agree- ment, and the lessor recovered possession of the prem- ises in an action of ejectment against the company for breach of the conditions, the lessee was allowed to prove in the winding up for the use and occupation by the company of the premises. Ex parte, Williamson, which has already been re- ferred to,> is sometimes thought to be opposed to the principle now in statement. But if carefully considered it will not be found to be so. Giffard, L. J., in his judgment, says, “I do not think it necessary to go through the evidence. Suffice it to say, that there is no proof whatever that one sixpence of this money went 73D. G. & J. 294. Dr. & Sm. 55; British Provident So- 2? Re London & County Assurance ciety v. Norton, 9 Jur. N. 8. 1308. Company, Wood’s Claim, 30 L. J. Ch, Burslem Paper Mills Company, ex 378, 9 W. R. 366, parte Key, 16 W. R. 1103. 710 W. BR. 662. See also per Kin- 5 Ante, p. 612; compare Pare ». dersley, V.C., in re National Patent Clegy, 29 Beav. 589; 80 L. J. Ch. 742. Steam Fuel Company, Baker’s case, 1 Uae LIABILITY OF A CORPORATION. 621 in payment of any debt which was recoverable against the company. In truth all this money went for the pur- poses of loans to members of this company. It is not for me to say whether the Savings Bank Association that lent the money, have or have not any right either as against the property of this company which was pledged to them, or as against the persons to whom this money was lent. If they have any such rights they can only be asserted by filing a bill, and taking a very dif- ferent proceeding from that which has been taken here.” In other words the decision was, not that the company were under no liability in respect of the loan in ques- tion, but that the proper course had not been adopted for rendering them liable. In fact, the lord justice more than hinted that they might be liable. And in the latest decision, Wilson’s Case,’ where a person had made a loan to a building society, which it was ultra vires of the society to accept, and which was secured by a deposit of deeds of the society, it was de- termined that on the society being wound up, the official liquidator could not without payment of the money ad- vanced deprive the lender of his securities. Bacon, V. C., said, “If the official liquidator had filed a bill to have the securities returned, he could not get relief ex- cept on payment of the money which he confesses was advanced. He has no equitable right other than the society has.” Two cases somewhat conflicting with this principle have to be noticed. In the former, Hx parte Cropper,’ a committee was appointed by the shareholders of a de- funct company to wind up its affairs. To do so they went to considerable expense in endeavoring to get the ? Re Durham County, dec. Building 2 Re St. George Steam Packet Com- Society, Wilson’s Case, L, R. 12 Eq.521; pany, ex parte Cropper, 1 D, G. M. & G. L. RB. 7 Ch, 45, 147. 622 PROCEEDINGS ABSOLUTELY ULTRA VIRES. public acts of parliament, which were at that time brought forward, made applicable to the company, and also in urging forward the winding up act itself. Their claim for these expenses was disallowed in winding up; and it is submitted rightly so in accordance with this principle. They did not advance money to the com- pany, or in any other way bring themselves within the principle. They were appointed for certain purposes and with certain powers only; but they went beyond their powers, and then attempted to charge those who appointed them for the expenses thereby incurred. In the latter, Hill’s Case," money had been advanced to a benefit building society which was not empowered to borrow. It was held, in the winding up, that the depos- itors were not entitled to have a call made upon the members for the repayment of their deposits. But here there was something very different from persons who had lent money or supplied articles to a company, asking simply for an inquiry as to how the company had benefited thereby. In the first place there were no assets to be divided. It was purely a question whether persons who had entered into an ultra vires agreement, could require a call to be made upon the shareholders to recoup them. It need not be said that the doctrine of ultra vires means, among other things, that this can- ' not be done. And secondly, the persons upon whom it was proposed to make the call, having paid all their subscriptions, had by the rules of the society actually ceased to be members, and were discharged from all further liability. Under such circumstances, even if the borrowing had been intra vires, the decision probably would have been the same. *~ 1 Re Victoria Perm. Benefit &c, Soc. Hill’s Case, Jones’ Case, L. R. 9 Eq, 605. LIABILITY OF A CORPORATION. 623 {V. Persons who have in any way advanced money to a corporation, which money has been devoted to the necessaries of the corporation, are con- sidered in chancery as creditors of the corpora- tion to the extent to which the loan has been so expended.* * See previous notes to this chapter. Where a company receives the benefit of money loaned, it cannot avoid payment by denying authority to contract the loan; Ottawa Plank R. Co. v. Murray, 15 Ill. 336; see Tal- mage v. Pell, 7 N. Y. 328, 348; Sackett’s Harbor Bank v. Codd, 18 N. Y. 242; Oneida Bank v. Ontario Bank, 21 N. Y.490; see also a series of cases known as the California “City Slip Cases;” viz: McCracken o. San Fran- cisco, 16 Cal. 591; Grogan v. Same, 18 Cal. 590; Piemental v. Same, 21 Cal. 351; Saterlee », Same, 23 Cal. 314; Herzo v. Same,” 28 Cal. 134; Dillon on Mun. Corp. § 750. , Some cases as to the powers of national banks and their officers may be conveniently referred to in this connection. Weckler ». National Bank, to be reported in 42 Md. was an action against the bank upon the fol- lowing facts. The defendant was a national bank which engaged in the sale of Northern Pacific Railroad bonds. It had a placard on its counter with the words Northern Pacific Railroad bonas for sale by the First Na- tional Bank. Tt actually sold and exchanged this kind of bonds to dif- ferent persons, and received commissions on the sale which went into the moneys of the bank, and were entered upon its books as belonging to it. The plaintiff was induced by the cashier to purchase the bonds of the railroad company, on a representation that they were a safe and profitable investment, and that the bank would take them back from her, at the price she gave for them. Upon suit brought for the sum paid and interest, there was a verdict forthe defendant. The court held, that the business of selling bonds on commission is not within the scope of the powers of national banks; that the defendant could not under any circumstances carry it on; that the transaction being thus beyond its corporate powers, the defense of ultra vires was open to it, and that the bank was not responsible for any false representations made by its teller to the plaintiff, by which she was induced to purchase the bonds in question. See Van Leuven v, First National Bank of Kingston, 54 N. Y. 671; 8. c. 6 Lans. 3783, where it is stated by the reporter (the opinion not being given in extenso), that it was held in the prevailing opinion, concurred in by all the judges: “ that the business of exchanging government securities, was such as a national bank, through its officers could properly and legally engage in.” But in Wiley ®. First National Bank (Sup. Ct. Vt.), 14th Am, Law Reg. N. 8. 342, it is held that national banks, created under the act of Congress, have no 624 PROCEEDINGS ABSOLUTELY ULTRA VIRES. This is the doctrine laid down in the well known German Mining Company’s Case,’ which arose thus: 1 Re German Mining Company, e« Bank of Australasia v. Breillat, 6 Moo. parte Chippendale, 4D.G.M.&G.19; P. C, 152. power to bind themselves, or the corporators, by accepting bonds, coin, or other valuable things, upon special deposit, for safe keeping and return on demand, and no recovery can be had against the bank for any such de- posit left with the cashier and not returned on request. See also note of Judge Redfield, p. 348; s.-c. 2 Cent. L. J. 271, note. The First National Bank of Lyons v. Ocean Bank (N. Y. Ct. of App.) 2 Cent. L. J. 267; 11 Alb. L. J. 250, was an action brought to recover the value of securities deposited for safe keeping. There was an entire absence of evidence that it was the habit and practice of the defendant to receive special deposits and valuable property or securities for safe keeping, or that they had done it for any other person or corporation, except in the case of a tenant occu- pying a part of the same building, as its lessee. It was not proved that the directors, or any of them, had ever sanctioned the receipt of special deposits of any kind for safe keeping, or that they had any knowledge of the deposit of these securities or of any other like deposit. The court declined to consider the question whether the receipt of goods and secu- rities on deposit for safe keeping is within the powers, express or implied, of national banks, though Allen, J., expressed his concurrence in the views of the court in Wiley v. The National Bank, supra, adding that, no general principle was decided in Van Leuven », First Nat. Bank of Kingston, that by a divided court it was held that the contract in that case, under the peculiar circumstances, was the contract of the corpora- tion, and not the individual contract of the president; that the ques- tion then under consideration was not considered by the learned commis- sioners, and does not appear to have been made in the action, and that, ‘¢having arrived at the conclusion, that if the power of the corporation to assume the position of bailee, with its responsibilities and obligations, be conceded, there was no evidence of the delegation of the power to the executive and ministerial officers of the bank, and that for that reason the judgment should be reversed, and a new trial granted. It is unneces- sary to consider the question back of it, as to the power of the corporation itself in that direction. It is a question not free from difficulty, but can be more satisfactorily considered, when it becomes (if it shall) necessary to a judgment.” But in Leach 2. Hale, 31 Ia. 69, it was held that where a bank, organized under the Federal banking law, receives on deposit United States bonds of one class, under a promise or agreement to ex- change them for those of another, it would not be regarded as a mere man- datory or bailee acting without compensation, but, on the contrary, held to the terms of the contract, and liable to the depositor for the value of LIABILITY OF A CORPORATION, 625 A joint. stock company was formed in England for working mines in Germany, subject to the terms of a deed of settlement, which provided that the capital should be £50,000, ad gave no powers to the directors to raise money except by the creation of new shares. That capital was paid up, and proved insufficient for working the mines. The wages of the miners being in arrear, and other debts being due, the managing di- rectors obtained advances from some of the shareholders for the purpose of paying those debts and preventing the mines from being seized under the law of the country. The directors also borrowed other sums on their personal guaranty from the bankers of the com- pany, not for payment of debts, but for carrying on the business of the company in its ordinary course, and they afterwards repaid the bankers these advances. The company was wound up under the winding up acts. Upon appeal, Knight-Bruce and Turner, L.JJ., decided that although the advances made by the bankers did not constitute a debt due to them from the company, the directors having no power to borrow, the directors the bonds on its refusal to deliver them; and a transaction of this character, on the part of the bank, is within the scope of its power to do a general banking business, conferred by the act of Congress authorizing the crea- tion of these banks. In Fowler ». Scully, 72 Penn. St. 456, it was deter- mined that no other than personal security could be taken by a national bank for a loan, and that lending money by such ‘banks on mortgage or Teal estate security was ultra vires and illegal. But, gu@re, whether a mort- gage bona side made by way of security for loans ‘etna contracted is not good. U. 8. Rev. St. p. 999, § 5187 (2); Shoemaker ». Nat. Mech. Bank, 1 Abb. U. 8. 416; Steward o. Nat. Union Bank, J}. 424; Matthews v. Mass. Nat. Bank (U. 8. Cir. Ct. Mass.) 14 Am. L. Reg. N. 8. 153; Kansas Val- ley Nat. Bank ». Rowell, 2 Dill. 374; Smith v. First Nat. Bank, 99 Mass. 605; Caldwell 1, Mohawk Valley Nat. Bank, 64 Barb. 833; Lancaster Nat. Bank ». Smith, 62 Penn, St. 47; Scott o. Nat. Bank, 72 Penn. St. 471; First Nat. Bank », Nat. Exchange Bank, 39 Md. 600; Sbinkle -o. First Nat. Bank, 22 Ohio St. 516; Marine Bank ». Chandler, 27 Ill. 525. 40 626 PROCEEDINGS ABSOLUTELY ULTRA VIRES. were entitled to be allowed the amounts repaid by them to the bankers, the directors being trustees, and in that character entitled to indemnity from their cestuis que trustent against expenses bona fide incurred. Turner, L. J., based his decision on the ground partly that the directors were trustees for the general body of the share- holders, partly that the money had been devoted to pay- ment of debts which could at once have been enforced, to the great detriment of the company. He said: “ Apply- ing these decisions’ and these principles to the present. cases, I think that the shareholders by whom these ad- vances were made would, in common with the other share- holders, have been liable to the miners and creditors who were paid by means of the advances, and therefore that (assuming the mines to have béen properly carried on, upon which I have already observed, and shall presently observe more fully, and assuming the expenditure to have been properly incurred, which, upon the footing of the mines being carried on, is not disputed), the de- cision of the master [allowing the proof] ought to be upheld upon that ground alone. In He parte Bignold, Fe Norwich Yarn Company,’ the directors of a trad- ing company had incurred a large debt on account of the company, and in due conduct of its affairs. They had no express power to borrow, and indeed clause 53 of the deed provided “that the board of directors shall cause all purchases for or on behalf of the com- pany to be made for ready money, so far as the same may be practicable, or they may deem expedient.” The subscribed capital was all exhausted, but the master of the rolls holding that the deed of settlement did not 1Viz., Hawtayne v. Bourne 7M.& wages due to the laborers in the mine, ‘W. 55, and Hawken v. Bourne, 8 M. & while in the latter they were liable for W. 708, in the former of which share- goods supplied for the necessary work- holders of a mining company were held ing of the mine on the order of the not liable for moneys borrowed by the resident agent. agent in order to pay the arrears of the 722 Beav. 143. LIABILITY OF A CORPORATION 627 limit the liability of each member to the amount of his shares as named in the deed, decided that the di- rectors were entitled to be repaid by a call upon the shareholders. ‘Troup’s Case’ arosethus. The directors of a company having no borrowing powers, being pressed for money by their contractor, obtained for him on credit £2,000 at a banker’s upon their guaranty. The contractor afterwards agreed to abandon the plant, &c., to the company on receiving £600 and being indemnified against the banker’s claim. Subsequently to this the secretary of the company, with the sanction of the di- rectors, borrowed £500 in his own name for the com- pany, which was applied in paying the banker and a judgment debt of the company. The company had the benefit of the plant, d&c., which were sold for what the company gave for them. The master of the rolls held that the secretary could prove in the winding up for the money, with interest, which had been so bona fide applied for the benefit of the company. Lowndes v. Garnett and Mosely Gold Mining Company of America? is to the same effect. One of the directors of a company established under the joint stock com- panies act, 1844, and having definite borrowing powers, made advances (not in accordance with the borrowing powers) to meet the necessary expenses of carrying on the concern. Subsequently the company, after being registered as a limited company under the joint stock companies act, 1856, was voluntarily wound up. Page-Wood, V. C., held that the director was entitled ? Re Electric Telegraph Company of report in 2 J. & H. 282, of the same Treland, Troup’s Case, 29 Beav, 353; case, shows that the creditor under these Hoare’s Case, 30 Beav. 226, where the circumstances may, upon the winding circumstances and decision were exactly up of the company, file his bill to re- analogous; Re Magdalena Steam Navi- cover the amount of his debt, instead gation Company, John, 690. ‘ of merely proving in the winding up. * 33 L, J. Ch. 418; 3. R, 601. The 628 . PROCEEDINGS ABSOLUTELY ULTRA VIRES. to rank as a creditor of the company, and to receive payment next after the general creditors in the event of there being any assets. In reference to the principle involved in these decisions, the vice chancellor observed : “When the directors had no, money in hand, and the borrowing powers were exhausted, they had a choice of two things—either to stop the business of the com- pany at once, or to carry on the business and pay the necessary expenses themselves, making the shareholders jointly liable for those expenses. If that were not intended, it ought to be provided against by the deed of settlement, but I think that very few companies would wish their deed of settlement to provide that the concern should be stopped immediately the directors had no money in hand.” Lastly, this principle was ap- plied in fe Cork and Youghal Railway Company,’ to advances made by persons to enable a railway company to complete its line. The company was in difficulties: it had spent its authorized capital, and was in debt be- sides; and resolutions were passed for the issue of Lloyd’s bonds. These were given to persons who lent the company money to pay for land, buy rolling stock, &c., but the resolutions and the issue were both ultra vires, because the company had exhausted its borrowing powers. It was decided by Malins, V. C., and on appeal, that the persons to whom the bonds had been issued were entitled to be repaid by the company to the extent to which their loans had been used for the company. The Lord Chancellor considered these persons to be equitable assignees of the original debtors. “It is shown, I think, that as regards some of the moneys which have been raised through the L, R. 4 Ch. 748; Re Exmouth dc. Railway Company, Ir. R. 2 Eq. 190; Docks Company, L. R. 17: Eq. 181; 16 W. BR. 598. Ulster Railway Company v. Banbridge LIABILITY OF A’ CORPORATION. 629 medium of Mr. Lewis some small portions were paid directly to persons who were actually creditors of the company, and so far, I apprehend, there could be: little or no dispute as to the right of Mr. Lewis, or of a per- son claiming through him, to stand in the place of the original debtor, whose debt, being a valid debt, had been so paid.” This, it will be noticed, is different from the ratio decidendi of the German Mining Company Case, where the lords justices went partly upon the ground that directors, being in a manner trustees for their shareholders, are entitled like other trustees to be indemnified by their cestuds que trustent for expenses justifiably incurred by them on behalf of the latter. There is, however, one decision to some extent at vari- ance. In Ae Worcester Corn Exchange Company,' directors who had themselves advanced money, after all the company’s capital had been called up, to complete the undertaking, were not entitled to be recouped by a call upon the shareholders. This case in some of its circumstances resembles, and is therefore often said to be in conflict with, Re Norwich Yarn Company, but it is easily distinguishable. Here the company was formed for one single definite purpose, viz., the erec- tion of a corn exchange; the building was to cost a certain sum, fixed beforehand, but it cost more, and the directors proprio motu supplied. the excess, although the deed of settlement expressly provided that calls should not be made upon the shareholders “beyond the amount for the time being remaining unpaid of their respective shares.” In the Norwich Yarn Com- pany’s Case all this was different; the company was established to carry on a manufacture, its liabilities were not, and could not, be precisely determined and 13D. G. M. & G. 180. 630 PROCEEDINGS ABSOLUTELY ULTRA VIRES. prescribed beforehand, and the deed did not fix a limit to the amount which the shareholders might be required to pay. Of course, if persons make loans to a corpora- tion, to be to their knowledge devoted to purposes which are ultra vires, they can have no possible claim upon the corporation in respect thereof. SECTION II. LIABILITY OF THE DIRECTORS AND OTHER OFFICIALS OF A CORPO- RATION IN RESPECT OF ULTRA VIRES TRANSACTIONS. Firstly, persons acting on behalf of others must clearly and unmistakably both act and give the parties with whom they are dealing to understand that they are acting as agents, and are unwilling to incur any per- sonal liability. Otherwise they will be liable as princi- pals, even though they had no such intention.’ * The same rule applies to the agents of acorporation, as is well shown by the decision in Kay v. Johnson? This was a suit asking for specific performance of an agreement to take a lease, and for damages caused by the refusal to do so, against the Blackburn Manufactur- ing &c. Company (Limited) and the directors and the secretary of the company. An agreement was made for the lease of certain premises, containing a stipula- tion that the lessees should execute certain building works, and the lessors should advance £1,000 on mort- gage to a limited company. This agreement was exe- cuted by the directors and secretary of the company as ) Re Kent Benefit Building Society, 2 Paice v. Walker, L. R. 5 Ex. 178.. 1 Dr, & Sm. 417; ex parte Williamson, 92H. & M. 118. L, R. 5 Ch. 309. . * See Story on Agency, §§ 266, 267; Thomson v. Davenport, 2 Smith’s: Leading Cases (7th Am. ed.), 858, 875. LIABILITY OF THE DIRECTORS. 631 lessees. The £1,000 was duly advanced, and the lessor (the plaintiff) in correspondence treated the company as liable to perform the stipulations of the agreement, and evidence was given that the directors and secretary were trustees of the benefit of the agreement for the company, but the memorandum of agreement expressly styled the directors named in it “the lessees.” It was therefore held that the directors and secretary who signed the agreement were personally liable, and a de- cree was made against them for specific performance of the agreement to take a lease. The vice chancellor said: “On the face of the instrument the presumption which arises is that the directors are liable as principals, as between them and the plaintiff, although they were also trustees for the company as between themselves. * Similarly with respect to every kind of agreement. If it be not ultra vires, and the language used is such as to make the corporate officials personally parties to the same, they will ex necessitate be liable thereon, apart from any question as to whether the corporation is also liable, or as to what rights of indemnity or other- wise they may have against the corporation.’ + ? Barker v. Allan, 5 H. & N. 61; 29 d& E.118, See Hallet », Dowdall, 18 L. J. Ex. 100; Haddon ». Ayers, 1 E, QB. 2; 211.5. Q. B. 98, * See Story on Agency, § 147. + In regard to all written contracts made by an agent for a corpora- tion, the rule is that in order to exempt the contracting party from per- sonal liability, he must so contract as to bind those he claims to represent. This rule has reference to the form of the contract. Seaver v. Coburn, 10 Cush, 824; Pumpelly 0. Phelps, 40 N. Y. 59; Lee ». M. E. Church of Ft. Edward, 52 Barb. 116; Dean 2. Roesler, 1 Hilt. 420. ‘‘ The difficulty is not in ascertaining the general principles which must govern cases of this nature, but in applying them to the different forms and shades of expres- sion in particular instruments. In order to exempt an agent from liability upon an instrument executed by him within the scope of his agency, he must not only name his principal, but he must express by some form of 632 PROCEEDINGS ABSOLUTELY ULTRA VIRES. Many of the decisions on this head have been in connection with negotiable instruments. Not unseldom directors, trustees, or other agents representing a com- pany make uotes and accept bills, very probably mean- ing the same to be on behalf of their company, but not using suitable language nor taking other precautions necessary to exclude personal liability. Thus in Dut- ton v. Marsh, four directors of a joint stock company signed their names to a promissory note in the follow- ing form: “ We, the directors of the Isle of Man Slate Company Limited, do promise to pay J. D. £1,600, with interest at six per cent. till paid, for value received.” And at one corner of the note the company’s seal was affixed, with “Witnessed by L. L.” It was held that the directors were personally liable as makers of the note, because there was nothing in the note itself to ex- elude this personal liability, and the fact that the com- pany’s seal was affixed was not sufficient to show that the note was signed on behalf of the company.* 1L, RB. 6Q. B. 861. See the cases 326; and Alexander v. Sizer, L. R. 4 there cited, and especially Lindus » Ex. 102, in neither of which were the Melrose, 3H. & N. 177; 271. J. Ex. directors who signed held liable. words that the writing is the act of the principal, though done by the hand of the agent. If he expresses this, the principal is bound, and the agent is not.” Tucker Mfg. Co. . Fairbanks, 98 Mass. 101. Among the later cases on this question are Carpenter v. Farnsworth, 106 Mass. 561; Nichols ». Frothingham, 45 Me. 220; Nicholas 2. Oliver, 36 N. H. 218; Slawson v. Loring, 5 Allen, 340 ; Draper v. Mass. Steam Heating, Co. 5 Allen, 338; Sharpe v. Bellas, 61 Penn. St. 69; Means v. Swormestedt, 32 Ind. 87. See, however, the peculiar case of Sherman vo. N. Y. Central R. R. Co. 22 Barb. 239, in which the contract was so drawn as to bind neither the principal nor the agent; not the principal, because the agent did not in any way execute it in their name; not the agent, for he did not profess in the body of the contract to act for himself. See Angell & Ames on Corp. § 293. # * Actions upon negotiable instruments can be brought only against that one whom the form of the instrument shows to be the contracting party. If the principal is liable thereby, the agent is not. If the agent is pernagd * E LIABILITY OF THE DIRECTORS. 633 Secondly, if an agent, or rather one acting as such, has not at the time a principal, and there is not then in liable, the principal is not; so that the determination of the liability or non-liability of one party on such instruments likewise involves the non- Viability or liability of the other. Upon the question, what shall be deemed sufficient in form to make the instrument that of the principal, it is difficult to lay down any exhaustive set of rules. A few general statements may, however, be made. _ 1. If in the body of the instrument the principal is named, the addi- tion of the word ‘‘agent,” or the like, to the signature of the party con- tracting, will relieve him from liability; and it is enough that the name of the corporation or other principal is printed in the margin. Fuller v.- Hooper, 8 Gray, 334; Slawson v. Loring, 5 Allen, 340; Mott 0. Hicks, 1 Cow. 514. ; . 2. If the principal is not named in the body of the instrument, and the instrument runs in the name of the agent, the addition to his name in the signature of such expressions as ‘‘agent f6r The Churchman,” and the like, will be treated as mere surplusage, and the agent will be person- ally liable. Stackpole 0. Arnold, 11 Mass. 27; Slawson »: Loring, 5 Allen, 340; Moss o, Livingston, 4 N. Y. 208; DeWitt ». Walton, 9 N. Y. 571; McClure v. Bennett, 1 Blackf. 189; Titus ». Kyle, 10 Ohio St. 444. 3. Where a note is made payable to one in a qualified character, as to “R. B., treasurer,” and he indorses it in the same way, the indorsement creates no personal liability. Babcock ». Beman, 1 E. D. Smith, 597; 8. 0. aff'd, 11 N. Y. 200; Bowne »v. Douglass, 88 Barb. 312; Mott ». Hicks, 1 Cow. 514; Bank of Genesee v. Patchin Bank, 19 N. Y. 312; same parties, 13 N. Y. 309. A distinction is drawn bétween an agent as indorser and acceptor See Babcock ». Beman, supra; Bruce v. Lord, 1 Hilt. 247. 3 And it is held that a bill drawn to “A. B., cashier,” is payable to the bank of which he is an officer, and that an indorsement in the same form is an official indorsement. In Bank of N. Y. v. Bank of Ohio, 29 N. Y. 619, Wright, J., says: ‘‘Had there been nothing in the case to connect the bill with the defendant’s bank, C. (the cashier) would have been regarded a3 the payee and indorser individually, and the abbreviation affixed to his name as a descriptio persone ; but when his official position is shown, con- nected with the fact that the bill was the property of the bank, and in the regular course of business was transmitted to its agent for collection, it is then shown that the indorsement is an official one.” Some authorities allow parol evidence to show that the note or bill is binding on the corporation, by reason of the recognition of the particular instrument, or previous recognition of similar instruments, by the corpo- ration, as corporate acts. Olcott v. Tioga R. R. Co. 27 N. Y. 546; Conro 634 PROCEEDINGS ABSOLUTELY ULTRA® VIRES. existence any person who could be principal, then, as the contract would otherwise be: wholly inoperative, such person will be held to have acted on his own be- half, and he cannot afterwards be relieved from liability by the intervention of some person willing to ratify such contract. In the case of corporations, this question will generally arise, when it does arise, with reference to the proceedings of promoters. If promoters make, on behalf of the future corporation, an absolute con- tract, and not merely one which is conditional on the formation of such corporation, they will be personally liable thereon, and will not be released from liability by the subsequent adoption of such contract by the corporation when created. ee Thirdly—where the agent of a corporation misrep- resents the extent of his authority. This is, perhaps, the commonest instance where a person dealing with directors obtains redress from them personally on the ground of the contract being ultra vires either of them- selves or of the corporation. The principle may be thus stated. Jf a director or other similar official of a cor. poration making a contract with a person misrepresent his own authority, whereby a contract not enforceable against the corporation is made, and the person so con- tracting was not aware of the limitation of authority, such person will have an action for damages against the 1 Kelner v, Baxter, L.R,2C.P.174, the facts of which have been given, ante, pp. 472, 478. ®. Port Henry Iron Co. 12 Barb. 27; Elwell ». Dodge, 38 Barb. 830; Thompson v. Tioga R. R. Co. 36 Barb. 79; Merchants’ Bank v. McColl, 6 Bosw. 473. Or even to show that the plaintiff and defendant understood the instrument to be that of the principal. Mott o. Hicks, 1 Cow. 614; Brockway ». Allen, 17 Wend. 40; Bruce ». Lord, 1 Hilt. 247. * Story on Agency, §§ 280-286; Herod 2, Rodman, 16 Ind. 241; ante, p. 475, note. LIABILITY OF THE DIRECTORS. 635 indwidual guilty of the misrepresentation ; and it has been decided that he will have a similar action when the misrepresentation is of the powers of the corporation, sed quere. (a) Misrepresentation of an Official’s Authority. Of the accuracy of the first part of this rule there can be little doubt. As is well known in the case of ordinary agents and principals, if the agent misrepresents or exceeds (however innocently) his authority, and his principal refuses to ratify the act in question, the agent is liable—not indeed upon the contract as principal, but to an action at suit of the injured party, upon the implied warranty that he had the necessary authority.* Directors are similarly ? Collen v, Wright, 8 E. & B. 647; 1D.G.F. & J. 518 Lon Edmunds v. 27 iL, J. Q. B. 215; Wilson », Miers, Bushell, L. R. 1 Q. B. 10 C. B. N.S. 848; Slim v. Croucher, * See Smout v. Ibery, 10 M. & W. 1. Upon this point the courts of the United States are not altogether in accord. There is in the first place a difference of opinion as to whether the assumed agent, failing to. bind his principal, can be held personally liable on the contract. The rule is often laid down that if an agent does not bind his principal, he binds himself. Where the failure to bind the principal results from the form of a written contract, because of the mode of signature or the mode of designating the party contracting, this rule seems to be universally re- ceived. If in such case, the agent uses words which do not suffice to indicate that his principal is the contracting party, although intended to do so, those words will be regarded as descriptive and as mere surplusage. This rule, which properly has to do with matters of form, has been ex- tended to matters of substance, and some authorities hold, that if the agent fails to bind his principal, by reason of lack of authority, in a written contract whose form clearly indicates that the agent did not in- tend to bind himself, everything which the agent had no authority to insert in the contract shall likewise be regarded as surplusag@, and the agent’s name left bare, as the signature of the contracting party. Nor has the application of the rule been confined to written contracts, but it has been held, generally, that any contract which fails to bind the prin- cipal, because the agent had no authority from him, shall be regarded as 636 PROCEEDINGS ABSOLUTELY ULTRA VIRES. liable. Thus, in Cherry v. Colonial Bank of Austral. asia, two of the directors of a company informed a 1L, R.3 P.C. 24; 17 W. R. 1031. Compare Eastwood v, Bain, 3 H. & N. 788; 28 L. J. Ex, 74. the contract of the agent. This is the view of the courts of New Hamp- shire. Underhill ». Gileson, 2 N. H. 356; Woodes v. Dennett, 9 N. H. 58; Pettingill ». M’Gregor, 12 N. H. 191; Weare v. Gove, 44 N. H. 196; see also Roberts v. Button, 14 Vt. 192; Royce v. Allen, 28 Vt. 2384; Bay ». Cook, 2 Zab. 343. It is also supported by the earlier cases in New York. Dusenbury ». Ellis, 8 Johns. Cas. 70; White v. Skinner, 18 Johns, 307; Meach v. Smith, 7 Wend. 315; Feeter 7. Heath, 11 Wend. 479; but is doubted, if not overthrown, by the later New York authorities (see Walker ». Bank of N. Y. 9 N. Y. 582; White o. Madison, 26 N. Y. 117; Aspinwall v. Torrance, 1 Lans. 381; Dung v. Parker, 52 N. Y. 494; Balt- zer v. Nicolay, 53 N. Y. 467), which accord with what seems to be the prevailing opinion, viz., that the agent cannot in such case be held liable on the contract. See Noyes v. Loring, 55 Me. 408; Jefts ». York, 4 Cush. 371; s. c. (on new trial) 10 Cush. 392; Draper ». Mass. Steam Heating Co. 5 Allen, 388; Ogden v. Raymond, 22 Conn. 379; Taylor ». Shelton, 30 Conn. 122; Duncan ». Niles, 32 Ill. 582; Sheffield 0. Ladue, 16 Minn. 388. But even where the liability of the agent as a contracting party is denied, still he is held liable by some courts on the ground of fraud and misrepresentation, and by others on that of an implied warranty ; thus in White v. Madison, 26 N. Y. 117, it is said: ‘‘ Whenever a person enters into a contract as agent for another, he warrants his own authority, un- less very special circumstances, or express agreement, relieve him from that responsibility. An action upon such warranty must always be ap- propriate where personal liability attaches to an agent,,in consequence of - his contracting without authority. * * If the act of the agent were fraudulent, an action for the deceit would lie, but it would be a concur- rent remedy with an action on the warranty, and so I apprehend must be the action on the contract itself, if the cases which sustain such action are to be regarded as correctly decided.” And this view is supported by Dung v. Parker, 52 N. Y. 494, and Baltzer v. Nicolay, 53 N. Y. 467. On the other hand, Shaw, C. J., in Jefts v. York, 10 Cush. 392, says: “Tf one falsely represents that he has an authority, by which another relying on the representation is misled, he is liable; and by acting as agent for another, when he is not, though he thinks he is, he tacitly and impliedly Sepresents himself authorized, without knowing the fact to be true, it is in the nature of a false warranty, and he is liable. But in both cases his liability is founded on the ground of deceit, and the remedy is by action of tort.” See Hegeman v, Johnson, 35 Barb. 200. That an action on the case for deceit is a proper action, when one LIABILITY OF. THE DIRECTORS. 637 bank that they had appointed C. to be the manager of the company, and had authorized -him to draw checks, They had no authority to do so, but they were held liable upon checks drawn by C., upon the implied war- ranty that they had the requisite authority. The agent will, however, not be so liable if the person with whom he dealt knew, or had the means of knowing, that he was exceeding his powers. Such means will, in the case of the officials of corporations, and more especially of joint stock companies, be generally in the power of the person contracting with them to obtain. They have such powers only as are expressly given them in the constating instruments, or are necessarily deducible therefrom in connection with the nature of the company’s business. It is, indeed, often difficult to define the Jimits of the implied powers of corporate officials) and therefore on that account questions will occasionally arise.* Never- 1 See Wilson v. Miers, 10 C. B. N.S. 348. knowingly or through culpable ignorance acts as the agent of another, without authority, seems nowhere to be doubted. See Noyes v. Loring, 55 Me. 408; Ballou v, Talbot, 16 Mass. 461; Abbey v. Chase, 6 Cush. 54; Draper o. Mass. Steam Heating Co. 5 Allen, 338; Bartlett ». Tucker, 104 Mass. 884; Ogden ». Raymond, 22 Conn. 379; Taylor ». Shelton, 30 Conn. 122; Walker 0. Bank of New York, 9 N. Y. 582; Duncan 2. Niles, 32 Ill. 532 ; McCurdy v. Rogers, 21 Wis. 197. That the notion of implied warranty gives a basis for an action ex contractu, cannot be considered as settled, An agent who falsely represents his authority to make a contract on behalf of another, is not liable, however, in contract or in tort, unless the principal would have been bound by the contract made, if the agent had such authority. Dung ». Parker, 52 N. Y. 494, and Baltzer ». Nico- lay, 53 N.Y. 467, in both of which cases the contract would not have bound the principal by the statute of frauds. * As to those matters wherein the powers either of the corporation or of the agent are fixed or limited by public act or by general laws, parties dealing with the agent have the means of knowing and must be pre- sumed to know the extent of the power, and having thus constructive notice, cannot set up that they were deceived by any implied representa- 638 PROCEEDINGS ABSOLUTELY ULTRA VIRES. theless, very generally a misrepresentation by a director or other agent of a corporation as to his powers must be a misrepresentation of law and not of fact, and when this is so he will not thereby be involved in any liabil- ity. Beattie v. Lord Ebury,* is the latest case in point. Here three directors of a railway company opened, on behalf of the company, an account with a bank, and sent a letter, signed by the three as directors, request- ing the bank to honor checks signed by two of the directors and countersigned by the secretary. The ac- count having been largely overdrawn by means of such checks, the bank sued the company at law, recovered judgment in 1865, and issued an elegit. The proceeds being insufficient to satisfy the debt, the bank filed a bill to make the directors personally liable for the defi- ciency. Bacon, V. C., held that this letter rendered the directors personally responsible for the advances so made by the bank, but the lords justices reversed his decision on the ground: that, assuming the letter to con- tain a representation (which they were greatly inclined to doubt) that the directors had power to overdraw the account, and such representation to be erroneous, this was not a representation of fact, which the per- sons making it were bound to make good, but only a mistaken representation of the law. Mellish, L. J., ‘L. R. 7 Ch. 777; affirmed in the House of Lords, W. N. 1874, p. 119; L. R. 7 H. L, 102. tions or warranty of power in the corporation or of authority in the agent. See Story on Agency, § 265, and cases cited; also Aspinwall 0. Torrance, 1 Lans. 381, where it is said: ‘‘ There is a class of cases in which an agent is held excused from liability, where he had acted in good faith, and the facts were known to both parties. With how much more pro- priety may that rule be applied, when the agent is induced to act on his supposed agency, by the representation of the party with whom he ib dealing.” See post, p. 643. LIABILITY OF THE DIRECTORS. 639 said: “It appears to me that there is no representa- tion made respecting the authority, except that they were directors of the railway company, and therefore had such authority as the directors of a railway com- pany had.” (b) Misrepresentations of the Corporate Powers. If it is but seldom that corporate officials can in this way be held liable for exceeding their own authority, it is of course still more seldom that an action will lie against them for misrepresenting the extent of the cor- poration’s powers, and thereby inducing a person to enter into an ultra vires engagement. In such case the other party has access to the constating instruments—he may therefore make himself acquainted with the exact extent and nature of the capacities of the corporation. He must also be assumed to be informed of the law of the land.’ Consequently, as the corporate powers are ques- tions of law, not of fact, the misrepresentation by the directors is of a matter of law, and it therefore follows that the person aggrieved is not entitled to redress. Accordingly, on two occasions, the Court of Chan- cery has refused to grant relief under such circum- . Stances. In the first case, Ellis ». Colman,’ directors _. had induced contractors to enter into an ultra vires agreement with a corporation, and on a bill being filed against the company and the directors for specific per- formance, or that the latter should make good their rep- resentations, demurrers for want of equity were allowed, because “the proper relief would be by action at law, for the purpose of compelling the directors to make good the loss that the plaintiff has sustgined by their 195 Beay. 662; 27 L. J. Ch, 611. 640 PROCEEDINGS ABSOLUTELY ULTRA VIRES. representations.”' The other case is Rashdall v. Ford, where directors had issued Lloyd’s bonds that were ultra vires. The plaintiff who advanced the money ' filed his bill to make the directors pay the amount he had advanced, with interest, but Page-Wood, V. C., allowed a demurrer, saying: “It seems to me impossi- ble to extend the principle of relief arising out of mis- representation to a statement of law, which turns out to be an incorrect statement. * * * It:is impossi- ble to say that the directors are more than agents, or that they can be held personally liable for any state- ments as to theelegal effect of a security which they agreed to give, and which the plaintiff agreed to take.” Similarly at common law, in the case of Mac- gregor v. Dover and Deal Railway Company, the facts of which have already been stated, the Exchequer Chamber decided that an action would not lie against the chairman of a railway company, upon a promise by him that the company should do an ultra vires act, at the suit of the person to whom the promise was made. The court said: “It is a promise that an act shall be done contrary to the public law of the country, of which both parties are bound to take notice. The actis, there- fore, illegal ; and the promise that it shall be done is a void promise.” However, in Richardson v. Williamson,* the laine was held entitled to recover in such an action. Here the plaintiff had lent £70 to a benefit building society, and received a receipt signed by the defendants, as two 1 Quere, whether the demurrers course, in addition to or in substitution would now be allowed, since by the con- for specific performance, which was here joined effect of Cairns’ Act and Rolt’s prayed. Act the court must both determine every “L, RB. 2 Eq, 750, question of law and fact necessary for 718 Q. B. 618; see ante, p. 231, giving full and complete relief, and must where is stated fully. award damages where this is the better ‘L. RB. 6 Q. B. 276. LIABILITY OF THE DIRECTORS. 641 directors of the society, certifying that the plaintiff had deposited £70 with the society for three months certain, to be repaid with interest after fourteen days’ notice. The society was formed under 6 & 7 Wm. IV, «. 82, and had no power to borrow money; and the plaintiff being unable to get her money back from the society, sued the defendants. On these facts, the court having power to draw inferences, the Court of Queen’s Bench unanimously decided that the defendants were liable to the plaintiff in damages for a breach of warranty of au- thority, they having by signing the receipt in effect . tepresented that they had authority to make a binding contract of loan on behalf of the society, and so induced the plaintiff to part with her money. It is scarcely possible to reconcile this decision with Rashdall v. Ford and Macgregor’s Case. The judg- ments seem to have proceeded upon the ground that the misrepresentation was as to the extent of the direct- ors’ powers. But even looked at in that way, it was still a misrepresentation of law rather than of fact, for the powers of the directors are limited pro tanto with those of the company, and those of the company being, certainly, at least as to the borrowing of money and similar matters, a question of law, those of the directors must be a question of the same nature. Cockburn, C. J., said: “It cannot be supposed that the plaintiff, on lending money to the society, did so with the knowl- ° edge that the society was not authorized to borrow; *and it was not till she wanted her money back that she ascertained the real position of affairs, and is met by the’ defense that the society is not liable.” But with all submission, that is exactly what the courts both of law and equity do—and in the previous decisions did—sup- pose, viz, that every person understands the doctrine 41 642 PROCEEDINGS. ABSOLUTELY ULTRA VIRES. of ultra vires, and the restrictions and qualifications which are by consequence of it imposed upon corpora- tions; and that a misstatement of the capacity of any particular corporation is a matter of law which a person credits or not, and acts upon or not, at his own peril. Mellish, L. J., has thus explained this decision :'* “There the plaintiff lent £70 to a benefit building so- ciety, and received a receipt signed by the defendants, as two of the directors, certifying that the money had been lent, and then it turned out that in point of law they had no power to borrow money. But then their power to borrow money depended upon whether they had made a rule to borrow money, because a benefit building society may receive money, at any rate to certain amount, on deposit, if it has a rule enabling it so to receive money. Therefore that was taken as a representation by the directors that they had such a rule, and that the borrowing was within the rule, when, in point of fact, there was no such rule at all.” Bate in the judgments as reported, nothing turns upon the want of such a rule—indeed no reference is made to it. The decision was simply that the directors “ represented that Beattie v, Lord Ebury, L. R. 7 Ch. 777, 801. * Honeyman, J., in Weeks »v. Propert, L. R. 8 C. P. 427 (which ‘was an action against a director of a company, to recover the amount paid for « its debentures, issued in excess of the borrowing powers of the company), comments upon the judgment of Mellish, L. J., in Beattie . Lord Ebury. ‘‘Taking the whole of that (the judgment) together, it amounts to this, that a misrepresentation as to a matter of law, which every man is! supposed to know, gives no cause of action. In that I fully agree. Here, however, the defendant, knowing that the power of borrowing money upon debentures had been fully exercised by this company (a fact which was unknown to the persons with whom he was dealing), repre- sented that the directors had power to issue debentures se as to bind the company. I think, therefore, that the defendant was guilty of a breach of warranty.” LIABILITY OF THE DIRECTORS. 648 they had authority to borrow money on behalf of the society, and that the society would be bound to repay it on proper demand;” whereas there was no such au- thority nor any such liability; and consequently “that the plaintiff was entitled to recover from the defendants the damages she had suffered from not being able to sue the society, on showing that the defendants pro- fessed to be able to bind the society.” * * The few American decisions which allude to the point of the lia- bility of officials for misrepresentation of corporate powers, appear to have been determined on the ground, rather of breach of an implied war- ranty, than of actual fraud. It would seem, however, that the following principles should solve the question: (1) If the powers are granted by the laws of the State where the representations are made, and the act granting them is a public one, then the extent of the powers is a question of law, of which no one can plead ignorance. See ante, pp. 160, 895, 427, 611. (2) Misrepresentation of a matter of law does not consti- tute fraud at law, although if a man dealing with another misleads him as to his legal rights and position, courts of equity will interfere to prevent imposition. (8) Mistake of law, both at law and in equity, is no ground for the recovery of money paid; “ but the rule is liable to a qualification, if the man to whom money has been paid has been accessory to the error of the other party, or has got some one to misinform him of the law.” See Kerr on Frauds (Am. ed.), 90, 401, and cases cited; Starr v. Bennett, 5 Hill, 308; Cook v. Nathan, 16 Barb. 842; Mead v. Bunn, 32 N. Y. 275; Pitcher v. Hennessey, 48 N. Y. 415; Oliver ». Mutual Ins. Co. 2 Curt. 271. (4) If, however, the corporate powers are granted by the laws of a State other than that where the representations are made, then the extent . of the powers is a question of fact. See Owings v. Hull, 9 Pet. 607; Havens v. Foster, 9 Pick. 112; Monroe v. Douglass, 5 N. Y. 447; Bank of Chillicothe 1. Dodge, 8 Barb. 233. As to actions at law for false repre- sentations, see Kerr on Fraud, ch. I, § 2; Meyer ». Amidon, 45 N. Y. 169; Oberlander ». Speiss, 7b. 175; Wakeman ». Dalley, 51 N. Y. 27; and note ante, p, 250. As to relief in equity from mistakes of law and of fact, see Willard Eq. Juris. chap. 2; Story Bq. Juris. §§ 126, 138; Benja- min on Sales, §§ 414, 419, 428-502, 607, and cases cited in Mr. Perkins’ notes to American edition. In McCurdy ». Rogers, 21 Wis. 197, the court say: “It is not claimed that the appellant made any false representations or practiced any decep- tions, unless it was done by making a promise in the name of the town, which he had no authority to make. His assuming to make a contract 644 PROCEEDINGS ABSOLUTELY ULTRA VIRES. which he had no authority to make would ordinarily in the case of private agents be equivalent to a representation that he had authority to make it; but not so in this case, or if so, its falsity was known at the time to L.; for the authority which the town had was by virtue of a general statute which both parties alike are presumed to know.” See Ogden »v. Raymond, 22 Conn. 379. Jefts v7. York, 10 Cush. 392, was a suit brought against one, who had executed a note in behalf of a church, which was held not to be a corporation, and had no power to authorize an agent to borrow money. Shaw, C.J., held that ‘ where a person acting as agent, borrows money for his principals, and gives their obligation for it, and it turns out that the principals were not of legal capacity to make such contract, and of course could confer no such power on another, the agent is not personally liable on the contract as his contract. * * If the defect of authority arises from a want of legal capacity, and if the parties act under a mutual mistake of the law, and are both equally well informed in re- gard io the facts, so that the lender is not misled by any word or act of the agent, he could have no legal remedy against the agent; not in as- sumpsit, for it is not his contract; notin tort, for he is chargeable with no deceit.” King 2. Doolittle, 1 Head, 78, was a suit in equity to rescind a con- tract for the purchase of a bank, claiming legal existence under several acts of the legislature of Tennessee, copies of which, certified by the Secretary of State to be full and perfect copies, were procured by the vendor, and upon the faith of which the vendee entered into the contract of purchase. There was no suspicion, much less knowledge on the part of either party, that there had been omitted from the copy, a clause re- serving to the legislature the right of repeal at pleasure. The legislature, after the contract of purchase had been completed by the delivery of several negotiable promissory notes, repealed the charter, and totally de- stroyed the legal existence of the bank. The contract was set aside upon the ground of a mistake of fuct, both parties having relied upon the certi- fied copy of the laws above mentioned; but the court also held that the . charter of a private bank, which is merely the title of the parties, stood upon the same footing with the laws of other States and governments, ignorance of which is ignorance of fact. The court observes: ‘‘ The complainant cannot, we think, be repelled on the ground that the charter, being a public act, the law imputes to the complainant, and charges him with knowledge at the time of making the contract, not only of the en- tire contents of the charter, as a matter of fact, but likewise of the rules and principles of law applicable to each and all of its several provisions. This position is not tenable. Whether an act incorporating a bank for the sole benefit of private individuals, may not, in some sense and for some purposes, be regarded as a public law, is a question we need not now discuss. For, if this were even to be admitted, no one will be heard to say, that it is a general law, affecting the whole community. And we have held, that the familiar maxim, that ignorance of the law is not ex- , LIABILITY OF THE DIRECTORS. 645. cuse for the breach or non-performance of any agreement, because every one is presumed to know the law, applies only to general public laws, which prescribe a rule of action for the whole community; and that it has no application whatever to special or private laws, which are intended to operate upon particular individuals; ” citing Cook ». Sumner Spring Co. 1 Sneed, 698; See State v. Paup, 18 Ark. 129; Russel 0, Branham, 8 Blackf. 277; People 0. Supervisors, 27 Cal. 655; Weare 2. Gove, 44 N. H. 196. CHAPTER IV. DISSOLUTION OF CORPORATIONS. A CORPORATION may be put an end to in the follow- ing ways: I. By proceedings against it on the part of the crown, as a punishment for the misuse of its fran- chises. IL. By surrender of its charter, or other volun- tary dissolution. IL By extinguishment, resulting from the death of all its members, or the total loss of one of its integral parts. IV. Bya special act of parlia- ment passed'in any particular case. V. By proceedings taken in accordance with the provisions of the various winding up acts.* First.—Dissolution by the direct Action of the Crown. The first of these causes of dissolution is distinctly an instance of the effect of the doctrine of ultra vires. From earliest times it has been established that a cor: poration which turned its liberties to improper purposes was liable to have those liberties forfeited. Without some just reason the crown cannot revoke a charter of incorporation, or withdraw any of the privileges con- * Another mode in which a corporation may be dissolved, is, by reach- ing the limit of time fixed for its duration by the charter or by general law. See Angell & Ames on Corp. § 778 a. If the act of incorporation fixes a definite time at which the charter shall expire, when the time fixed arrives, the corporation is dissolved. But if its continuance beyond 4 fixed time is made to depend on the performance of a certain condition, non-performance is merely ground for forfeiture. La Grange &. R. R. Co. v. Rainey, 7 Cold. 420. DISSOLUTION OF CORPORATIONS. 647 tained therein.* But it may do so whenever the con- ditions of the grant are not observed.t+ The method of procedure is by a writ of scire facias against the corporation to repeal the charter, or against a body claiming to exercise corporate powers to determine the validity of such claims; and by guo warranto, when the intention is to inflict the minor punishment of suspending for a while the corporate franchises, and not of actually taking them away and determining the existence of the corporation. The difference between the two proceedings has been thus stated: “A seire facias is proper where there is a legal existence capable of acting, but who have been guilty of an abuse of the power intrusted to them; for as a delinquency is imputed to them they ought not to be condemned unheard ; but that does not apply to the case of a non-existing body. And a quo * TRex ». Amery, 2 T. R.515; Rex v. Ponsonby, 1 Ves. 1, 7. *See Dartmouth College 1. Woodward, 4 Wheat. 518, and case cited in Angell & Ames, § 767, + Through neglect or abuse of its franchises, a corporation may forfeit its charter as for condition broken, or for a breach of trust. Angell & Ames, § 774; Terrett 2. Taylor, 9 Cranch, 51; Dartmouth College 2. Woodward, 4 Wheat. 518, 658; Mumma v. Potomac Co. 8 Pet. 281; Pe- nobscot Boom Corp. ». Lamson, 16 Me. 224; Hodsdon v. Copeland, Jb. 314; Day o. Stetson, 8 Greenl. 365; State ». Bradford, 82 Vt. 50; Common- wealth v. Union Ins. Co. 5 Mass. 230; Charles R. Bridge v. Warren Bridge, 7 Pick. 871; State v. Pawtuxet T. Co. 8 R. I. 182, 521; People v. Man- hattan Co. 9 Wend. 351; People v. Kingston &c. Turnp. Co. 23 Wend. 193; People ». Bank of Niagara, 6 Cow. 195; People o. Washington Bank, J. 241; People o. Bank of Hudson, Id. 217; People v. Dispen. & Hosp. Soc. 7 Lans, 305; Lehigh Bridge Co. . Lehigh Coal Co. 4 Rawle, 9; Common- wealth 0. Commercial Bank, 28 Penn. St. 283; Com. ». Pittsburg R. R. Co. 58 Penn. St. 26; Washington &c. Road v. State, 19 Md. 239; Canal Co. », Railroad Co. 4 G. & J. 1; Paschall », Whitsett, 11 Ala. N. 8. 472; State 0. Commercial Bank, 38 Miss. 474; Atchafalaya Bank ». Dawson, 13 La. 497; McIntire Poor School ». Zanesville Canal Co. 9 Ohio, 203; State Bank 0. State, 1 Blackf. 279; John v. Farmers’ Bank, 2 Blackf. 367. 648 DISSOLUTION OF CORPORATIONS. warranto is necessary where there is a corporate body de facto, who take upon themselves to act as a body corporate, but from some defect in their constitution they cannot legally use the powers they affect to use.” 1 * ‘ Per Ashurst, J.,in Rex v, Pasmore, 8 T, R. 199, 244. * See Terrett v. Taylor, 9 Cranch, 51; Turnpike Co. ». State, 3 Wall. 210; People v. Soc. for Prop. Gosp. 1 Paine C. C. 660; State o. Bradford, 82 Vt. 50; People o, Bank of Hudson, 6 Cow. 217; Lea ». Amer. Canal Co. 3 Abb. Pr. N. 8. 1; Kishacoquillas T. R. Co. 0. McConaby, 168. & R. 145; Canal Co. », R. R. Co.4G. & J. 1; Univ. of Md. 2. Williams, 9 G. & J. 365; Wash. & Balt. T. R. o. Md. 19 Md. 239; State v. Mer. Ins. Co. 8 Humph. 235; State. Cincinnati, 23 Ohio St. 443; Baker v. Backus, 32 Tl. 79; Lindell ». Benton, 6 Mo. 361. As to the mode of procedure estab- lished in New York, see Code, §§ 428, 429, 430. ‘* Where a corporation has abused its power, or committed acts which are unlawful, it neverthe- less continues legally to exist as a corporate body until the State or govern- ment which created it shall, by a proper proceeding, procure an adjudica- tion and enforce a forfeiture of the charter. But all such proceedings are at the instance and on the behalf of the State or government. Acts which are improper do not of themselves work a dissolution.”” Ormsby », Ver- mont Copper Mining Co. 65 Barb. 860. The right of forfeiture may be waived by the State. See Angell & Ames on Corp. § 777, and the numer- ous cases there cited. State v. Paterson & Hamb. T. Co. 1 Zab. 9. The declaration of forfeiture is for the court and not the legislature. Bruffett v. Great Western R. R. Co. 25 Ill. 353. When, however, the charter re- serves the power to forfeit the charter in case of abuse, or failure to per- form a condition, the legislature may enact a repeal whenever the abuse or failure occurs. See Crease ». Babcock, 23 Pick. 2384; Erie and N. E. R. R. Co. v. Casey, 26 Penn. St. 287, But the legislature is not the final judge of the existence of the condition upon which its power is based: The court can inquire whether the facts show such an abuse or breach of condition, and according as they do or do not the act of the legislature is valid or void. Commonwealth », Pittsburg & Connellsville R. R. Co. 58 Penn. St. 26. The case of Erie & N. E. R. R. Co. . Casey, contains a full¢ and able discussion of this question. Reference may also be made to Commonwealth v, Essex Co. 13 Gray, 239; Delaware R. R. Co. o. Tharp, 5 Harring. 454; State ». Curran, 7 Eng. (Ark.) 821; Curran ». State, 15 How. 304; Flint and Fentonville P. R. Co. ». Woodhull, 25 Mich. 99; Miners’ Bank ». U. 8. 1G. Greene (Ia.) 553. A substantial performance of conditions is all that is required. People ». Thompson, 21 Wend. 235; 8. C. 28 Wend. 587. In the absence of statutory provisions, the question of forfeiture is wholly for courts of law. Att. Gen. », Tudor Ice Co. 104 DISSOLUTION OF CORPORATIONS. 649: In former times it was a rather common occurrence for proceedings to be instituted by the crown against corporations for misusing their franchises, or against in- dividuals for usurping such privileges. State reasons were generally the motive cause. The municipal cor- porations during the middle ages, and till a period at least as late as the revolution of 1688, formed one of the chief mainstays of English liberty.* The sovereigns encouraged them as the centres of trade, and repressed them by every means when they attempted to make subservient to political objects the great power which the union and periodical meetings of their members gave them. Other incentives there were, too, which prompted the almost continual interference of the crown with the corporations. Every addition to the import- ance and strength of them was assumed to be an en- croachment upon and a diminution of the prerogative. Moreover, the fines imposed upon corporate bodies, and often upon the luckless corporators themselves, were a lucrative source of revenue. However, with the increase: of individual freedom, and protection for the expression of individual opinions, the political importance of these Mass, 239; Att. Gen. v. Bank of Niagara, 1 Hopk. 324; Slee », Bloom, 5 Johns. Ch. 866; Verplanck o. Mercantile Ins. Co. 1 Edw. Ch, 84; Doyle». Peerless &c. Co. 44 Barb. 239; Soc. for Estab. Usef. Manuf. ». Mor. Canal & Bkg. Co. Sax. 157; Doremus v. Ref. Dutch Church, 2 Green Ch. 352; Gifford o. N. J. R. R. Co. 2 Stock. 171; President &c. v. Trenton Bridge Co, 2 Beasl. 46; Bayless ». Orne, 1 Freeman Ch. 161; State v. Merchants» Ins, & Trust Co. 8 Humph. 235; Baker v. Backus, 32 Ill. 79. As to non- user as a ground of forfeiture, see Commonwealth v. Fitchburg R. R. Co. 12 Gray, 180; Ward v. Sea Ins, Co. 7 Paige, 294; Jackson 0. Marine Ins. Co, 4 Sandf. Ch. 559; People 7. Washington Bank, 6 Cow. 211; People o. Bristol T. R. Co, 28 Wend. 222; State o, Flavell, 4 Zab. 370; Canal Co. % RR. Co. 4G. & J. 1; State o. Commercial Bank, 33 Miss. 474; State ». Urbana Ins, Co. 14 Ohio, 6. * See Dillon Mun. Corp. §§ 718, et seg. 650 DISSOLUTION OF CORPORATIONS. bodies has greatly diminished ; consequently, seldom if ever does the crown now attack them for an encroach- ment upon its own privileges, or for any other reason of offense to itself. When the crown does intervene, it is rather the State than the sovereign personally; the cause is detriment actual or apprehended to the public interests. The proceedings are by the attorney general by way of information; and the object sought is to compel the delinquent body to do or forbear from given acts, and not its dissolution temporarily or completely.* The power of the crown to cancel a charter for non- observance of its conditions remains in full vigor, and it may be exercised at any moment to the punishment of an offender. Consequently, where a corporation or its officials are acting contrary to the provisions of their charter, or other constating instrument, or in any other manner so as to imperil the existence of the corporation, the Court of Chancery will, upon the request of any member, restrain such acts.t In Rendall v. Crystal Palace Company,' the defendants had been incorporated by royal charter, one of the conditions of which was, that no person should be admitted to the building or grounds on the Lord’s day in consideration of any money payment, whether made directly or indirectly, unless the express sanction of the legislature should have been obtained. By a private act of parliament subsequently passed, power was given to the directors of the company to agree with any proprietor, absolutely entitled to shares or stock in the company, for the con- 204 L. J. Ch. 397; see Queen v, Eastern Archipelago Company, 22 L. J. Q. B. 196. * See High on Extra. Rem. chaps. XV, XVI. t See ante, p. 588, note. DISSOLUTION OF CORPORATIONS. 651 version thereof into a ticket of admission into the building and grounds for such proprietor or his nom- inee for life, or term of years, as might be determined on, provided that nothing therein contained should invalidate the charter or relieve the company from any conditions contained therein, excepting in so far as the same were thereby expressly varied. In pursuance of this act, it was proposed to give in exchange for each share a ticket. entitling the owner to a certain number of admissions, and which should be available on Sun- days as well as other days. Upon a bill being filed by one of the members of the company, on behalf of him- self and the rest, to restrain the proposed exchange, Page-Wood, V. C., considered that such a proposal, if carried into effect, would be an infringement of the con- dition in the charter, and also that it was not authorized by the act. He accordingly overruled the demurrer which the company and the directors had put in to the bill. Secondly.— Voluntary Dissolution.* The majority of a corporation may, against the * See Mumma. Potomac Co. 8 Pet. 281; Penobscot Boom Co. v. Lam- son, 16 Me. 224; Hodsdon v. Copeland, 16 Me. 314; Enfield Toll Bridge Co, o. Conn. R. Co, 7 Conn. 45; McLaren v. Pennington, 1 Paige, 107; Slee 2 Bloom, 19 Johns. 456; Canal Co. v. R. R. Co. 4 Gill & J. 1; Mobile R. R. Co. 2. State, 29 Ala. 578; Att. Gen. ». Clergy Soc. 10 Rich. Eq. 604; McIntire Poor School 9. Zanesville Canal Co. 9 Ohio, 203. It is essential that the surrender be accepted by the State. Revere v. Boston Copper Co. 15 Pick. 851; Boston Glass Co. v. Langdon, 24 Pick. 49; Enfield Toll Bridge Co. ». Conn. R. Co. 7 Conn. 45; Ward ». Sea Ins. Co. 7 Paige, 294; N. Y. Marbled Iron Works 2. Smith, 4 Duer, 362; Norris ». Mayor, 1 Swan, 164; Campbell ». Miss. Union Bank, 6 How. (Miss.) 681; Portland Dry Dock &c. Co. v. Portland, 12 -B. Mon. 77; Harris 1. Muskingum Mfg. Co. 4 Blackf. 267; Town v. Bank of River Raisin, 2 Doug. (Mich.) 580. Surrender may in some cases be presumed from neglect of functions. See 652 DISSOLUTION OF CORPORATIONS. wishes of the minority, dissolve by winding up, and the more generally received opinion is that they can do so by any other process which is purely voluntary.* Ward v. Society of Attorneys,’ is often stated to be a decision to the contrary, but this is scarcely correct. What Knight-Bruce, V. C., did in this case was to grant an injunction restraining a corporation to the hearing from surrendering its charter or parting with its assets, and he did this to prevent irreparable damage. His words are: “The two substantial objects of the present application are, to prevent the destruction of the cor- poration and to prevent that alienation of the property "1 Coll. 370; see the facts, ante, p. 206: compare Rendall v, Crystal Palace Company, 27 L. J. Ch. 897, Brandon Iron Co. v. Gleason, 24 Vt. 228; State o. Bull, 16 Conn. 179 . State ». Vincennes Univ. 5 Ind. 77. But non-user, suspension of business, or the sale or assignment of the corporate property, will not be necessa- rily a surrender. Penobscot Boom Corp. v. Lamson, 16 Me. 224; Brandon Iron Co. v. Gleason, 24 Vt. 228; Brinkerhoff ». Brown, 7 Johns, Ch. 217; Barclay v. Talman, 4 Edw. Ch, 123; People v. Bank of Hudson, 6 Cow. 217; Bradt v. Benedict, 17 N. Y. 98; State», Bank of Md. 6 Gill & J. 205; Univ. of Md. v. Williams, 9 Gill & J. 365; Town ». Bank of River Raisin, 2 Doug. (Mich.) 541; Bruffett », Great Western R. R. Co. 26 Ill. 353. It is held, however, that acts which destroy the end for which the corporation was instituted do amount toa surrender. Strickland 0. Prich- ard, 37 Vt. 324; Slee v. Bloom, 19 Johns. 456; Penniman 2. Briggs, 1 Hopk. 800; 8, 0. 8 Cow. 387; People ». Bank of Hudson, 6 Cow. 217; Moore 2. Whitcomb, 48 Mo. 543. * On the question, whether to surrender the charter is within the power of a majority, see pro Treadwell v, Salisbury Mfg. Co. 7 Gray, 393; Wilson v. Prop. of Central Bridge, 9 R. I. 590; Zabriskie ». Hackensack R. R. Co. 3 C. E. Green, 193; Black v. Del. & Rar. Canal Co. 7 C. E. Green, 404; McCurdy v. Myers, 44 Penn. St. 535; contra, Kean v. Johns- ton, 1 Stockt. 401; Revere ». Boston Copper Co. 15 Pick. 351; Curien v. Santini, 16 La. An, 27; Polar Star Lodge v. Polar Star Lodge, 16 La. An. 58. Where time for the duration of the corporation is fixed in the char- ter, unanimity is held essential to a surrender. Von Schmidt ». Hunt- ington, 1 Cal. 55; see also ante, pp. 543; 544, note. Inquiry may be made collaterally as to whether a corporation has ceased to exist by its own act. Carey v. Cin. & Chic. R. R. Co. 5 Ia. 857. DISSOLUTION OF CORPORATIONS. 653 of the corporation which is proposed for no purpose except its destruction. If such opinion as I have at present formed were more favorable to the case of the respectable defendants than it is, I could not allow the property to be so importantly affected before the hear- ing of the cause. It seems to me that to do so would, in the strongest sense of the term, be an irremediable act. How could I, or any court in the kingdom, restore these plaintiffs to their original position, if the act now sought to be restrained were done?” In this there is nothing like an assertion that the majority of the mem- bers of a corporation cannot dissolve it, either absolutely. or to reconstruct it upon a new footing. All that the vice chancellor meant was, that they may not act in such a manner, whether with a view to dissolution or other- wise, as to damage the common funds, at- least “ not before the hearing of the cause.” In connection with this question may be mentioned the case of Bank of Switzerland v. Bank of Turkey." Here the directors of a projected banking company, not being able to carry out the project to its full extent, determined upon winding up the affairs, and returning to the applicants for shares the full amounts of the de- posits made by them. Deposits amounting to two- thirds of the sums deposited had accordingly been re- turned to the depositors, and the remainder was in course of payment, when a bill was filed by purchasers of shares who were dissatisfied with the termination of the affairs of the proposed company, to restrain the directors from further carrying out the arrangement. Page-Wood, V. C., however, held that the course which the directors had taken was not ultra vires, and that they were justified in taking it, since it was morally im- 15 L. T.N.S. 549. 654 DISSOLUTION OF CORPORATIONS. possible, from the events which had happened, that the project could be carried out in its entirety; and he therefore granted an injunction in terms of the bill which had been asked for. Next to be considered is the question whether a person not actually a member of, but interested in, a corporation, such as a creditor, can call upon the courts to prevent such corporation dissolving by amalgama- tion, the surrender of its charter, or any voluntary mode whatever, other than by winding up or a similar statutory arrangement.* The creditor may fairly say that he is entitled to the protection of the court in so far as, if at all, it can render him assistance by putting a stop to proceedings, active or passive, on the part of his debtor which may interpose obstacles to the debtor’s discharge of his obligation. Whether this would hold * The rights of creditors are in most cases sufficiently protected by the equity rule, which is now generally established in this country, that the funds of a corporation are held in trust for creditors, so that in case of dissolution they can be followed into the hands of all save bona jide purchasers without notice. See Wood 0. Dummer, 3 Mason, 308; Mumma ». Potomac Co. 8 Pet. 281; Curran o. State, 15 How. 304; Bacon v, Rob- ertson, 18 How. 480; Lum ». Robertson, 6 Wall. 277; Read o. Frankfort Bank, 23 Me. 318; Nathan o. Whitlock, 9 Paige, 151; Tinkham 2. Borst, 31 Barb. 407; Gillet ». Moody, 3 N. Y. 479; Hightower o. Thornton, 8 Ga. 486; Nevitt ». Bank of Port Gibson, 6 Sm. & M. 518; Paschall v. Whit- sett, 11 Ala. N. S. 471; Marr 0. Bank of Western Tennessee, 4 Coldw. 471; State o. Bailey, 16 Ind. 46; Adler o. Milwaukee &c. Co. 18 Wis. 57. Quite generally statutes provide for the continuance of the corporation in a semi-existence for the purpose of settling its affairs, after the disso- lution has taken place, or fix the liabilities on stockholders, or somehow provide for the protection of creditors and others. See Pomeroy v. Bank, 1 Wall. 28; McGoon v. Scales, 9 Wall. 23; Franklin Bank ». Cooper, 36 Me. 179; Mariners’ Bank v. Sewall, 50 Me. 220; Blake v. P. & C. R. R, Co. 39 N. H. 485; Crease 0. Babcock, 10 Met. 525; Grew ». Breed, 10 Met. 569; Lea o, Amer. A. & P. Canal Co. 3 Abb. Pr. N. 8. 1; Stetson ». City . Bank, 12 Ohio St. 577; Herron ». Vance, 17 Ind. 595; Muscatine Turn Verein v, Funck, 18 Ia. 469; and statutes of the several States. DISSOLUTION OF CORPORATIONS. 655 as a general proposition cannot be affirmed, but at least in Kearns v. Leaf,‘ relief of this kind was afforded. Here the plaintiff held a policy in a company, the funds of which were made liable to pay the sum insured, and certain shares of profits by way of bonus. The com- pany having entered into an agreement to transfer its business.and assets to another company, contrary to the stipulations of its deed of settlement, and without mak- ing provision out of its own assets for payment of the fiaintiff’s policy, Page-Wood, V.C., granted an injunc- tion at suit of the plaintiff to prevent this agreement being carried out. He considered that the plaintiff ac- quired under his contract “such a species of interest in the funds [of the company] as would entitle him to in- terfere to save the property from being wasted, contrary to the provisions of the deed,” in accordance with which the plaintiff accepted his policy. No doubt the vice chancellor did not here decide, any more than did Knight-Bruce, V.C., in Ward v. Society of Attorneys, that a corporation cannot put an end to its existence voluntarily and proprio motu, but he did decide that it could not, in doing so, be permitted to prejudice the rights of its creditors, or to derogate from the securities which it gave or held out to them as an inducement for them to contract with it. Thirdly and Fourthly —Dissolution by Demise of the Members, or by Act of Parliament. The doctrine of ultra vires is but slightly concerned with either of these matters. A corporation perishes whether the whole of its members have died out, or the 11H. 4&M, 681. See also Law v. pany,1D. G.J. & Sm. 634; 34 L. J. London Indisputable Company, 1 K.& Ch. 58, J, 228; re State Fire Insurance Com- 656 DISSOLUTION OF CORPORATIONS. whole of those who constitute an integral and essential part, * provided that there is no means for repairing the breach? It would, however, seem that in such a case the corporation, sometimes at least, is not abso- lutely gone, but rather in abeyance, the crown having power by a fresh charter to revive the torpid body, and to clothe it with all the dormant rights and capacities of the original body.2+ Whether a corporation—that 1 Rex v. Morris, 4 East, 17. Com- ® Mayor &c. of Colchester v. Brooke, pare Kennet d Avon Navigation Com- 7 Q. B. 339;15L.3 QB. 173. Com pany v. Witherington, 18 Q. B. 531; 21 pare Rex». Pasmore, 3 T. R. 199; Col- L. J. Q. B. 419. chester v. Seabar, 83 Burr. 1866; New- 2 See 1 Vict. c. 78,8. 7. ling v. Francis, 3 T. R. 189. * See Penobscot Boom Corp. v. Lamson, 16 Me. 224; Boston Glass Manuf. v. Langdon, 24 Pick. 52; Phillips ». Wickham, 1 Paige, 596 ; Canal Co. » R. R. Co. 4G. & J. 1; McIntire Poor School 2. Zanesville C. Co. 9 Ohio, 203; State ». Trustees of Vin. Univ. 5 Ind. 77; Angell & Ames, §§ 768-777. The want of the proper officers, by reason of failure to elect, or by death, does not cause dissolution, though the exercise of the powers of the'corporation may be thereby suspended. Vincennes Univ. ». Indiana, 14 How. 268; Russell o. McClellan, 14 Pick. 63; Knowlton ». Ackley, 8 Cush. 94; Evarts ». Kellingworth Co. 20 Conn. 447; Phillips 7. Wickham, 1 Paige, 590; Hoboken Building Ass’n v. Martin, 2 Beasl. 427; Rose ». Turnpike Co. 3 Watts, 46; Commonwealth ». Cullen, 18 Penn. St. 183; Blake v. Hinkle, 10 Yerg. 218; Nashville Bank ». Petway, 8 Humph. 524; Cahill », Kalamazoo Ins. Co. 2 Doug. (Mich.) 140. A private corporation does not become dormant, or forfeit its fran- chises, because a single individual becomes, by purchase of the stock, sole owner of the corporate property and franchises; and if such sole owner continues the business under the corporate name, without notice to the public, he may be sued as such corporation. Newton &c. Co. v. White, 42 Ga. 148. + If a corporation is not dead, but lacks only the means for using its powers, as, ¢. g., if the trustees by failure to elect, are reduced to 8 num- ber too small to act, a new charter creating a new body is not necessary. The powers of the corporation are not lost, and the means of exercising the powers may be supplied by the legislature filling the vacancies. If the corporation is wholly dissolved, it would seem that no action of the legis- lature could, strictly speaking, revive it. A new corporation might be created by a new charter. Moreover, as a condition of the grant of the new charter, the assumption of the liabilities of the old company might DISSOLUTION OF CORPORATIONS. 657 is to say, whether the members—can allow the corpora- tion to die out, may be considered doubtful, at least as to all such which may be denominated public. The franchises have been granted to these for public ends and aims, and the original intention must have been that they should be used. With regard to cor- porate offices, it is admitted that by the common law a corporator can be compelled to undertake them when called upon ;* and by statute the same has been ex- pressly provided with reference to municipal corpora- tions?* Pari ratione it would seem that the corpora- tion itself must be compellable to fulfill its duties, and to discharge the purposes for which it has been created, at least whenever such purposes have a distinct and primary reference to the public welfare; and if com- pellable to do this, it is apparently compellable to keep up, or at least to make the attempt to keep up, its mem- bers, so as not to perish of mere inanition. In the present day, however, there are other ways and means *? Rex v. Bower, 2 D. & R. 842. 75 & 6 Will. IV, c. 76, 5. 51; Reg. v. Richmond, 11 W. R. 65. be forced upon the new. Still the corporation would be essentially a new body. It is important in certain cases to determine whether a reorganiz- ation comes after the death or merely during the ‘‘torpidity” of the orig- inal body, and whether an act of the legislature revives an old or creates: 4 new corporation. Upon this subject see Lea ». Amer. Atl, & Pac. Canak Co. 3 Abb. Pr, N. 8. 1. ' It may be noticed in this connection that mere insolvency, proceedings in insolvency, the appointment of receiver, or non-user of the powere granted, does not of itself work dissolution. See Rollins v. Clay, 33 Me. 122; Brandon Iron Co. v. Gleason, 24 Vt. 228; Boston Glass Manuf. ». Langdon, 24 Pick. 49; Coburn . Boston Papier Mache Mfg. Co. 10 Gray, 248; Catlin o. Eagle Bank, 6 Conn. 288; Pondville Co. ». Clark, 25 Conn. 97; Hoyt o. Sheldon, 8 Bosw. 267; Nimmons », Tappan, 2 Sweeny, 652; State Nat. Bank », Robidoux, 57 Mo. 446; Platt 2. Archer, 9 Blatch. 559. But see Nat. Bank 9. Colby, 21 Wall. 609, as to national banks. * See Dillon on Munic. Corp. §§ 61, 111, 112. 42 658 DISSOLUTION OF CORPORATIONS. of accomplishing that for which corporations were formerly frequently established to bring about. Con- sequently it may safely be predicated that, whether it is or not theoretically ultra vires of a corporation to allow its members to die oat totally, or as to any in- tegral part, the crown at least will not intervene to pre- vent this. If the members themselves find the. duties too onerous, or do not value their privileges sufficiently to keep them alive, neither political necessities nor pub- lic needs can now be deemed sufficiently pressing to require that corporations should be made to discharge their functions. This applies even more strongly to private corpora- tions—that is, to those associations that have been in- corporated purely for private aims. In these the privi- leges and capacities that belong to the whole as dis- tinct from its parts—d. e, the individual members— belong to them for the private advantage of the latter. Consequently these may use or not use them as they think fit, and may allow them to pass into desuetude, and the corporation itself to decay.* So with regard to dissolution by act of parliament.t * Corporations, other than municipal, cannot be compelled to exercise franchises after their own interests shall cease to be subserved thereby, but their non-user nevértheless is ground for forfeiture. See People’ v. Albany & Vt. R. R. Co. 24 N. Y. 261; Treadwell v. Salisbury Mfg. Co. 7 Gray, 893; see ante, p. 71, note. + Under the decision of Dartmouth College ». Woodward, 4 Wheat. 518, the legislature cannot dissolve a corporation without its consent. No application from the stockholders would make any difference unless it were such as would amount toa surrender. Accordingly this means of dissolution does not exist in this country, in respect to private corpora- tions, save in cases where the power to repeal is reserved. Penobscot Boom Corp. 9. Lamson, 16 Me. 224. For like reasons the legislature can- not declare new grounds of forfeiture, although it can alter the remedy on old grounds. Aurora T. Co. ». Holthouse, 7Ind.59, As to dissolution of municipal corporations, see Dillon on Munic. Corp. §§ 109-116, c. vii. DISSOLUTION OF CORPORATIONS. 659 Such an act may not be applied for at the corporate expense, at least not against the opposition of any one member.‘ But in all other respects such proceedings will be matters of internal management, within the scope of a general meeting to decide upon. Lifthly—Dissolution by Winding up.* This is the mode by which is ordinarily determined the existence of all corporations coming within the pur- view of the provisions in this behalf contained in the companies act, 1862.+ These provisions apply to all corporations registered under this act, and also to many unregistered bodies, whether corporate or not. (a) Winding up under the Court. The winding up may take place either under the supervision of the Court of Chancery or voluntarily. As to the former mode, it is provided? that :— A company, under this act, may be wound up by the court as hereinafter defined, under the following circumstances (that is to say): 1, Whenever the company has passed a special resolution requiring the company to be wound up by the court. 2. Whenever the company does ) Part ti, ch. vi, s. 2. to be deemed unable to pay its debts; 725 & 26 Vict. c. 89, 8. 79. There and ins, 81, a definition of “ The Court,” follows in s. 80, a statement of the cir- as referred to ins. 79. cumstances under which a company is * See cases cited in Angell & Ames, § 766, n. Statutory provisions in relation to dissolution and the winding up of the affairs of corporations will be found in the States generally. See, for example, Gen. St. of Mass. (1860) p. 888, §§ 35-39; N. Y. St. at Large (fdmond’s ed.), vol. I, 557, Il, 488; Brightly’s Purdon’s Digest of Penn. (1862), p. 197; Curwen’s R. 8, of Ohio, c. 592, §§ 1, 2, p. 1153; and Swan & Sayler’s Supplement, Pp. 243-246; Statutes of Ill. (1871-2) p. 577, § 25; also Stat. of Ill. (1869) p, 99; and Stat. of Ill. (1871-2) p. 575; Wagner’s Missouri Stat. P. 293, §§ 21, 22, + Buckley, p. 179. 660 DISSOLUTION OF CORPORATIONS. not commence its business within a year from its incorporation, or suspends its business for the space of a whole year. 3. Whenever the members are reduced in number to less than seven. 4. Whenever the company is unable to pay its debts. 5. Whenever the court is of opinion that it is just and equitable that the company should be wound up. The act empowers (section 170*) the lord chan- cellor, with the advice and consent of certain of the chancery judges, to make such regulations for winding up as may be necessary. By virtue of this authority certain rules have been made, but it has been decided that one of them (No. 26 +)—which provides that creditors whose debts or claims do not carry interest shall be entitled to interest at 4 per cent. from the date of the winding up order—is ultra vires, as varying the rights of the parties and adding to the burdens of the contributories.' A’ similar doubt with respect to Rule 25 was decided in the negative by giving to the lan- guage used in that rule a somewhat strained construc- tion? The clause in the above section, which is most important in connection with our subject, is the fifth, the “just and equitable” one. As to this, ultra vires transactions are no ground for granting a winding up order. This was determined in Spackman’s Case,* where an arrangement was come to for allowing upon terms certain members to retire from a company. One of the members who objected to the arrangement—and which has since been adjudged ultra vires*‘— thereupon pre- 1 Re East of England Banking Com- ? Re Trent & Humber Company, ex pany, L. R. 6 Eq. 368; L. R.4 Ch. 14. parte Cambrian Steam Packet Company, In connection with this case may be L. R. 6 Eq. 396; L. R. 4Ch. 112. mentioned a somewhat analogous de- * Re Agriculturist Cattle Insurance cision, Fitzgerald v, Champneys, 2 J. & Company, ex parte Spackman, 1 Mac, & H. 81, where an order in council, pur- G.170; 18 L. J. Ch, 261. porting to be made under s, 3 of 2 & 3 *Spackman v. Evans, L. R. 3H. L. Vict. c. 49, was held to be ultra vires, 171. and consequently invalid. * Buckley, p. 343. t Buckley, p. 504. DISSOLUTION OF CORPORATIONS. 661 sented a petition to wind up the company, but the lord chancellor dismissed the application. So in Re Factage Parisien, where the petitioner alleged that the com- pany were acting in an ultra vires manner, the petition was finally dismissed, it having been first directed to stand over tilla meeting of the members was called, and which, having been called, preferred to continue the undertaking. A fortiori, mere irregularities in the management of a company,’ or misconduct on the part of the directors,? or the loss of capital*—unless it amounts to actual insolvency or the impossibility of continuing the business*—are not per se sufficient for compulsorily winding up, though any one or more of these facts taken in connection with other circumstances —especially such as show fraud on the part of the di- rectors, or those who got up the company—may suffice. In the last chapter has been considered. the liability (if any) of corporations in respect of proceedings which are absolutely ultra vires. Whatever be the nature or extent of this liability, it does not amount to a “debt” within the fourth clause of the above section, so as to enable a person having such a claim against a company to ground thereon a petition to wind up.’ (b.) Voluntary Winding up.* The provisions for this, contained in section 129 of 25 & 26 Vict. c. 89, are as follows: 734 L, J. Ch, 140, * Re Anglo-Greek Steam Navigation Company, L. R, 2 Eq. 1. * Ex parte Wise, 1 Drew. 465; Re Anglo-Greek Steam Navigation Com- pany, ubi supra, _ "Re European Life Assurance So- -eiety, L, R, 10 Eq. 403; Re Spence’s Patent &c. Cement Company, L. R. 9 Eq. 9. +, See judgments in Re Suburban Hotel Company, L. R.: 2 Ch. 737, and Re Joint Stock Coal Company, ex parte Green, L, R. 8 Eq. 146. * Re National Permanent Benefit Building Society, ex parte Williamson, L, R. 5 Ch, 309, * Buckley, p. 263. 662 DISSOLUTION OF CORPORATIONS.. A company under this act may be wound up voluntarily: 1. Whenever the period, if any, fixed for the duration of the company by the articles of association expires, or wherever the event, if any, occurs, upon the occurrence of which it is provided by the articles of association that the company is to be dissolved, and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily. 2. Whenever the company has passed a special resolution 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 satisfaction that the com- pany cannot, by reason of its liabilities, continue its business, and that it is advisable to wind up the same. In applying the section here cited, it is not always easy to determine what companies are “ under” the act, so as to be enabled to take advantage of its provisions. The statute itself enacts that it shall apply to the fol- lowing companies: (1.) Those formed and registered, or merely registered, under the joint stock companies acts of 1856, 1857, 1858 (sections 175-178). (2.) Com- panies registered under the act (sections 79, 129, 180, 196). As to registration, see section 179. (38.) All other associations consisting of more than seven mem- bers not registered under this act, but with the excep- tions and qualifications as laid down in section 199.1 As to the application of the act, it has been decided, firstly, that all English companies duly registered are within its purview, but where the number of members is very small, the court hesitates to make a compulsory order, and has refused to do so in two cases ;* though in a very recent case, where there were only seven share- holders and no debts, Malins, V. C., made the order, thereby overruling the previous decision to the contrary. 1 Cited post, pp. 664, 665. * Re Sanderson’s Patents Associa: ? Re Natal dc, Company, 1H. & M. tion, L, R, 12 Eg. 188. 639; re Sea & River Marine Insurance Company, L, R, 2 Eq. 545. DISSOLUTION OF CORPORATIONS. 663 The act applies alike to friendly, building, and other similar societies, whether registered or not under 25 & 26 Vict. c. 89, to cost-book mining companies,’ to in- surance companies,® and to companies other than rail- way companies incorporated by special act of parlia- ment,* and to companies which are practically defunct, é. g. such as have amalgamated with others,’ as well as to such as are carrying on their business. Secondly, as to foreign companies. Registered companies formed for carrying on business partially or even exclusively abroad are within the act, provided they have an office or branch office here,’ or have, or contemplate the hav- ing, as shareholders British subjects or persons resident in England;* but probably they are not so if both their objects and their shareholders are exclusively foreign.® Thirdly, as to railway companies.? These, if incorporated by special act, are by section 199 expressly excluded from this statute. After their undertaking has been abandoned by warrant of the board of trade, any shareholder may, by section 31 of 13 & 14 Vict. ¢. 83, present a petition to wind up under any winding up act for the time being in force, but a creditor cannot do so.” But where by a special act a railway company 'Queen’s Benefit Building Society, 7 Re General Company for Promotion L.R. 6 Ch. 815. of Land Credit, L. R. 5 Ch. 363; and 7 See § 180; and 32 & 38 Vict. ¢. 19. * See 88 & 34 Vict. c. 61, § 21; and 35 & 86 Vict, c. 41, § 4. ‘ Wey and Arun J ‘unction Canal Com- pany, L. R, 4 Eq. ae re Bradford her Company, L. R, 10 Eq, 331; * Re Family Endowment Society, L. R, 6 Ch, 118, * ° Re Commercial Bank of India, L R,6 Eq. 517. Compare re Imperial Sngio German Bank, 25 L. T. 89%; 26 L, T: N. 8, 229; W. N. 1872, p. 40. Princess cf Reuss v. Bos, L. R. 5 . L. 176. ® See last note. * In connection with the dissolution of railway companies, see the abandon- ment of railways act, 1850,18 & 14 Vict. c. 83;* and the railway com- anies act, 1867, 80 d& 31 Vict. c. 127, 31-35.+ ” Re North Kent Extension Railway Company, L. R. 8 Eq. 356. * Goddefroi & Shortt, Ixxvi. + Goddefroi & Shortt, 500. 664 DISSOLUTION OF CORPORATIONS. was amalgamated with another, and in consequence it entirely ceased to carry on any business as a railway company, and continued its existence only for the pur. poses of winding up its affairs, Malins, V. C., overruled a demurrer to a bill filed by one of its creditors which alleged that the assets were being wasted, and therefore prayed that the company might be wound up under the court! Here the vice chancellor thought that section 199 of the statute has reference only to going concerns. In another case he held that the exception from the power to wind up unregistered companies given by that section applies only to companies whose principal object is the construction and working of a railway, and that where a company’s principal object was the con- struction of docks it could be wound up by the court, although it had power also to make a branch railway for purposes connected with the docks.’ (c) Unregistered Companies. The provisions of the act (25 & 26 Vict. ¢. 89) with reference to these bodies are contained in section 199, and are as follows :— ” Subject as hereinafter mentioned, any partnership, association, or company, except railway companies incorporated by act of parlia- ment, consisting of more than seven members, and not registeréd under this act, and hereinafter included under the term “ unregistered company,” may be wound up under this act, and all the provisions of this act with respect to winding up shall apply to such company, with the following exceptions and additions: 1. An unregistered company shall, for the purpose of determining the court having jurisdiction in the matter of the winding up, be deemed to be registered in that part of the United Kingdom where its principal place of business is situate ; or if it has a principal place of business situate in more than one part 1 Ward v. Sittingbourne and Sheer- ? Re Exmouth Docks Company, L. ness Railway Company, L. R. 9 Ch.488. R. 17 Eq, 181. DISSOLUTION OF CORPORATIONS. 665 of the United Kingdom, then in each part of the United Kingdom where it has a principal place of business; moreover, the principal place of business of an unregistered company, or (where it has a prin- cipal place of business situate in more than one part of the United Kingdom) such one of its principal places of business as is situate in that part of the United Kingdom in which proceedings are being in- stituted, shall, for all the purposes of the winding up of such company, be deemed to be the registered office of the company. 2. No unregis- tered company shall be wound up under this act voluntarily, or sub- ject to the supervision of the court.’ 3. The circumstances under which an unregistered company may be wound up are as follows that is to say : (a) Whenever the company is dissolved or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs, (0) Whenever the company is unable to pay its debts.’ (c) Whenever the court is of opinion that it is just and equitable that the company should be wound up. From the language of the preliminary part of this section, it might have been thought to include any asso- ciation whatever, other than those expressly excepted; but it would seem that a club cannot be wound up by the court.2 A doubt has also been raised as to whether the court can make an order for the winding up of an unregistered mutual marine insurance society.* Nor can persons who associate themselves for the purpose of forming a company, which project fails, obtain an order to wind up such projected company on the ground that they have acted for and represent such company.” ’ But with regard to industrial and 2 See, for the circumstances under provident societies, 25 d 26 Vict. c. 87, 8. 17, provides that, if registered under that act, they may be wound up volun- tarily or by the court in the same man- ner and under the same circumstances in and under which any company may be wound up under any act or acts for ‘the time being in force for winding up companies, which a company will be deemed un- able to pay its debts, the fourth clause of this section. 8 §t. James's Club, 2 De G. M. & G. 383. * See re London Marine Insurance Association, L, R. 8 Eq. 176. 5 Re Imperial Anglo-German Bank, 26 L. T. N.S. 229; W. N. 1872, p. 40. * Re Sheilds Marine Ins. ‘Assoc. L. R. 5 Eq. 868; Re Albert Average Assoc. L, R. & Ch. 697; 18 Eq. 529; Re Merchants’ & Traders’ Assur- ance Soc, L. R. 9 Eq. 694. APPENDIX. I. Tue Constitution of the United States provides (art. 1, § 10) that no State shall pass any law impairing the obligation of contracts. The Su- preme Court of the United States early construed this clause as applicable to executory and executed contracts, and to grants by States as well as by individuals. Fletcher , Peck, 6 Cranch, 87; Terret v. Taylor, 9 Cranch, 48; Dartmouth College ». Woodward, 4 Wheat. 518; see also Woodruff ». Trapnall, 10 How. 190; Paup »v. Drew, 7d. 218; Trustees Wabash & Erie Canal Co. v. Beers, 2 Black, 448; Hawthorne v. Calef, 2 Wall. 10; McGee %. Mathis, 4 Wall. 148. In Dartmouth College 0. Woodward, it was dis- tinctly held that private charters were contracts between the State and the corporation, and that any act of a legislature making changes therein was void, unless the power so to do had been reserved. See, also, Provi- dence Bank’», Billings, 4 Pet. 514; Planters’ Bank v. Sharp, 6 How. 301; East Hartford v. Hartford Bridge Co: 10 How. 511; s. c. 17 Conn. 79; Trustees Vincennes Univ. o. Indiana, 14 How. 268; Piqua Bank v. Knoop, 16 How. 369; 8. c. 1 Ohio St. 603; Ohio Life Ins. & Trust Co. v. Debolt, 16 How. 416; 8. c. 1 Ohio St. 563; Dodge v. Woolsey, 18 How. 331 ; Sherman ». Smith, 1 Black, 587; 8. ¢. 21 N. Y.9; Binghamton Bridge Case, 3 Wall. 51; Mayor of Balismore ». Pittsburg & Connellsville R. R. Co. 1 Abb. U. 8. 0. C. R. 9; Holyoke Co. 0. Lyman, 15 Wall. 500; 8. c. 104 Mass. 446; Pennsylvania Collega Cases, 13 Wall. 190. This rale has been followed by the State courts. See among other cases, the following, in some of which is. discussed the effect of accepting legislative acts, containing the right to alter or repeal pre-existing grants. Yarmouth v. North Yarmouth, 34 Me. 411; Coffin 0. Rich, 45 Me. 507; State 0. Noyes, 47 Me. 189; Bangor R. R. Co. », Smith, 47 Me, 84; Piscataqua Bridge o. N. H. Bridge, 7 N. H. 35; Brewster 7. Hough, 10 N. H. 188; Backus ». Lebanon, 11 N. H. 19; Grammar School 2. Burt, 11 Vt. 632; Thorpe v. Rutland & Burlington R. R. Co. 27 Vt. 140; Wales . Stetson, 2 Mass. 143, 146; Charles River Bridge ». Warren Bridge, 7 Pick. 341; City of Roxbury 2. Boston & Providence R. R. Co. 6 Cush. 424; Boston & Lowell R. R. Co, v. Salem & Lowell R. R. Co. 2 Gray, 1; Com. ». New Bedford Bridge Co. 7b, 339; Com. ». Essex Co. 13 Gray, 239; Fitchburg R. R. Co. ». Grand Junction R. R. Co, 4 Allen, 198; Com. o. Eastern R.-R. Co. 103 Maas, 254; Bailey 668 APPENDIX. ». Methodist Ch. 6 R. I. 491; Enfield Toll Bridge Co. ». Conn. R. Co. 7 Conn. 28; Same v. Hart. & N. H. R. R. Co. 17 Conn. 40; People o. Man- hattan Co, 9 Wend. 351; Re Reciprocity Bank, 22 N. Y. 9; Morris & Essex R. R. Co. 0. Miller, 2 Vroom, 521; Glover ». Powell, 2 Stock. 211; Bridge Co. v. Hoboken Co. 2 Beas. 81; Zabriskie 1. Hackensack & N. Y. R. R. Co. 8 C. E. Green, 178; Bank », Commonwealth, 19 Penn. St. 144; Brown v. Hummel, 6 Penn. St. 86; Com. v. Cullen, 13 Penn. St. 133; Erie R. R. Co. v. Casey, 26 Penn. St. 287; Bailey ». Phila. Wil. & Balt. R. R. Co: 4 Harr. (Del.) 389; Delaware R. R. Co. ». Tharp, 5 Harr. 454; Phila. Wil. & Balt. R. R. Co. o. Bowers, 4 Houst. 506; Norris »v. Trustees Abingdon Acad.7 G. & J.'7; Regents of University o. Williams, 9 G. & J. 402; Mills ». Williams, 11 Ired. Law, 558; Bank of State ». Bank of Cape Fear, 13 Ired. Law, 75; State » Heyward, 3 Rich. 389; Young ». Harrison, 6 Ga. 130; State». Tombeckbee Bank, 2 Stew. (Ala.) 30; Alabama & Florida R, R. Co. v. Burkett, 46 Ala. N. 8. 569; Payne o, Baldwin, 3 Sm. & M: 661; Commercial Bank », State, 14 Miss. 599; Pontchartrain R. R. Co. v. New Orleans &c. R. R, Co. 11 La. An. 253; Sage a. Dillard, 15 B. Mon. 340; City of Somer- ville v. University, 15 B. Mon. 642; Edwards »v. Jagers, 19 Ind. 407; Smead v. Ind. Pitts. & Cl. R. R. Co. 11 Ind. 104; Bruffett o. G. W.R. R. Co. 25 Ill. 353; State ». Cape Girardeau & St. L. R. R. Co. 48 Mo. 468; Miners’ Bank v. U.S. 1 G. Greene (Ia.), 558; State vo. Kirkwood, 14 la. 162; Michigan Bank v. Hastings, 1 Doug. (Mich.) 225; People v. Plank-road, 9 Mich. 285. See as to conflict between the State courts of Ohio and the Su- preme Court of the United States, Debolt ». Ohio Life Ins. & Trust Co. 1 Ohio St. 563; Mech. & Traders’ Bank v. Debolt, 7b. 591; Knoop ». Piqua Bank, J6. 603; Toledo Bank v. Bond, Ib. 622; Matheny ». Golden, 5 Ohio St. 361; State v. Moore, 7d, 444; Ross County Bank ». Lewis, Id. 447; Sandusky City Bank v. Wilbor, 7 Ohio St. 481; Skelly 0. Jefferson Bank, 9 Ohio 8t. 606; Piqua Bank v. Knoop, 16 How. 369; Dodge ». Woolsey, 18 How. 881; Mech. & Traders’ Bank ». Debolt, Zb. 380; Mech. & Traders’ Bank v. Thomas, id. 384; Skelly v. Jefferson Bank, 1 Black, 436. Mr. Pomeroy, in his treatise on Constitutional Law, §§ 588, ef seg., thus sums up the rules in regard to this constitutional provision: ‘‘(1) The charter of a private corporation, whether a special statute or a general law, is, in its general scope and design, and so far as it confers franchises for the accomplishment of the general objects of the association, a con- tract, the obligation of which the State may not impair. (2) All the ex- press collateral stipulations which may have been inserted in the charter, though not necessary to the existence and objects of the corporation, but which may aid in promoting its success, and which are restrictions of the legislative powers of the State, are also contracts. (8) No collateral agreements will be implied in favor of the corporation from its general nature, design, and objects.” To these may be added: (4) Where a privilege is granted without any beneficial equivalent to the State, its . APPENDIX, 669 revocation is not forbidden by the Federal constitution. Christ Church 2. Philadelphia, 24 How. 300; People ». Commissioners, 47 N. Y. 501; State », Commissioners, 8 Vroom, 228, 241. This last rule is especially applica- ble to some cases, where exemption from taxation is claimed by virtue of a charter or other legislative grant, as to which see New Jersey v. Wilson, 7 Cranch, 164; Providence Bank ». Billings, 4 Pet. 514; Gordon », Ap- peal Tax Court, 3 How. 188; State Bank v. Knoop, 16 How. 369; Dodge ». Woolsey, 18 How. 381; Home of the Friendless v. Rouse, 8 Wall: 430; Washington University v. Rouse, Ib. 489; Wilmington R. R. Co. v. Reid, 18 Wall, 264; Tomlinson ». Jessup, 15 Wall. 454; Humphrey v. Pegues, 16 Wall. 244; Pacific R. R. Co. v. Maguire, 20 Wall. 36; Hewitt ». N.Y. & Oswego Midland R. R. Co, 18 Blatch. C. C. R. 452; Cooley on Const. Lim. p. 280. As to grants of exclusive privileges, see ante, p. 284, note. It has been held without dissent that the clause of the Federal con- stitution which forbids the States passing laws violating the obligation of contracts, does not so far remove from State control the rights and properties which depend for their existence upon contracts, as to relieve them from the operation of such general regulations for the good govern- ment of the State and the protection of the rights of individuals as may be deemed important. The limit to the exercise of this police power in these cases must be this: the regulations must have reference to the com- fort, safety, or welfare of society; they must not be in conflict with any of the provisions of the charter; and they must not, under pretense of regulation, take from the corporation any of the essential rights and privileges which the charter confers. In short they must’be police regu- lations in fact, and not amendments of the charter in curtailment of the corporate franchise. Cooley on Const. Lim. 574-576; see Veazie o. Mayo, 45 Me. 560; State v. Noyes, 47 Me. 189; Coffin ». Rich, 45 Me. 507;. Boston, Conc. & Mont. R. R. v. State, 32 N. H. 215; Horn a. Atlantic & St. Lawrence R. R. Co. 35 N. H. 169; Thorpe v. Rutland & Bur. R. R. Co. 27 Vt. 140; Lyman », Boston & Worcester R. R. Co. 4 Cush. 288; Fitchburgh R. R. Co. o. Grand Junct. R. R. Co. 1 Allen, 552; Com. 2. _ Eastern R. R. Co. 103 Mass. 254; Coms. 0. Holyoke Water Power Co. 104 Mass. 446; Washington Bridge Co. v. State, 18 Conn. 53; Bulkley;o. N.Y. &N.H.R. R. Co. 27 Conn. 479; Judson v. Same, 29 Conn. 488; State o. Jersey City, 5 Dutch, 170; Waldron ». Rens. & Sar. R. R. Co. 8 Barb, 390; Suydam ». Moore, 8 Barb. 358; Miller 0. N. Y. & Erie R. R. Co, 21 Barb. 518; Benson ». Mayor, 10 Barb. 228; People ». Mayor, 32 Barb. 102; Hegeman v. Western R. R. Co. 18 N. Y. 1; Comm. oN. ¥. & Erie R. R. Co. 18 N. Y. 42; Bradley 2. Buffalo N. Y. & E. BR. R. Co. 34 N.Y. 427; Staats » Hudson R. R. R. Co. 8 Keyes, 196; Com. v. Penn. Canal Co. 66 Penn. St. 41; Penn. R. R. Co. v, Riblet, 66 Penn. St. 164; New Albany & Salem R. R. Co, v. Tilton, 12 Ind. 3; Indianapolis & Cin. R. R. Co. », Kercheval, 16 Ind. 84; Galena & Chic. Union R. R. Co. v, Loomis, 13 Ill, 548; Bank of Republic v. Hamilton Co, 21 II. 58; Ohio & Miss. R. 670 APPENDIX. ‘R. Co. v. McClelland, 25 Ill. 145; Galena & Chic. Union R. R. Co. ». Ap- pleby, 28 Il. 288; Chic. Bur. & Quincy R. R. Co. o. Triplett, 38 Ill. 482; Peters v. St. L. & Iron Mountain R. R. Co. 23 Mo. 107; Grannahan »o. Han- nibal & St. Jo. R. R. Co. 80 Mo. 546 ; State v. Mathews, 44 Mo. 528; Jones ». Galena & Chic. U. R. R. Co. 16 Ia. 6; Kenosha R. & RI. R. R. Co. 2. Marsh, 17 Wis. 18; Blair v. Milwaukee &. R. BR. Co. 20 Wis. 254; Whit- ing v. Sheboygan & Fond du Lac R. RB, Co. 25 Wis. 167; West Wisconsin R. R. Co. 0. Trempealeau, 35 Wis. 257; Att’y General 2. R. R. Cos. 85 Wis. 425; People v. Jackson & Mich, Plank-road Co. 9 Mich, 285; Winona & St. Peter R. R. Co. ». Waldron, 11 Minn. 515; Southwestern R. R. Co. o. Paulk, 24 Ga. 356; Coosa River Steamboat Co. v. Barclay, 30 Ala. 120. As to Police Powers, see Dillon on Mun. Corps. §§ 93, 291; Gibbons v. Ogden, 9 Wheat. 1,203; The Passenger Cases, 7 How. 288; License Tax Cases, 5 Wall. 462; Slaughter-house Cases, 16 Wall. 86. As to Municipal corpora- tions, see Dartmouth College ». Woodward, 4 Wheat. 518; East Hartford 2. Hartford Bridge Co. 10 How. 511; Girard v. Philadelphia, .7 Wall. 1; Dillon on Mun. Corp. Chap. IV; Cooley on Const. Lim. 276. The legislative power of alteration, amendment, and repeal of charters has recently been much discussed in connection with laws passed regu- lating the use of, and rates of tolls upon, railways, commonly known as the “Granger Laws.” The limits of these notes will only allow references which may guide those interested in the subject. See Philadelphia, Wil. & Balt. R. R. Co. o. Bowers, 4 Houst. 506; Att’y General o. Railroad Com- panies, 35 Wis. 425; McElrath’s Case, 2 Dill. C. C. R. 460; Chic. Bur. & Quin. R. R. Co. v Ati’y General, 9 Western Jurist, 847; 9 Am. Law Rev. 50, 174, 212; Gilbert’s R. R. Laws, Ill. passim; Peik ». Chic. & N. W. R. R. Co. 1 Cent. Law Jour. 848; Mowrey v. Indianapolis & Cin. R. R. Co. 4 Biss. 78; Olcott ». Supervisors, 16 Wall. 678. Il. “ur. Justice Miller, in Watson o. Jones, 18 Wall. 679, 722, thus classi- fies the questions arising in civil courts concerning property held by ecclesi- astical bodies: ‘‘ The questions which have come before the civil courts concerning the rights to property held by ecclesiastical bodies may, so far as we have been able to examine them, be profitably classified under three general heads, which, of course, do not include cases governed by consid- erations applicable to a church established and supported by law as the. religion of the State. “1, The first of these is when the property which is the subject of con- troversy has been, by the deed or will of the donor, or other instrument by which the property is held, by the express terms of the instrument, de- APPENDIX. 671 voted to the teaching, support or spread of some specific form of religious ° doctrine or belief. “3, The second is when the property is held by a religious congregation which, by the nature of its organization, is strictly independent of other ecclesiastical associations, and, so far as church government is concerned, owes no fealty or obligation to any higher authority. “3, The thirdis where the religious congregation or ecclesiastical body holding the property is but a subordinate member of some general church organization in which there are superior ecclesiastical tribunals with a general and ultimate power of control, more or less complete, in some su- preme judicatory over the whole membership of that general organization. “In regard to the rrrst of these classes, it seems hardly to admit of a rational doubt that an individual, or an association of individuals, may dedicate property by way of trust to the purpose of sustaining, supporting and propagating definite religious doctrines or principles, provided that in doing so they violate no law of morality, and give to the instrument by which their purpose is evidenced the formalities which the laws require. And it would seem also to be the obvious duty of the court, in a case properly made, to see that the property so dedicated is not diverted from the trust which is thus attached to its use. So long as there are persons qualified within the meaning of the original dedication, and who are also willing to teach the doctrines or principles prescribed in the act of dedication, and so long as there is any one so interested in the execution of the trust as to have a stand- ing in court, it must be that they can prevent the diversion of the property or fund to other and different uses. This is the general doctrine of courts of equity as to charities, and it seems equally applicable to ecclesiastical matters. In such case, if the trust is confided to a religious congregation of the independent or congregational form of church government, it is not in the power of the majority of that congregation, however preponderant, by reason of a change of views on religious subjects, to carry the property so confided to them to the support of new and conflicting doctrines. A pious man, building and dedicating a house of worship to the sole and ex- clusive use of those who believe in the doctrine of the Holy Trinity, and placing it under the control of a congregation which at the time holds the same belief, has a right to expect that the law will prevent that property from being used as a means of support and dissemination of the Unitarian doctrine, and as a place of Unitarian worship. Nor is the principle varied when the organization to which the trust is confided is of the second or associated form of church government. The protection which the law throws around the trust is the same. And though the task may be a deli- cate one and a difficult one, it will be the duty of the court in such cases, when the doctrine to be taught or the form of worship to be used is defin- itely and clearly laid down, to inquire whether the party accused of violat- ing the trust is holding or teaching a different doctrine, or using a form + 672 APPENDIX, of worship which is so far variant as to defeat the declared objects of the trust. “The sEconpD class of cases which we have described has reference to the case of a church of a strictly congregational or independent organiza- tion, governed solely within itself, either by a majority of its members or by such other local organism as it may have instituted for the purpose of ecclesiastical government; and to property held by such a church, either by way of purchase or donation, with no other specific trust attached to it in the hands of the church than that it is for the use of that congrega- tion as a religious society. Jn such cases, where there is a schism which leads. to a separation into distinct and conflicting bodies, the rights of such bodies to the use of the property must be determined by the ordinary principles which govern voluntary associations. If the principle of government in such cases is that the majority rules, then the numerical majority of members must control the right to the use of the property. If there be within the con- gregation officers in whom are vested the powers of such control, then those who adhere to the acknowledged organism by which the body is governed are entitled to the use of the property. The minority, in choos- ing to separate themselves into a distinct body, and refusing to recognize. the authority of the governing body, can claim no rights in the property from the fact that they had once been members of the church or congre- gation. This ruling admits of no inquiry into the existing religious opin- ions of those who comprise the legal or regular organization; for, if such was permitted, a very small minority, without any officers of the church. among them, might be found to be the only faithful supporters of the reli- gious dogmas of the founders of the church. There being no such trust. imposed upon the property when purchased or given, the court will not imply one for the purpose of expelling from its use those who by regular succession and order constitute the church, because they may have changed in some respect their views of religious truth. “But the ramp of these classes of cases is the one which is oftenest found in the courts, and which, with reference to the number and diffi- culty of the questions involved, and to other considerations, is every way the most important. It is the case of property acquired in any of the usual modes for the general use of a religious congregation which is itself part of a large and general organization of some religious denomination, with which it is more or less intimately connected by religious views and ecclesiastical government. In this class of cases, we think the rule of ac- tion which should govern the civil courts, founded in a broad and sound view of the relations of church and State, under our system of laws, and supported by a preponderating weight of judicial authority, is, that, when- ever the questions of discipline, or of faith, or ecclesiastical rule, custom, or law have been decided by the highest of these church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final,. and as binding on them, in their application to the case before them.” See,. APPENDIX. 673 also, The Dublin Case, 38 N. H. 459; Hale o, Everett, 53 N. H. 9; Smith ». Nelson, 18 Vt. 511; Baker o, Fales, 16 Mass. 147; Stebbins o. Jennings, 10 Pick. 171; Stearns 0, Bedford, 21 Pick. 114; Weld v. May, 9 Cush. 181; Inhabitants of Princeton v, Adams, 10 Cush. 129; Att’y Gen. ». Federal Street Meeting House, 8 Gray, 1; Hosea v. Jacobs, 98 Mass. 65; Baptist Church ». Rouse, 21 Conn. 160; Field o. Field, 9 Wend. 395; Miller ». Gable, 2 Den. 492; 8.c.10 Paige, 627; Baptist Church v. Witherell, 3 Paige, 296; Lawyer v. Cipperly, 7 Paige, 281; Watkins ». Wilcox, 6 N. Y. Su- preme Ct. (T. & C.) 539; People 2. Steele, 2 Barb. 397; Robertson v. Bullions, 9 Barb. 64; 8. c. 11 N. Y. 248; Walker v. Wainwright, 16 Barb. 486; Bowden ». McLeod, 1 Ed, Ch. 588; Kniskern v, Lutheran Church, 1 Sandf. Ch. 439; Wheaton v. Gates, 18 N. Y. 395; Petty ». Tooker, 21 N. Y. 267; 8. 0. 29 Barb. 256 ; Burrel ». Associate Ref. Synod, 44 Barb. 282; Gram , Society, 836 N. Y. 161; State o. Crowell, 4 Halst. 411; Den ». Bolton, 7 Halst. 206; Hendrickson v. Decow, Saxt. 577; Doremus v. Dutch Church, 2 Green Ch. 332; Den ». Pilling, 4 Zab. 653; McGinnis ». Watson, 41 Penn. St. 9; Winebrenner v. Colder, 43 Penn. St. 244; Re St. Mary’s Church, 7 8. & R. 517; Commonwealth v. Green, 4 Whart. 603; Presby- terian Church 2. Johnson, 1 W. & 8S. 37; German Ref. Church ». Com- monwealth, 8 Barr, 282; Keyser v. Stansifer, 6 Ohio, 368; Wiswell 2. Congregational Church, 14 Ohio St. 31; Harrison 7, Hoyle, 24 Ohio St. 254; Shannon ». Frost, 3 B. Mon. 253; Gibson ». Armstrong, 7 B. Mon. 481; Watson v. Avery, 2 Bush, 332; s. c. 3 Bush, 645; Lewis v. Watson, 4 Bush, 228; Lucas v. Case, 9 Bush, 297; Kinkead ». McKee, Jd. 535; Harmon ». Dreher, 1 Speer Eq. 87; Johns Island Church Case, 2 Rich. Eq. 192; Ferraria 0. Vasconcelles, 23 Ill. 456; s.c. 31 Ill. 25; Calkins v. Cheney, 4 Ch. Legal News, 389; Lawson v. Kolbenson, 61 Ill. 405; Watson ». Far- tis, 45 Mo. 183; Lutheran Church v. Gristgau, 34 Wis. 829; see Hagar v. Whitehouse, Hoffman’s Ecc. Law, ch. 23; Tyler’s Ecc. Law, 85; Buck’s Ece. Law, 244; Steed ». McAuley, 32 Leg. Intel. 378. II. Whatever doubts may have been expressed as to the power of railroad companies to carry beyond their own lines, the law is now well settled that such contracts are not uléra vires. In Ogdensburgh & Lake Champlain R. R. Co. o. Platt (U. 8. Supreme Ct. Oct. T. 1874), Hunt, J., says, as to the power of a railroad company to contract as a common carrier for the transportation of property beyond the terminus of its own road: “The distinction between the liability of a carrier, in carrying goods upon its own line, and in forwarding them when the duty to carry is at an end, is well defined. In the language of Mr. Justice Davis in Railroad Com- pany v. Manufacturing Company, 16 Wall. 324, ‘It is the duty of the carrier, in the absence of any special contract, to carry safely to the end 43 674 ; APPENDIX. of his line, and to deliver to the next carrier in the route beyond.’ What constitutes a sufficient delivery to the succeeding carrier is often a diffi- cult question, but we have no occasion to embarrass ourselves with it here. The fair result of the American cases limits the carrier’s liability as such, when no special contract is made, to his own line, although there are cases which hold the liability as continuing the same throughout the whole route, and such is the English doctrine. A discussion on this point is unnecessary, as the judge on the trial held the rule as we have stated it, and as was most favorable to the defendants. He charged the jury that the defendants were only liable upon a contract, to be proved, that they had assumed a liability beyond that imposed by law. The de- fendants were an incorporation organized under the general railroad law of the State of New York. They possessed the powers given to corpora- tions generally, and were subject to the corresponding liabilities. Assum- ing the case to stand upon the general principles applicable to the ques- tion, the doctrine that a railroad company may subject itself to the obli- gations of a carrier beyond its own line has been distinctly held in the State of New York, where this contest was made; in the State of Massa- chusetts, where its performance was to be completed, and in the State of Vermont, where the alleged injury occurred. Bissell ». Michigan R. R. 22 N. Y. 258; Buffit o. Troy & Boston R. R. 40 N. Y. 168; Root »v. Gr. W. R.R. 45 N. Y. 524; Burtis 0. Buff. & 8. L. R. 24 1b. 269; Hill Manuf. Co. ». B. L. & L. R. R. Co. 104 Mass. 122; Feital ». Middlesex R. R. 109 Ib. 398; Noyes v. Rutland & B. R. R. Co, 27 Vt. R. 110; Morse ». Brain- erd, 41 Vt. 550; Railroad Company v. Transportation Co. 16 Wall. 824; ‘Evansville & Crawfordsville R. R. Co. v. Androscoggin Mills. In the case of Burtis ». Buff. & S. L. R. R. Co. supra, it was held that this prin- ciple applied to connecting roads extending beyond the limits of the State. The single exception to this holding, so far as we are aware, is the State of Connecticut, where the contrary has been held by its Su- preme Court. Converse v. N. & N. Y. Tran. Co. 83 Conn. R. 166; 22 Jb. 502. This case, however, does not stand on the general principle only. By the statutes of New York (Stat. 1847, 299, § 9; 2 R. 8, 5th ed. 693, § 67), it is enacted as follows: Any | railroad company receiving freight for transportation shall be entitled to the same rights and subject to the same responsibilities as common carriers. Whenever two or more rail- road companies are connected together, any company owning either the roads receiving freight to be transported to any place on the line of either of said roads so connected, shall be liable as common carriers for the delivery of such freight at such place. In case any such company shall become liable to pay any sum, by reason of the neglect of any other company or companies, the company paying such sum may collect the same of the company by whose neglect it became so liable.’ This statute is declared by Rapallo; J., in Root ». G. Western R. R. supra, to be declaratory merely. We do not see that there is room to doubt the power APPENDIX. 675 ‘of the company to make the contract in question.” See also Perkins v. Portland & Saco R. R. Co. 47 Me. 573; Nashua Lock Co. ». Worcester & Nashua R. R. Co. 48 N. H. 339; McCluer v. Manchester & L. R. BR. Co. 18 Gray, 124; Najac v, Boston & L. R. R. Co. 7 Allen, 329; Baltimore & Phil. Steamboat Oo. 2. Brown, 54 Penn. St. 77; Kessler v. N. Y. Central R. R. Co. 7 Lans. 63; Illinois Central R. R. Co. v. Copeland, 24 Ill. 382; Cincinnati Ham. & Day. R. R. Co. 0, Pontius, 19 Ohio St. 221; Candee ». Pennsyl- vania R. R. Co. 21 Wis. 582; Wheeler v. San Francisco & Alameda R. R. Co, 31 Cal. 46; Kyle v. Laurens R. R. Co. 10 Rich. 882; Angle v. Miss. & Mo. R. R. Co. 9 Iowa, 488. The case of Hood ». N. Y.& N. H.R. R. Co. 22 Conn. 502, is opposed to thé rule laid down by other State courts ‘and by the Federal courts. In Converse v. Norwich & N. Y. Trans. Co. 38 ‘Conn. 166, 179, Butler, J., says: ‘‘The defendants insist, in the second place, that if a contract could be found or implied from the facts as in evi- dence, they could not be holden liable, because their directors had no legal power to make such a contract which would bind the company; and they rely on the case of Hood ». N. Y. & N. H. R. R. Co. 22 Conn. 502. The plaintiffs insist that the case is in conflict with the whole current of authority both in England and this country, and is not law. That case cannot be overruled or shaken on the ground that the principles there applied are technically wrong. The principle is fundamental and ele- mentary, that the power of a corporation is limited to the powers con- ferred by the charter, and such as are necessarily incidental thereto. The courts of other States in the cases cited have not questioned or disre- regarded that principle. But corporations have within a few years under general laws become so numeyvous, and are so connected with and so con- trol the business of the country, and even its religious and benevolent agencies, that the courts have gradually come to think it necessary to re- lax the technical and theoretical strictness of the legal principles applica- ble to them, and subject them to the same liabilities for the acts of their agents as natural persons, so far as it can be done practically and consist- ently with their charters. The very rapid increase of these corporations, which now monopolize the business of land carriage and a large share of that which is done by water, and the equally rapid increase in the quan- tity of freight which they carry destined to points beyond their chartered termini, render it desirable for them and the business community that they should have power to make business connections and contracts with each other, and assume a joint responsibility for carriage beyond the termi-| nation of their routes; and the tendency of the courts is almost universal to recognize their power to do so, where the purpose is auxiliary, beneficial, and within a reasonable limit, as an intended or necessary and incidental power, by a liberal construction of the legislative grants. Whether we ought 80 to regard these changes and follow this prevailing tendency, and relax the strictness of the rule by such a liberal construction in respect to the in- tention of the legislature or the necessity for such an incidental power, either 676 APPENDEX. because it ts wise to do so or for the sake of uniformity, or whether we should! hold to the maxim of stare decisis, and: adhere'to the old and strict con- struction adopted in the case relied upon, it is not necessary now to deter- mine. There is no contract to carry beyond.the terminus of the defend- ant’s route proved by the evidence, and the question is not a material one in the case.” The authority of Hood vo, N. Y. & N. H. R. R. Co. is there- fore shaken, and questioned even in Connecticut. See 1 Baldwin’s Connecticut Digest, p. 99; Milnero. N. Y.& N. H. BR. R..Co. 53 N.Y. 368. IV. The decisions in the courts of the Unitedi States. as‘ to: the validity of corporate acts performed outside of the State creating the corporation, are hardly reconcilable with each other; nor is the reasoning of some of the opinions convincing. There appears to be a struggle between the logicak results of the rule that a corporation exists only in the territory creating it,. and the desire of the courts to prevent the repudiation by corporations oft acts of which they have received the benefit. The cases are uniform in: holding that: 1. A corporation exists only within the territory of the juris- diction creating it. 2. A corporation can only be organized. within the. bounds of the State creating it. 3. Corporate acts, strictly so called, can-- not be performed outside that territory. 4, The acts of duly authorized agents can be performed anywhere not forbidden by positive enactment.. But, 5. Courts differ as to what are corporate acts and what are acts purely of agents; some holding that the directors are only agents, and others: holding their acts as directors to be corporate acts. The following are the principal cases on this subject: ‘¢Tt may be safely assumed that a corporation can make no contracts; and do no acts either within or without the State which creates it, except such as are authorized by its charter; and those acts must also be done by such officers or agents and in such manner as the charter authorizes. And if the law creating a corporation does not, by the true construction of the words used in the charter, give it the right to exercise its powers beyond the limits of the State, all contracts made by it in other States would be void. Natural persons, through the intervention of agents, are continu- ally making contracts in countries in which they do not reside, and where they are not personally present when the contract is made, and nobody has ever doubted the validity of these agreements. And what greater ob- jection can there be to the capacity of an artificial person by its agents to make a contract within the scope of its limited powers, in a sovereignty in. which it does not reside, provided such contracts are permitted to be made by them by the laws of the place? The corporation must, no doubt, show that the law of its creation gave it authority to make such contracts. through such agents. Yet, as in the case of a natural person, it is not. necessary that it should actually exist in the sovereignty in which the con- APPENDIX. 677 ‘tract is made. It is sufficient that its existence-as-an artificial person, in the State of-its creation, is acknowledged and recognized by the law of the nation Where the dealing takes place, and that it is permitted by the laws of the place to exercise there the powers with which it is endowed. Every power, ‘however, of the description of which we are speaking, which a corporation exercises in another State, depends for its validity upon the laws of the sovereignty in which it is exercised, and a corpora- ‘tion can make no valid contract without their sanction, express or implied. And this brings us to the question which has'been so élaborately discussed : whether, by the comity of nations and between these States, the corpora- ‘tions of one State are permitted to make contracts in another. We can perceive no sufficient reason for excluding them, when they are not con- trary to the known policy of the State, or injurious to its interests. It is nothing more than the admission of the existence of an artificial person created by the law of another State, and clothed with the power of mak- ing certain contracts. It is but the usual comity of recognizing the law -of another State.” Bank of Augusta v, Earle, 13 Peters, 587-590. “Ttis next objected that the mortgages were not properly executed, be- ‘cause the meetings of the directors by which the mortgages were authorized to be executed were held in the city of New York. It is not denied that the mortgages were executed in good faith under the corporate seal, and signed by the president and countersigned by the treasurer of fhe com- pany, and duly recorded in the proper offices of registry in the State of Texas, No doubt it can be true, in many cases, that the extraterritorial acts of directors would be held void, as where a set of directors of a New Jersey corporation met in Philadelphia, against a positive prohibitory stat- ate of New Jersey, and improperly voted themselves certain shares of stock. And other cases might be put where their acts would be held void with- out a prohibitory statute; and it is generally true that 9 corporation exists only within the territory of the jurisdiction that created it. But it is well settled that a corporation may, ‘by its agents, make contracts and transact ‘business in another tgrritory, and may sue and be sued therdin.” Galves- -ton Railroad ». Cowdrey, 11 Wall. 476, 477. In Arms 2, Conant, 36 Vt. 745, where the validity of the mortgage of a Vermont corporation, authorized by a directors’ meetiitg held in Massa- -chusetts, came in question, the court said: ‘‘ The conferring of authority by the directors of a corporation upon an agent to execute a deed is not a corporate act. ‘The directors act in such a case not as the corporation, but as the agents of and ‘in behalf of the corporation. And this authority may be conferred by a vote passed at a meeting of the directors without the State where the corporation was created and exists. The orator’s counsel makes no question of the general power of the directors of the railroad ‘company to act, even in their aggregate capacity as a board, out of this State, in all matters of ordinary business or contract, where they have au- -thority to bind the corporation, but claims that the authorizing an agent \ 678 APPENDIX, to deed, which must be by vote under the statute, is a corporate act, and’ therefore can only be done in the State. We have no occasion now to dis- cuss or decide whether a corporation created in one State can degally hold a corporate meeting and pass corporate votes in another. There certainly: seems to be strong reason for holding that they cannot act in a strictly corporate capacity where they have no legal existence. But we do not regard this conferring authority by the directors upon an agent to execute’ a deed as being a corporate act any more than any and every other act or contract they do or make on behalf of the corporation. It is a mere ques- tion of authority in the directors, and not one of corporate power; and when it is established that the power is vested in the directors, it cannot. with any more propriety be said that they are performing a corporate act in conferring it, than in every other matter where they bind the company by their official agency as directors. They act in neither case as the corpo- ration, but as the agents of and on behalf of the corporation.” A meeting of the corporators of a corporation, of the State of Maine, was called, under its charter for organization, in the city of New York, and the charter was there accepted, and the officers of the corporation—- president, secretary and directors—were chosen. There was no proof that any meeting for the organization of the company, or for the choice of its. officers, had ever been held in Maine. The court said: ‘‘If directors of the corporation, legally chosen, might transact business as such by vote of the board, at a meeting held in another State, and might authorize persons to execute a conveyance of real estate, yet it would be necessary to show that such persons were legally chosen directors, before any conveyance made by their direction could be considered as legally made. AIl votes and proceedings of persons professing to act in the capacity of corporators, when assembled without the bounds of the sovereignty granting the char- ter, are wholly void. The directors of a corporation are not a corporate: body when acting as a board, but a board of officers or agents, and they may exercise their powers as agents beyond bounds where the corporation exists. Whether the statute provisions of this State, and the intention of the legislative power, or the general rules of law respecting corporations, be examined, the conclusion must be the same: that this corporation could. hold no meeting dor the election of its officers or for the regulation of its. affairs without the limits of this State, and all such meetings and pre-- ceedings were without right or authority, and wholly void.” Miller ». Ewer, 27 Me. 517. No legal organization by the corporaters, under a charter granted by the State of Maine, can be effected by their action in another State. Free- man v. Machias Water Power & Mill Company, 38 Me. 348. / But contra, The proceedings at such meeting could not be regarded. as illegal and void, though held by the appointment of a magistrate, in the State of New Hampshire, where the proprietors resided, the statute not. prescribing any place of meeting. Copp v. Lamb, 12 Me. 312. APPENDIX. 679 It is competent for the directors of a manufacturing company, incorpo- rated by the legislature of Connecticut, without restriction as to the place of holding their meetings, to meet in another State, and there appoint a sec-. retary. McCall». Byram Manufacturing Co. 6 Conn. 428, 429. Corporate acts performed by the body of the corporation while sitting. out of the State which creates it are void and of no effect. Aspinwall et al, v. Ohio & Mississippi R. R. Co. ef al. 20 Ind. 497. In Wright ». Bundy, 11 Ind. 404, which was a suit to foreclose a mort- gage made by an Indiana railway company executed in Ohio, it was said: ‘We do not think the contract void because executed out of the State. There is nothing in our railroad act requiring the directors of the corpora- tions to transact their business within the State. It is true that corpora- tions cannot migrate from one sovereignty into another, so as to become legal local existences within the latter sovereignty; but it is true that the migration of the directors of a corporation from one sovereignty into an- ether does not terminate the existence of such corporation within the sov- ereignty which created it, for by our statute (1 R. 8. p. 409) the stock- holders are the corporation, the directors its agents; and by interstate and international courtesy, corporations created in one State are permitted to’ contract and sue in others; and if all the directors could there, as agents of the corporation, make a contract, why can they not there authorize one of their number to make it? The mere place where the active agents of a corporation enter into a contract must, in general, be immaterial. The important question arising must be one of power, not of place. The exer- cise of the power has relation to the place of their legal establishment, where the contract may be subsequently acted under. The meetings of the directors of a business corporation are not analogous to the sessions of a judicial tribunal. The corporation is organized by the election of di- rectors; but the mere organization of the directors into a formal meeting for business afterwards is quite a different thing. States cannot migrate; but, by their agents, they are daily making contracts without their terri- torial boundaries. Besides, our law seems to contemplate that corpora- tions chartered in this State, and local to it, may have offices for business in other States. 1. 8. p: 113, § 82; Acts of 1853, p. 102. Such, also, is the spirit of our legislation authorizing railroad companies in this State to consolidate with those in other States.” The directors are the agents of the corporation, not the corporation it- self; although they meet without the limits of the State creating the cor- poration, yet their proceedings will be valid and binding upon the com- pany. Where a charter granted by the State of Illinois declared certain persons to be a corporation, and named the directors thereof, such directors could meet and act in the State of Missouri. Ohio & Mississippi R, oR. Co. », McPherson, 35 Mo. 13. In Ormsby v. Vermont Copper Mining Co. 56 N. Y. 623, the de- fendant was a corporation organized and created by a statute of the State of Vermont. A meeting of the stockholders was held in the city of 680 APPENDIX. New York, at which neither D. nor G. were present or represented. At that meeting an amendment of the by-laws was adopted authorizing the directors to assess the stock to pay debts, and to furnish means to carry on the company, and empowering the treasurer to'sell the shares of any stock- holder refusing or neglecting to pay the assessment. Held, that, accord- ing to the settled law of corporations, neither stockholders nor directors ‘can do a corporate act, out of the jurisdiction creating the corporation, which shall have any force to bind those who do not participate in it, and that, therefore, neither of the meetings in New York, ex propria vigore, bound D. or G., or imposed upon them any obligations, even conceding that the corporation had power to impose further assessments on full paid stock. The opinion of the court is not reported in full, but it may be doubted whether the court intended to lay down so broad and general a rule, as that directors of a corporation can do no valid corporate act outside of the jurisdiction creating it. The decision of the case called for no such ex- pression; and an examination of the record shows that the statute of Ver- mont was capable of a construction forbidding the corporation from doing pusiness outside of that State. See Merrick v. Van Santvoord, 88 Barb. B74; 8. co. 84 N. Y. 208; Smith a. Alvord, 63 Barb. 415; New York Float- ing Derrick Co. ». New Jersey Oil Co. 3 Duer, 648; Stoney v. American Life Ins. Co. 11 Paige, 635; Mumford v. Same, 4 N. Y. 468; Bard ». Poole, 12 N. Y. 495; Wood Hydraulic H. M. Co. v. King, 45 Ga. 84, In a case touching an election held in Pennsylvania of directors of a New Jersey corporation, the court, after quoting the general acts concern- ing corporations, by which it was enacted that all companies incorporated under the laws of New Jersey, whose charters do not designate their places of meeting, shall hold their business meetings and the meetings of their directors in the State, said: ‘* Independent of this statutory provision, it is a rule of law that a private corporation, whose charter has been granted by one State, cannot hold meetings and pass votes in another State. It exists by force of the law that created it, and when that law ceases to exist and is not obligatory, the corporation can have no existence. When it appears that resolutions of a board of directors of a corporation of this. State, authorizing the transfer of stock, were passed at a mecting held in Philadelphia, such resolutions are void, and the transfer of stock in pur- suance of them to the directors who participated in the illegal proceedings can vest no title in them.” Hiles 0. Parrish, 1 McCarter, 380. As to the power of a State to exclude foreign corporations from doing business and to impose conditions on them, compare Paul ». Virginia, 8 ‘Wall. 168, and Insurance Co. v. Morse, 20 Wall. 445, And see Farnum 0. Blackstone Canal Co. 1 Sumn. 46; Runyan » Coster, 14 Pet. 122; Ohio & Miss. R. R. Co. v. Wheeler, 1 Black, 297; Ducat v. City of Chi- cago, 10 Wall. 410; 48Ill.173; Carroll». City of East St. Louis, 2 Cent. L J. 557 (67 Ill.); Matthews v. Theological Sem. 2 Brews. 541; Phoenix Ins. Co. » Commonwealth, 5 Bush, 68; Gill o. Kentucky Mining Co. 7 Bush, APPENDIX. 681 $35; Martin v. Mobile &c. R. R. Co. 7 Bush, 116; Land Grant Co. ». Cof- fey, 6 Kans, 245; Warren v. Aitna Ins. Co. 2 Paine, 501; State o. Lathrop, 10 La. An. 398; State v. Fosdick, 21 La. An. 484; Lafayette Ins. Co. o. French, 18 How. 404; Milner o. N. Y. & N. H.R. R. Co. 53 N. Y. 363; Fire Department ». Noble, 8 E. D. Smith, 449; Tatem v. Wright, 8 Zab. 444; County of Allegheny 2. Pittsburg & Cleveland R. R. Co. 51 Penn. St. 228; Slaughter », Commonwealth, 13 Grat. 767; Commonwealth ». Milton, 12 B. Mon. 212, V.. The character of “ rolling stock” of railways in America is a subject upon which there has existed, and still exists, great diversity of opinion. There is a class of cases holding that such property is a fixture of the railroad, Another class holds it to be an accessory, passing by a deed or mortgage as a necessary incident. Another class takes the ground that rolling stock, being indispensable to the exercise of the fran- chises, cannot be sold under execution, because the sale would prevent the use of the franchise. A fourth class adjudges it to be person- alty, and that mortgages covering it are void as against; judgment cred- itors, unless the requirements of law relating to mortgages of chattels are complied with. In considering the several decisions, reference must be had to the dates of their rendition, and to the changes in method of operating railways in this country. In the early history of railroads, they were designed to be public highways, open to the use of all per- sons with their own vehicles, subject only to the payment of tolls and the proper regulations of the companies owning and controlling the roads. This plan, being found inexpedient and insufficient to accommodate the public needs, gave yay to another, by which the corporation owning the highway became a common carrier of persons and property upon it by its own cars and motive power. Later on, however, the necessities of inter- state commerce, and the competition between rival roads, led to the running of cars over connecting roads, so that it is an every day occur- rence for the cars of a railroad company to be seen hundreds of miles away from the road owned by it, and outside of the territorial limits of the State creating it. In addition to this, more recently, the requirements of commerce demanding transportation under a common management, have led to the establishment of independent companies owning cars, which are used upon the tracks of several connecting roads. And still further, other corporations have come into existence, as proprietors of rolling stock, which is hired to those railway companies whose necessities demand the use of more of such property than their means permit them to possess as owners. 682 APPENDIX. Tn some States the question has been settled by legislation, and such must be the ultimate solution of the matter. Until a very short period it had been taken for granted by the profes- sion, that in the Federal courts it was not an open question, but that, in those tribunals, rolling stock was considered as a part of the realty. But in the case of Farmers’ Loan & Trust Company »v. St. Joseph & Den- ver City Railroad Company, argued at the June, 1875, term of the U. 8. Circuit Court, Kansas, Mr. Justice Miller, of the Supreme Court of the United States, held the matter under advisement, stating that he did not. consider, that the point had been authoritatively settled by the last-named court. No decision has yet been rendered. Coe ov. Hart (U. 8. Circuit Ct. Northern District of Ohio, July 7, 1857), 6 Am. Law Reg. 27; 2 Redfield Railway Cases, 667, was a bill filed by the trustees of a mortgage made by a railroad corporation, for an injunc- tion to stay an execution on a judgment at law, obtained by the defend- ants against the corporation, by virtue of which a levy had been made by the United States marshal upon locomotives and cars on the road. The court. (McLean, J.) says: ‘‘ From the nature of the property levied on, it could not be separated from the road without suspending, in whole or in part, its operations. The operation of the machinery on the road, in the trans- portation of passengers and freight, constitutes its chief value. The rail- road, like a complicated machine, consists of a great number of parts, a combined action of which is essential to produce revenue, and as well might a creditor claim a right to levy on and abstract some essential part. from Woodworth’s planing machine, or any other combination of machin- ery, a3 to take from a railroad its locomotives or its passenger cars. Such an abstraction would cause the operations to cease in both cases. A. stronger ground for an injunction than is taken in this case could not well be conceived. The defendants, under a judgment at law, have levied upon a large part of the rolling stock on the road, which, if sold and re-. moved, will stop its operations, while the same stock is under mortgage to creditors whose lien is prior to that of the defenfants. Such a pro- cedure, if carried out, in this and other cases, would defeat the liens of creditors in such cases to many millions of dollars, and put an end to the structure, if not the maintenance, of railroads.” This cause was taken up to the Supreme Court on appeal, 23 How. 117, sub nom. Pennock ». Coe. The court (p. 127) says: “The first‘ question is, whether or not the after-acquired rolling stock of the company placed upon the road attaches, in equity, to the mortgage, if within the description, from the time it is. placed there, so as to protect it against the judgment creditors of the railroad company. * * In conclusion, upon this point, we are satisfied that the mortgage attached to the future acquisitions, as described in it, from the time they came into existence. As to the claim of the judgment. creditors there are several answers to it. In the first place, the mortgage being a valid and effective security for the bondholders of prior date, they APPENDIX. 683. present the superior equity to have the property in question applied to the discharge of the bonds. It is true, if the property.covered by the mort- gage constituted a fund more than sufficient to pay their demands, the court might compel the prior encumbrancer to satisfy the execution, or, on a refusal, the mortgage having become forfeited, compel a foreclosure and satisfaction of the bond debt, so as to enable the judgment creditor to reach the surplus. Or.the court might, upon any reasonable resistance of the claim of the execution creditor or inequitable interposition for de- lay, and to hinder and defeat the execution, permit a sale of the rolling stock sufficient to satisfy it. But no such ground has been presented, or could be sustained, upon the facts before us. On the contrary, it cannot be denied but that the whole of the property mortgaged is insufficient to- satisfy the bondholders under the first mortgage, much less when those under the second are included. To permit any interference therefore, on the part of the judgment creditors, with a view to the satisfaction of their debt, consistent with the superior equity of the bondholders, would work only inconvenience and harm to the latter, without any benefit to the former.” The court held (and this was all that was necessary to the de- cision), in the second place, that the judgment sought to be enforced by the defendants, being recovered upon bonds secured by the mortgage, upon the property seized, in common with other bonds of that issue,. the defendants should therefore not be permitted to obtain an advantage over those having a common jen upon the property seized. In Gue ». Tide-water Canal Co. 24 How. 257, the court sustains an in- junction prohibiting the sale of sundry canal locks, &c., under fiert facias issued upon a judgment at law. It was admitted that the property levied on was necessary for the uses and working of the canal. The court held that whatever was essential to the operation of the canal could not he sold under execution, and that no property could be dissevered from the franchise which was essential to its useful existence. % In Minnesota Co. v. St. Paul Co. 2 Wall. 609, the question was argued before the court, but was not discussed in the opinion of the majority, though it would seem, that there was no difference of opinion between the majority and minority of the court upon that point. Nelson, Justice, in whose dissenting opinion Clifford and Field, JJ., concurred, says:. “We agree that the rolling stock upon this road, covered by the sev- eral mortgages, and as respects any other valid liens upon the same, is inseparably connected with the road; in other words, is in technical language a fixture to the road, so far as, in its nature and use, it can be called a fixture.” In the subsequent case of Railroad Co. o. James, 6 Wall. 750, which was part of the same litigation as that in 2 Wall. 609, Mr. Justice Nelson, delivering the unanimous opinion of the court, holds that the rolling stock owned by a railroad company, “ and used and em- ployed in connection with the road, is made a fixture by an express stat- ute of the State of Wisconsin, and such, we think, is the law, according to 684 APPENDIX. the true construction of the charter, independent of the statute,” citing Pen- nock ». Coe. In a note to 2 Wall. p. 645, will be found the learned brief of Mr. Carpenter on the question. And in the brief of Mr. Cary, who was op- posed to Mr. Carpenter in the litigation, it is said that the Supreme Court and the Circuit Courts of the U. 8. have uniformly held that rolling stock was in its nature a fixture, in the absence of a statute upon the subject. In a branch of the same litigation, in the District Court of Wisconsin, A. G. Miller, District Judge, held, upon the authority of Pennock ». Coe, that the rolling stock having been procured by the company as owners, ‘and adapted to the road as a means of operating, so long as it was thus ‘used, should be considered as a fixture, even without statute law. In Pullan o. Cin. & Chic, R. R. Oo. 4 Biss. 35, McDonald, D. J., ‘on a motion for a temporary injunction and the appointment of a re- ‘ceiver, while inclining to the opinion that a mortgage of a railroad cov- ered the rolling stock, reserved the question until the final hearing, plac- ing the property meanwhile in the hands of a receiver. See Galveston R. R. v. Cowdrey, 11 Wall. 450; U. S. ». New Orleans R. R. 12 Wall. 362. Boston, Concord & Maine R. R. Co. v. Gilmore, 87 N. H. 410, was an action of trespass against a sheriff, who had levied upon certain rolling stock of the plaintiff, under an attachment. The property seized consti- tuted the largest part of the ordinary rolling stock of the plaintiff, and ‘without the same, the plaintiff had not sufficient rolling stock for the transaction of its ordinary business. The action was sought to be main- tained, on the ground that the rolling stock was an incident to the franchise of the corporation, and necessary for the discharge of its public ‘duties, and could not be severed from its connection by attachment or seizure on execution. The court held rolling stock not to be fixtures, and that it was liable to seizure and sale to discharge the corporate debts. See Pierce v. Emery, 32 N. H. 485. : Vermont General Statutes, 1863, p. 237, secs. 101 and 102, passed 1856, provides as follows: All mortgages of railroad franchises, furniture, cars, engines, and rolling stock of any kind, when properly executed and re- corded, shall be effectual to vest in the mortgagee a valid mortgage interest in, and lien upon, all such property, without delivery or change of posses- sion; and for the purpose of mortgage, all such property shall be deemed part of the realty. But this shall not prevent the attachment of furniture, cars, en- gines, or rolling stock, by any person having a claim against the corpora- tion, (1) for an injury sustained on the road by neglect; or (2) for services rendered or materials furnished for the purpose of keeping the road in repair or in running the same; or (8) for any liabilities as common car- riers; or (4) for loss of any preperty while in possession of the railroad company. See Miller 2, Rutland & Washington R. R, Co. 36 Vt. 452, 490. In Howe ». Freeman, 14 Gray, 566 (reversed on question of jurisdic- APPENDIX. 685 tion in 24 How, 450), the mortgage was recorded in the registry of deeds. of the counties, and offices of the clerks of the towns through which the railroad passed. The defendant, as United States marshal, levied on cer- tain cars in use upon the road of the mortgagor, and this was an action of replevin by the mortgagees. The court seem to assume that the cars were chattels or personal property, but placed. the decision on the effect of a special act of the legislation ratifying and confirming the particular: mortgage. It would appear that the mortgage had been recorded as a chattel mortgage (see General Statutes Mass. 1860, p. 766, § 1). In Hoyle ». Plattsburgh & Montreal R. R. Co. 54 N. Y. 814 (1878),. Johnson, Com. (now U. 8. Circuit Judge, 2d Circuit), thus reviews the decisions of the New York courts: ‘The first question necessarily to be decided in this case is, whether the rolling stock of a railroad is personal property, or whether it is to be deemed constructively annexed to the road upon which it runs, so as in law to be regarded as part of the realty. If it be determined that roll- ing stock retains its character of personal property, then the question. arises whether a mortgage of a railroad and its equipment needs to be filed under the statute of 1833, requiring mortgages of personal prop- erty to be filed when the possession of the property is not immediately delivered to the mortgagee (Laws of 1833, chap. 279, p. 402). The questions thus presented are not authoritatively determined in this State. The opinion of the Supreme Court has been given in four reported cases. The earliest was that of the Farmers’ Loan & Trust Co. ». Hendrickson (25 Barb. 484), in which the judgment rendered in October, 1857, by Justices 8. B. Strong, Birdseye and Davies, declared that as between mortgagees and judgment creditors the rolling stock was to be deemed fixtures, and consequently that such a mortgage did: not need to be filed. under the act of 1833. In this case, the mortgage specified engines, tenders, cars, &c., as part of the property mortgaged, and the rights of the plaintiffs might have been sustained by holding either that the chat- tel mortgage law did not apply to railroad mortgages, or that engines and cars were fixtures. The court rejected the former ground, and placed the decision on the position that the rolling stock was part of the realty. In Stevens v. The Buffalo & N. Y. City R. R. (81 Barb. 590), decided in September, 1858, Justices Greene, Grover and Marvin held that rolling: stock was personalty, and that a mortgage thereof was required to be filed under the act of 1888. Elaborate opinions were written in support of these conclusions, in which the Hendrickson case, before cited, and that of Coe ». Hart, in the United States Circuit Court, before Mr. Justice McLean, that of Corey v. The Pittsburgh & F. W. R. Co., and Mitchell 0. Winslow (2 Story, 690), were examined with the result before mentioned. In December, 1859, Mr. Justice Allen decided Beardsley v. Ontario Bank, 81 Barb.619, ‘The mortgage was of the railroad, real estate, chattels. and franchises of the corporation. It was held that the rolling stock was. 686 APPENDIX. not covered by the mortgage, not being part of the realty. The last two decisions were acquiesced in; the first, the case of Hendrickson, was taken to the Court of Appeals in 1863, and resulted in an order for reargument, and subsequently the case was settled. The case now under consideration is reported in 47 Barb. 109, before Justice Sutherland, at special term, in 1867. He held that rolling stock does not become a part of the realty, and that it passed, by the two mortgages in question, as specially named, and not as part of the realty. He also held that mortgages of the cor- porate property and franchises of. railroads should not, as to the personal property covered by them, be deemed to be subject to the provisions of the chattel mortgage act of 1833. At general term the case came before Justices Ingraham, Sutherland and G. G. Barnard, and the decision ap- pealed from was affirmed, Judge Ingraham giving the only opinion. After declaring himself not prepared to accede to the opinion at special term, that rolling stock is in all cases to be considered as personal prop- erty, he holds that the intent of the parties is evident that the rolling stock should pass as part of the realty, and that such a construction should be given to the transaction. He further holds that the chattel mortgage act does not apply to a mortgage executed by a railroad com- pany under authority of section 28 of the general railroad act of 1850. That section warrants a mortgage of the corporate property and franchises of a railroad company to raise money for completing, finishing or operat- ing its road. Such a mortgage was intended by the legislature, the learned judge says, to be treated as a mortgage of the road and its acces- sories, and therefore need not be filed as a chattel mortgage. While upon each proposition involved, a majority of judges appear to have been against the claim that rolling stock may be effectually mortgaged without filing under the act of 1833, the question still remains open for decision.” Judge Johnson then discusses the law of fixtures and the character of rolling stock, and holds it to be personal property and subject to the provisions of the law requiring the filing of chattel mortgages where no change of possession takes place. Reynolds, Com., while holding that whether rolling stock of a railroad company is to be regarded as a fixture or not, it cannot be considered as any part of the company’s real estate, still dissents from the majority of the commissioners on the point of the necessity of filing a mortgage covering it as a chattel mortgage. In Randall v. Elwell, 52 N. Y. 521 (1878), the question arose whether horse railroad cars were real or personal property, upon the validity of a levy and sale to pay a tax assessed against the railroad company. The court, Grover, J., delivering the opinion, held them to be personal property and, as such, liable to be seized and sold for the collection of a tax against the company. The act of May 9, 1868 (7 N. Y. Stat. at Large, Edmond’s ed. 387), provides: It shall not be necessary to file, as a chattel mortgage, any mortgage which has been, or shall hereafter be, executed by any rail- road company upon real and personal, and which has been, or shall be, APPENDIX, 687 recorded as a mortgage of real estate in each county in or through which the railroad runs. See Benjamin v, Elmira, Jeff. & Can. R. R. Co. 54 N. Y.675. In State Treasurer v. Somerville & Easton R. R. Co. 4, Dutch. 21, Green, C. J., in passing upon the charter of the defendants to determine their liability for a tax, speaks of the equipment as not being part of the road. He says as to the word “appendages: ” ‘I think it will be found on examination that the phrase is never used by the legislature in railroad charters in any other than its ordinary and popular sense. It is never used to include the equipment, rolling stock, furniture, or other personal property of the company, but it is invariably applied to its real estate—to the accessories of the road itself ’"—and holds that defendants were “not re- quired to pay tax upon the costs of their engines, cars, boats, or other persmal property.” In Corey v. Pittsburg, Fort Wayne & Chicago R. R. Co. 3 Phila- delphia Rep. 173, Agnew, P. J. (approving Coe ». Hunt), holds, that al- though cars and other rolling stock may be ordinarily termed personal property, yet, that a mortgage of the railroad and fixtures and all its other property is not invalid, as to rolling stock, against an execution without delivery of possession. This is put on the ground, that the gen- eral principle that chattel mortgages are invalid under such circum- stances, is subject to exceptions, where from the nature or condition of the property and the object to be accomplished by the parties, it is neces- sary that the possession should be retained by the mortgagor. See Am- mant 0. New Alexandria & Pittsburg Turnpike Co. 18 8. & R. 210; Sus- quebanna R. R. Co. v. Bonham, 9 W. & 8. 28; Plymouth R. R. Co. v. Colwell, 89 Penn. St. 339; Trunnick ». Smith, 63 Penn. St. 18. In State o. Northern Central Rw. Co. 18 Md. 193 (1861), the mort- gage conveyed to the complainant, the entire line of railroad belonging to ” the defendant from Baltimore to Sunbury, in the State of Pennsylvania, with all the revenues and tolls thereof. The Court of Appeals reversing the chancellor’s decision, held, on the authority of Seymour v. Canandaigua & ‘Niagara Falls R. R. Co. 25 Barb. 309; and Farmers’ Loan & Trust Co. ¢. Hendrickson, 25 Barb. 484 (as to which see 52 N. Y. 522; 54. N. Y. 314; 54 N. Y. 675), that the mortgage covered the line of road from Baltimore to Sunbury, and all the rolling stock and fixtures, whether movable or immova- ble, essential to the production of tolls and revenues. But in New En- gland Car Spring Co. ». Balt. & Ohio R. R. Co. 18 Md. 81 (1857), where it is determined that coal cars used upon a railroad are not within the mean- ing of a law giving mechanics a lien upon ‘‘ machines,” the court uses language which would seem to imply that rolling stock was not part of the realty. See McKim v. Mason, 3 Md. Ch. 201; Wells & Miller o. Can- ton Co. 3 Md. 241; Denmead v. Bank of Baltimore, 9 Md. 179. In Coe v. Columbus, Piqua & Ind. R. R. Co. 10 Ohio St. 872 (1859) “locomotives, cars, and the like personal property” are held subject to execution, See Ludlow v. Hund, 6 Am. Law Reg. 502; i Disney, 552. 688 APPENDIX, In Phillips ». Winslow, 18 B. Mon. 431, cars are held to be incident and indispensable to the use and enjoyment of the thing conveyed—4. ¢.,. the railway. See Applegate v. Ernest, 3 Bush, 649; Winchester Turnpike Co. ». Vimont, 5 B. Mon. 2. Palmer v. Forbes, 23 Til. 301 (1860), holds that rolling stock and ma- terial provided for the repair of the track are part of the real estate. See also Hunt 2. Bullock, 23 Ill. 320; Titus 0, Mabell, 25 Ill 257; Titus v. Einheimer, 27 Ill. 462. This question is settled in Illinois by the consti- tution which took effect August 8th, 1870, Art. XI,§ 10. ‘The rolling stock and all other valuable property belonging to any railroad company or corporation in this State, shall be considered personal property, andi shall be liable to execution and sale in the same manner as the personal: property of individuals, and the general assembly shall pass no law ex- empting any such property from execution and sale.” In Indiana rolling stock “is treated as realty for the purpose of taxation, as being intimately connected with the purpose and uses of the railroad track and superstructure.” Louisville & New Albany R. R. Co. ». State, 25 Ind. 177. Pacific R. R. Co. 0, Cass County, 53 Mo. 17, holds rolling stock to be per- sonal property, and taxable in the county where the principal office of the company is located. In Hill 2 La Crosse & Milwaukee R. R. Co. 16 Wis. 214, it was held, though not necessary to the decision of the case, that rolling stock was personal property. See Commercial Bank ». Farmers’ Loan & . Trust Co. 11 Wis. 207. 1 Taylor’s Stat. Wis. p. 1048, § 53, provides, that. ell rolling stock of any railroad company, used and employed in connec~ tion with its railroad shall be a fixture; and that when acquired subse- quently to the execution of a trust deed or mortgage of locomotives, ten- ders, etc., it shall be subject to the same lien as the property owned by ° the company at the time of execution. See construction of this statute in Chicago & Northwestern Rw. Co. », Borough of Fort Howard, 21 Wis. 44. Statutes Nebraska (1873), p. 197, provides, that any mortgage or deed of trust made upon the lands, roads or other property of any railroad company, shall bind all the property mentioned in such deed or mortgage, including rolling stock; and that, to secure the rights of mortgagees and parties interested under deeds of trust, the rolling stock, personal property and material necessary for operating the road, belonging to the road, and appertaining thereto, shall be deemed a part of the road, and said mort-. gages and deeds, when recorded, shall have the same effect, both as to notice and otherwise, as to the real estate covered by them. See State v. Rives, 5 Ired. 297; Macon & Western R. R. Co. o. Parker, 9 Ga. 377; City of Bath 0. Miller, 58 Me. 308; 2 Washburn on Real Property (3d ed.), 149; 2 Redfield on Railways, § 235; Herman on Executions, § 3623, 1 Hilliard on Mortgages (4th ed.), 7. APPENDIX. 689 VI. In passing the latter portion of the book through the press, it was found more convenient to abandon the plan of inserting in the appendix, notes on executed and executory ultra vires contracts, on estoppel, and on suits by stockholders, and to put the matter thus prepared in a condensed form in the body of the work. As to executed and executory contracts, see pp. 372-375 n, As to estoppel, see pp. 41, 42 2., 375 ., 379 n., 385 7., 396 n. As to suits by stockholders, see pp. 7 n., 184 n., 571-574 n. INDEX. ABANDONMENT, of business, 70, 811-314, 543, 544 7., 657, 658. + of unprofitable branch of railway, 71 7. of part of railway by agreement with rival line, 71 n. of powers and privileges by transfer, 305-311. See TRANSFER. by actual abandonment, 311-314. can it be prevented by mandamus or suit in equity, 297 n., 315 n., 657, 658. ABUSE. See FORFEITURE. of powers, ground of forfeiture, 646, et seg. ACCEPTANCE, of charter, renders powers obligatory, 315 n. of amendment of charter, must it be by stockholders, 393 n. by legislature, necessary to surrender of charter, 651 n.. of dividend by stockholder, no ratification of illegal conduct of directors, 144 n. ACCOMMODATION PAPER. See NeaoTrasLe INSTRUMENTS, corporation has no power to make or accept, 121 n. binding against corporation, in hands of holder without notice, 122 n., 160 n. ACCORD AND SATISFACTION. See Novation. what it is, and effect of it, 507. ACQUIESCENCE. See RaAtiricarron. of shareholder, induced by fraud, 248 »., 258, 259. See FRAUD. in abuse of special powers, 312. in regard to public works, 312 n. as to irregularity of notice of meeting, 351, 352. as to varying capital, 1137. as to illegal subdivision of shares, 144. in amalgamation, 518, 520, 522, 523, 526, 528. in informal forfeiture of shares, 445. gives no presumption of legality of corporate act, 30. of corporation, in respect to informal contracts, 885, 440-442, 449, 466, 467. See FoRMALITIEG. 692 INDEX. ACQUIESCENCE—continued. of corporation, cures defect of authority in agent or officer, 385, 442 7n., 468, 4647. in unauthorized issue of stock, 463. in transfer and cancellation of shares, 465. in contract between director and corporation, 404 2. in user of its property by another company, 821. of creditors, in amalgamation, 528. ACQUISITIONS, future, mortgage of, 125, 126, n. ACTION AT LAW. See Surv in Equiry; Leesan Proceepines. between corporators and corporations, 3 x. for libel upon the managing body, 194. for fraud-—requisites of, 242. See Fraup. lies against a corporation, 243-246. when barred by limitations, 259. by member complaining of majority, seldom lies, 579, 593. for money had and received, in respect of an ultra vires proceeding, 618 and x. See ConTRAcTs. against director or agent for misrepresentation of his own powers, 635-639. of the corporate powers, 639-645. in assumpsit lies for a dividend declared, 139 x. ADMISSIONS, of directors, officers and agents, effect on corporation, 425. ADOPTION. See RATIFICATION. of acts of promoters. See PROMOTERS. by corporation of suit by or against other parties, 194-197. ADVANCES, agent, trustee, etc., to be reimbursed, 98, 196 n., 288, 289. got by ultra vires contract, recoverable in chancery, 628 -630. See: ConTRAcT, : contract before organization for repayment of, 480 n. AGENTS. See Drrecrors, OFFICERS. appointment of, does not require seal, 356 7., 365-367. corporation can act only by, 246 7., 273 n., 356, 358, 359 n. liability of, upon contracts not binding the principal, 680-682. upon negotiable instruments, 631. when acting for a non-existing corporation, 471-473, 633. for misrepresentations of authority, 634-639. of corporate. powers, 689-645, how affected by ratification, 471 n., 471-473. liability of corporation for fraud of, 246-261. for torts of, 240, 241, 261-270. for crimes of, 271-277. for expenses of, in legal proceedings, 196 n. INDEX. 693 a AGENTS—continued. grounds of liability for acts of, 248, 249 ., 266 n. acts of, binding by acquiescence, 442 n. See RATIFICATION. vindictive damages for acts of, 270-272 n. , distinction between general ind special, 394 n. position of directors as being, 390-412. notice to, is notice to principal, 421-424. notice to directors as being, 422. position of promoters as being, 496-502. ALBERT ARBITRATION, 530, 531 2. ALIENATION, of land by corporations, 11 and. See Lanp. of land belonging to the public, 301 n. of special powers, 103, 104. See TRANSFER; FRANCHISES; PowERs. ALLOTMENT OF SHARES, : scrip issued instead of, 149. ALTERATION. See AMENDMENT; Business. of charter or business, if fundamental, requires the assent of all the stockholders, 6 ”., 79, 80 ., 90 n., 540 n. relieves subscribers, 151, 542 n. unless anticipated at the time of subscription, 542 n. power of legislature as to (App. I), 667. where power to alter charter is reserved by legislature, 83-86 7x. by exercise of eminent domain, 84 n., 541 n. necessitates compensation to dissenting stockholders. See CoMPENSATION. of seal, 4, 5, 387 n. of location of road, 296 n. of amount of stock or number of shares, 112-115, 142-144. See SHaREs, AMALGAMATION. See ConsonIpaTIon. meaning of the term, 509-512, 516. distinguished from consolidation, 538 n. governed by principles of novation, 505-508. corporations have not impliedly the power of, 82, 509-512. cannot give power to directors, 512. cannot acquire an express power by constating instruments, 512-516, indirect, by sale and dissolution, 517-521. difference between purchase and, 522-526. ‘by formation of partnership, 337, 388. See PARTNERSHIP. by making a joint estate, 331 7. creditors, how affected by, 526-530. acquiescence in, 518-528, passim. principles in Albert and European arbitrations, as to, 530. 694 INDEX. e AMALGAMATION—continued, statutory enactments, as to, 531-538. express provision for, to be strictly observed, 521. ‘AMENDMENTS. See ALTERATION. of charter, to be accepted b stockholders, sed quere, 398 n: power of legislature, as to (App. I), 667. APPLICATION TO PARLIAMENT. See PARLIAMENT. APPOINTMENT OF AGENTS. See AcEnrs. APPORTIONMENT, . of tolls, 324-327. See TRAFFIC ARRANGEMENTS, of receipts, 327-334. ARBITRATION, Albert, 530, 531 n. European, 530, 531 x. effect of; on special powers, 321. ARRANGEMENTS OF TRAFFIC. Sce Trarric ARRANGEMENTS. ARTICLES OF ASSOCIATION. See DEED oF SETTLEMENT. of registered companies, public have notice of, 429 n. See Noticr. ASSAULT. See Torts. corporation may be liable for, 262, 263. ASSESSMENTS. See Cauxs. raising the requisite capital a condition to making, 105-112. for preliminary expenses, made before capital is raised, 105 x. special agreements as to payment of, 106 x. on stock illegally issued, in case of acquiescence, 463 n. of damages from the exercise of special powers, 286 n. ASSIGNMENTS. See DEBENTURES; TRANSFER; Stock. of property of corporation for payment of debts, 124 n. necessary to performance of functions, 141 n. when it amounts. to surrender of charter, 652 n. of stock in blank, 141 2. : ASSUMPSIT, lies for money received upon an ultra vires contract, 618 n. dividend declared, 139 n. ATTORNEY GENERAL. See Surv wv Equity. proper party to sue to restrain ultra vires acts affecting the pub- lic, 595, proper party to sue to restrain breach of trust where the benefici-- aries are numerous, 600 x. proper party to apply to equity to enforce charter duty, 317 x. may sue for injunction in behalf of public interests, 599 7., 601. to be made party in suit concerning public interests, 602. BANKS. See NavionaL Bangs. BANKING ACCOUNT, overdrawing, 128, 161. INDEX, . 695. BANKING POWERS, power to issue notes, does not give, 122 n. corporation not having, may be bound by contract for making plates, notes, etc., 614 n, BENEFIT BUILDING SOCIETIES, 54-57. power to borrow, 119, 120. BENEFIT RECEIVED. _See Contracts, ground for enforcing ultra vires contract, 372-875 n. contract of projectors, 477 n. as ratification of a contract of agent, 613 n. BEQUEST, to charitable uses controlled by equity, 50 n. BILLS IN PARLIAMENT. See PartiaMEnt, APPLICATIONS TO. BILLS OF EXCHANGE. Sce Nugortasie INstRUMENTS, BOARD MEETINGS. Sce Directors; MEETINGS. what business to be done at, 452-457, where to be held, 458. BONDHOLDER, power of, to sue to restrain ultra vires acts, 591 7. BONDS. See DEBENTURES; NEGOTIABLE INSTRUMENTS. which pass by delivery, how far negotiable, 177-179 n. seal does not prevent negotiability of, 177 n. may be issued by corporation as evidence of debt, 121 n. executed by corporations as security for costs, 182. issued by corporation to lend its credit, ‘invalid, 122 n. BOOKS, of record to be kept, 488, 461. BOROUGH FUNDS. See Corporate Founps. what expenses chargeable on, 187-190. not liable for application to parliament, 236, 237. unnecessary litigation, 59, 189-193. when liable for expense of opposing bills in parliament, 237-239. BORROWING. See Loans. corporations generally have the power of, 115-120. by benefit building societies, 55, 119, 120. must be limited to the purposes of the business, 115 x. . distinguished from increasing capital, 116. from issuing bills and notes, 161. by means of negotiable instruments improperly issued, 161, 162, by overdrawing bank account, 161. by directors, power implied when, 420, 421. beyond limit assigned, 439, 440. though ultra vires, may create liability in assumpsit, 623-630. to increase capital of partnership, 609 x. securities for sums borrowed, 121-123. 696 . INDEX. BREACH OF TRUST. See Trust. gives equity jurisdiction, 48-51, 57. diversion of property of municipal corporation is, 58. in applying to parliament at corporate expense, 224. by directors, in agreements for division of profits, 308, 330. by release of subscribers, 417 n. where beneficiaries are indefinite, to be remedied at suit of attor- ney general, 600 n. BRIBES, disguised as payments, 486. BUILDING SOCIETIES. See Benerit Buripine Societies. BURDEN OF PROOF, Sce PresuMPTIONs. in questions of ultra vires, 39-42, as to necessity for exercise of eminent domain, 291. BURGESSES, election of, 187, 188. BUSINESS, of non-trading corporations, 47, e¢ seq. of trading corporations. See TRADING CoRPORATIONS. raising capital condition to beginning, 105-112. preliminary, may be done before capital is raised, 105 7. stockholders cannot waive this condition as to beginning, 106 n. which is intra vires, 63-104. extension and development of, 78-104. alteration of, 79 n. See ALTERATION. applications to parliament to extend, 198, 224, 225. to vary the nature of, 217-220. abandonment of, 70, 811-314, 548. See ABANDONMENT. transfer of, 305-311. future, agreements to divide void, 232, 233. powers of directors as to, 410-412. See DrREcToRS. ordinary, directors control, 390, 391 n. contracts regulating. See TRarric ARRANGEMENTS. what to be done at general, special and adjourned meetings, 354, 355 7. ‘BY-LAWS, power to make, an incident of corporations, 12. are left to the discretion of the corporation, 12. must not conflict with charter or general law, 12, 13 n. must be reasonable, 13 n. 4 may be void as to strangers, but binding on members, 13 n. sometimes require official ratification, 13. can restrict the powers of directors when, 392, n- third person bound to take notice of, when, 895, 396 ., 427 n. illegal, 575. INDEX. 697 : CALLS. See AssESsMENTS. power to make, when it exists, 150. in whom vested, 150. made by de facto directors, 150. when directors have implied power to make, 416. when and how to be made, 151, 152. must press equally on all, 151, 576. notice of, not properly given, effect of, 445. fundamental change relieves subscriber from liability for, 79 7., 151, 542 n. subscriber induced by fraud liable for, when, 152, 248, 258, 259. remedy for non-payment of, 152, 153 n. for illegal purpose restrained, 152. mortgage of, 128, 421. CANAL COMPANY, railway company purchasing a canal becomes a, 341. CANCELLATION, of shares, by directors, 417, 465. Sce RELEASE. CAPITAL. See Stock; SHARES. subscribed, a condition to beginning business, 105-112. power‘to vary amount or number of shares of, 112-115, 142-144. increase of, in lieu of money dividend, 130 n. distinction between raising money and increasing, 116. advances out of, to be repaid from revenue, 137, 188. to make new railways, 229. CARRIERS. See Common CARRrers. CASHIER. See OrrIcERs. powers of, 415-7. ‘ representations of, 248, 249 n., 623 n. CENSURE, right to, incident to every corporation, 45 n. CERTIFICATE, of deposit, may be given by corporation as evidence of debt, 121 n. of stock, with blank assignment, how far negotiable, 141 n. CHSTUIS QUE TRUSTENT. See Trust; TRUSTEE. of a charity, are the objects of the charity, 51. of shares, can they sue to restrain ultra vires acts, 589 and n. CHANCERY, COURT OF. See Equity; Suir in Equity. discretion of, as to enforcing agreements, 291, 802. a rule of, held to be ultra vires, 660. CHANGE. See ALTERATION. CHARITABLE COMMISSIONERS, 52. CHARITABLE CORPORATIONS, . objects of, 50, 52. visitor of, 49. 698 INDEX. CHARITABLE CORPORATIONS—continued. usually import a trust, 51. _ court of chancery interferes with, when, 49-51, doctrine of ultra vires applied to, 51-53. property of, cannot be diverted by legislature, 51 n. power to hold real estate in territories of U. 8., limited,9 x. CHARITABLE USES, bequest to, regulated by courts of equity, 50 n. CHARTER, : special, seldom granted now in United States, 8 n. may be limited in duration, 5 n., 7,646 n. presumed from exercise of powers, 21 n. qualified by law of State granting it, 64 n. alteration, amendment and repeal of (App.), 667. See ALTERA- Trion; AMENDMENT. power to alter or repeal reserved by legislature, has what effect, 83, 86 n., 545 n. notice to be taken of provisions of, 898, 427 "., 637 n., 643 n. grants in, strictly construed, 63 n., 286 n., 294 n. surrender of. See SURRENDER. violation of, suit by members to restrain, 568; 570.n., 589. See Sort In Equrry. of railroad is a contract imposing public duties, 344 n. CHURCHWARDENS, 19. CIVIL CORPORATIONS, 16, 17. COLLATERAL AGREEMENTS. See PartiaMENT, APPLICATIONS TO3, and ConTRACTS. COLLEGES, 50. COLLUSION, between subscribers and agents, 107 n., 248 n. by.stockholder and rival company in suit in equity, 598, 594 n. See Surr in Equrry. ‘ COLORABLE SUBSCRIPTIONS, effect of, 106, 107 n. COMMISSIONERS. See Pusiic Boprss, charitable, 52. for public works, form quasi corporations, 18, 19 n: hold funds upon a trust, 235, 236. to receive subscriptions, before organization, 106 7. essentials of subscriptions made to, 107 n. acts of, prior to organization, 437 n., 482 n. COMMITTEE, when may be appointed, 459, 460. how to be summoned, 461. COMMON CARRIER, may contract to carry beyond its line, 318 ”., App. 673. cannot make discrimination of persons, 846-349 n. INDEX. 699. COMMON OFFICIALS, corporations having, when affected with notice thereby, 424. COMMON SEAL. See Spat. COMPENSATION. See Evrnent Domar. to dissenting stockholders requisite in case of any fundamental alteration, 6 7., 309 n., 542, See ALTERATION. for private property taken for public use, 74 n., 280 n., 285 n. in some States to be made before the property is taken, 285 x. not a condition to entry for surveys, 75 n. for temporary occupation of land, 75 n. necessary to burden a highway with a railway, 86 7. for consequential damage from works erected under legislative authority, 289 n. personal, contracts to give, 225-227, 229, 2380. COMPETING RAILROADS, Sce TRarric ARRANGEMENTS, not to consolidate in New Hampshire, 327 n. COMPETITION, contracts to prevent, 327 n., 328 n. acquisition of land by railroad company, to prevent, 92 n. COMPULSORY POWERS. See PowERs. CONDEMNATION. See Eminent Domain. CONNECTING RAILROADS. See Trarric ARRANGEMENTS. contracts for through transportation on, 324 n. consolidation of, favored.in United States, 550 n. ‘CONSIDERATION. See Contracts. .receipt of, as affecting liability on ultra vires contracts, 608-612. contracts ultra vires of agent, 612-614. amounts to ratification, when, 613 7. failure of, ground for recoupment, though the contract is ultra vires, 614-623, CONSOLIDATION. See AMALGAMATION. distinguished from amalgamation, 588 n. is dissolution of old companies and creation of a new one, 538 n. necessary for, are consent of legislature, 539 x. of all individual stockholders, 539-544 n. unless the right of eminent domain is exercised, 541 n, whether reservation of power in legislature to repeal or alter removes necessity of, 545 n. whether the power of majority to dissolve at any time enables majority to consolidate, 543, 544 n. effect of, generally, 545 7. as to creditors, 546 7. of corporations of different States, 546-549 n. general policy of United States has favored, 550 n. Y00 INDEX. CONSOLIDATION—continued. of competing railroad companies in New Hampshire, 327 n. relieves dissenting stockholder from liability, 542 n. unless the change was anticipated at time of subscription, 542 n. of shares, 144, 539 n. CONSTATING INSTRUMENTS, e meaning of the term, 38. CONSTRUCTION, strict, in case of grants from the State, 63 n., 286 n., 294.7n., 801 2. CONTEMPT, ; liability of corporations for, 277 n. CONTINGENCY FUND. See Reserve. CONTINUOUS IDENTITY, incident of corporations, 6. CONTRACTS, I. between the stockholders, that in internal affairs majority shall govern, 551, 554-563. See INTERNAL AFFAIRS. ° that there shall be no diversion of funds, 79 7. this contract broken by alteration of business or char- ter. See ALTERATION. by consolidation, 540-545 n. by varying capital, 112-115. before incorporation for division of stock, 479 n. II. between directors and the corporation, 402-405 n. See DrrecTors. IIL. with third parties. power to make, generally, 66 7. made outside of State creating the corporation (App.), 676. are prima facie valid, 39-42, 480 n., 616. are presumed to be made with due formalities, 399 n., 428 n., 482. mode of making, seal necessary when, 356-387. See SEAL. seal not generally required in U. 8., 356-359 n. formalities required in making of contracts by directors and agents. See FoRMALITIES. informally made, binding in favor of persons having no notice of the formalities required, 428 n., 429 n., 481-486. unable to detect their absence, 439. when they have been executed, 371-377. when they have been recognized as valid, 877-883. in case of part performance, 383-386. . bind the party dealing with corporation, guere, 380-383, creating partnership, 309, 326, 334-338, INDEX. 701 CONTRACTS—continued. between several corporations for regulation of business. See Trarric ARRANGEMENTS, for division of tolls or profits, 309, 324-334. giving running powers, 318-324. involving transfer of special powers, 305-308. for through transportation, 324 n. to operate several railroads as a joint estate, 331 n. infringing rights of travel, 828. See Ramroap Cos, by railroad company to carry beyond its line, 94, App. 673. giving monopoly of transportation, 346-349 n. , to prevent competition, 327, 328 n. collateral to applications to parliament, 212-214, 225-229. to withdraw opposition, 212, 2183 n., 225-229. by peers or legislators, 226, 498-495, 504 n. to aid others in applying, 230-2382. for services as counsel before legislature, 284 n. as lobbyist, 233, 234 x. conditional upon success of application to parliament, 220-228. beyond the strict limits of corporation’s business, 66, 71, 90-94. ultra vires, not always illegal, 37, 28 n., 42 n., 378 n., 615 n., 617 n. liablility of corporations upon. differs with the different meanings of ultra vires 34-38, 611 n. when the purpose only is ultra vires, 611 n. when benefit has been received, 608-612, 618 n., 614 n. ~when ultra vires of agent only, and benefit has been received, 612-614. when contracts are executed, 372-375 n., 615 n. when indorsed by long course of dealing, 41 n. when there has been failure of consideration, 614~622. in assumpsit for money had and received upon, 618 m., 619, 620, 623-630. sometimes grounded on estoppel, 42 7. liability of directors and other agents upon, 630-645. made by agents. See AGENTS; DIRECTORS. made before organization. See PROMOTERS. CORPORATE FUNDS. See Boroven Fonns. in trust for creditors, 139 ”., 654 n. not liable for application to parliament, 286, 237. liable for expenses in opposing bills in parliament, when, 2387-239. See PARLIAMENT, APPLICATIONS TO. when can be devoted to expenses of legal proceedings. See Lre@at Proceepines; Costs. when preliminary expenses chargeable on, 486. 702 INDEX. CORPORATE PROPERTY, lying idle, used for purpose outside of corporate business, 67 and 2. may be let or transferred temporarily, 68-70. lease of, does not relieve lessor from liability eoENec with it, 805 n. may be taken under right of eminent domain, 309 n. acquired compulsorily for one purpose cannot be devoted to an- other, 84—88. capital stock not the limit of, 113 n. of municipal corporations, held in trust for the State, 300, 301 7. of ecclesiastical bodies, jurisdiction over (App.), 670. CORPORATIONS, definition and description of, 1-3. incidents of, 6-14. varieties of, 15-20, 43 n. quasi, 19, 20. sole, not common in United States, 15 n. for some purposes States of the Union are, 15 n. foreign, power to take real estate, 11 n. created by several States, 546-549 n, how created, 20-27, 475, 477 n. by common law, 20. by prescription, 21. by implication, 22. by charter, 22. by act of parliament, 23. ordinary and special distinguished, 38, 43. not trustees of stockholders, 133 n. are distinct from the members, 3, 554. are ae partnerships, yet resemble them, 117, 312, 397, 398, 558, 55: powers of. See Powers; BusrmNEss. contracts of. See ConTRACTS. torts of. See Torts. crimes of. See Crimgs. acts of, done without the State (App.), 676. CORPORATORS. See SHAREHOLDERS; MemBERS, may sue the corporation, and be sued by it, 8 7. liable, when statutes are not complied with, 3 n. COSTS. See Lega PROCEEDINGS. bond to secure, 182. liability of corporate funds for, 186-193. Pee oe for, when corporate interests are not affected, 9 iucidental to applications to parliament, See PaRLiament, Ap- PLICATIONS TO. INDEX. 703 COUNCILLORS, town, election of, 189. COUPONS. See Bonps; Nucorrasiz InsTRUMENTS, dissevered, retain qualities of negotiable paper, 180 n. ‘may be sued upon by holder, 179 n. cease to be incidents of the bond, 180 2. are still liens under the mortgage, 181 n. interest upon, 180 x. holders of, to be paid pro rata or in order of maturity, 181 7. CREDIT, LETTER OF, 164. CREDITORS, right of, in case of amalgamation, 526-530. consolidation, 546 n. dissolution, 654 and n., 655. assets of corporation are trust fund for, 138 n., 139 n., 654 n. priority of, over stockholders, 130 n., 183 ., 139 x. when holding mortgage debentures, 129. stockholders are not, 133 n. power to prevent voluntary dissolution, 654, 655. CRIMES, liability of corporation for, 271-277. torts against the public are, 272. in which mental element is negligence, 278, 274 n, _ is malice, etc., 274 and 2. for which corporation can and cannot be indicted, 274 x. CUSTOM. See Usacz. CY PRES, observance of formalities, 447-451. DAMAGES, consequential from acts authorized by legislature, 289 n. from exercise of powers granted by legislature, 75-77 n., 286 n. vindictive or exemplary, awarded against a corporation, 270-272 n. DEBENTURES. See Bonps. power to issue, 125. are prima facie not negotiable, 163. when negotiable, 163, 164. are mortgages, 129. . effect of, 129, 164. purporting to be negotiable, effect of in chancery, 164-168. at law, 168-171. exact import of, 172-177. mortgage debenture acts, 177. liability of directors for unauthorized issue of, 642 n. 704 INDEX. DEBT, corporation can take its stock in payment of, 99 n. may give note, bond, mortgage, certificate of deposit as evidence of, 121”. See BorRowine; NeaotraBte InsTRUMENTS, of another, corporation cannot assume, 121 7. assignment of property for payment of, 124 n. claim on an ultra vires contract not a, 661. DECAY, of members, works dissolution when. See DissoLutron. DECLARATIONS. See Representations; DIvIDENDs. DEED OF SETTLEMENT, is private act of shareholders, 428 n. public have access to, 398. notice to be taken of, when. See Noricz. acquiescence in act contrary to, 41 n. DEED OF TRUST, 124 x. DE FACTO DIRECTORS, calls made by, 150. contracts made by, 435, 4386. DEFECT OF AUTHORITY, in corporation, cured by legislative ratification, 124 n. in agent, cured by acquiescence, 442 n, 463, 465. induces personal liability, 630-645. distinguished from defect in form, 158, 160 x. DEFENSES. See Conrracts. ultra vires as a defense to contracts by corporation, 41, 42 7., 608—- 630. to negotiable instruments. See FORMALITIES. arising from want of power good against all, 160 x. inegularities good only against those with notice, 1222., 60 n. to action on subscription, agreement by agent tofrelease sub- scriber, no, 248 n. illegal election of directors, no, 151 7. fraud as a, 251 n. DELEGATION, of powers by corporation. See TRANSFER; POWERS. of authority, by directors to agents, 412-414 n. to executive committee, 460. of right of eminent domain by State, 279 n., 342 n. DEPOSIT NOTE, given by corporation, 121 n., 164. DEPOTS, land taken for, as incidental, 287 n. DEVISE, power of corporation to take land by, 9, 10 n. © INDEX, 705 DIRECTORS. See Acents; PowErs; ForMAiriss. exact position of, 390-399. are agents, 358, 359 n. are special general agents, 899. are agents of corporation, not of stockholders, 390 n. their powers are fixed by charter, 390 n. when by-laws may be made to control, 392 n. have entire charge of the regular business, 391 n. can they act outside of State creating the corporation (App.),676. fiduciary position of, 400-409. ultra vires of, 35, 410-415. suit against, for fraud on corporation, 184 ., 568 n. I. Powers. See Surr 1n Equrry. express, given by constating instruments, 409, 410. effect of limitation of, 439. implied, how they arise, 410-412. various, 410-425. limited by powers of corporation, 411, 412. as to calls, 150, 416. cancellation of shares, 417, 418. surrender of shares, 418, 419. forfeiture of shares, 420. dividends, 137 n., 140 n., 147 n. varying stock, 113 n. issue of new stcck as dividend, 180 n. issue of paid-up shares, 419. selling assets, 101, 103 »., 415. borrowing, 116, 118, 420, 421. mortgages, 117, 421. legal proceedings, 421-425. management of business, 391 7., 411 n., 418-415. ratification, 468-470. amalgamation, 509-516. contracts giving running powers, 320. alterations of charter or business, 392, 393 n., 412 n. dissolution, 653, 654. notice, 421-424. where corporations have common officials, 424. representations and admissions, 425. delegating authority, 412-414 n., 459, 460. how far public have notice of restrictions of. See Notice. Il. Exercise of powers. See MEETING. as a rule, directors have power only as a body, 452 n. they must act at board meeting, 452-457. exceptions to this rule, 453 n., 455-457, 45 706 INDEX. DIRECTORS—ontinued. appointment of executive committee, 460. delegation of authority to agents, 412-414 n. must they act only in State creating corporation (App.), 676. Ill. Duties of. fiduciary position of, 400-409. must be impartial to stockholders, 406. must not contract with corporation, 402, 402-404 x. must promote corporate not private interests, 402 n. may exercise discretion as to division of profits, 133 7., 137 n., 140 n. as to exercise of powers, 297 n. but not, as to dividends on preferred stock, 147 n. the registry of sbares, 577. where public duties exist, 346 n. suit for violation of, when shareholders may bring. See Surr mn Equity. IV. Rights of, to be indemnified, 196, 288, 289. to protect themselves like other creditors, 401 n. to rank as creditors for advances made, 627, 628. V. Liability of, for legal proceedings, 194. for fraud or negligence, 251, 406, 407, 408 ». for fraud in selling stock below charter price, 153 7. upon contracts made for corporation, 630-634, for misrepresentation of their own powers, 635-639. of the corporate powers, 639-645. See Memrinas; FRAvD; Contracts; Torts. DIRECTORS, DE FACTO, calls made by, 150. contracts made by, 485, 486. DISCRETION, of directors. See Directors. as to exercise of powers, 297 n., 311-814. of majority in internal affairs, 557 n. of court of equity, 302-304. DISCRIMINATION, | in division of profits, restrained, 187 n. personal, as to fares or privileges of transportation, 346-349 n. railroads are for public use, without, 342 n. DISFRANCHISEMENT, incident of corporations not for gain, 45. opposing interests of corporation, ground for, 44 and n. member entitled to notice and hearing before, 45 n. DISSENTING MEMBERS. Sce Mempers. INDEX, [07 DISSOLUTION, by expiration of time limited, 646 n. by direct action of the crown, 646-651. for neglect or abuse of powers, necessity of proceeding to enforce forfeiture, 648 n, proper action scire facias or quo warranto, 647 and n. non-user as ground for, 298 n. See ForFEITURE, voluntary, 651-655. See SuRRENDER. power of directors to make, 658, 654. majority to make, 652 n. minority to restrain, 652. stranger to restrain, 654. creditor to restrain, 654, 655. by demise of members, 655. by act of parliament, 655, 658 n. by winding up, 659-665. under the court, 959-661. voluntarily, 661-664. as to unregistered companies, 664, 665. creditors, how protected in case of, 654 n. semi-existence after, by statutes, 654 n. non-user, sale of property, &c., do not ipso facto work, 657 n. statutory provisions as to, in United States, 659 n. DIVERSION. See AurERATIon; Busrinzss. of corporate funds, 30-32, 79 and 80n., 540 n. ‘of funds of charitable corporation not in the power of legisla- ture, 51 7. of municipal corporation is ultra vires and breach of trust, 58. to aid application to parliament, 215-239. DIVIDENDS. See Prorits. to be declared only out of money earned, 130, 131 n. in stock, 180 n., 185, 136 and n. in stock, are income or capital, 131 n. must be general on all stock, 1407. declaration of, in discretion of directors, 137 n. matter of internal management, 136. when equity intervenes as to, 183 n., 137 7., 320, 575. on preferred stock, 147 n. ‘ fraudulently or improperly declared, 188, 139 n. when declared, become debts, 131 7. assumpsit lies for, 139”. DIVISION, of shares, 148, 144. See SHARES. of tolls, See TRarric ARRANGEMENTS, of profits, See TRarric ARRANGEMENTS; DIVIDENDS; PROFITS. 708 INDEX. DOMICILE, of corporations, 47. of corporations created by several States, 547-549 n.. DONATION, to charity, by directors of trading corporation, 38 n. DRAFT. See NEGoTIABLE INSTRUMENTS. DURATION, of corporate existence, may be limited, 7. is always practically limited in United States, 5 7. effect of limitation of, 646 n. after dissolution, for settling affairs, 654 . not fixed by charter, is controlled by majority, 544 n.. EARNINGS. See Prorits; DIvipENDs. net, what are, 131 ». mortgage of future, 126 n. EASEMENT, only, when acquired by eminent domain, 85, 86 7. must be used only for purpose for which acquired, 84-87.. ECCLESIASTICAL CORPORATIONS, varieties of, 15. exist at common law, 20. doctrine of ultra vires applied to, 47-49. jurisdiction of courts over (App.), 670. ELECTION, of directors and officers, nterference of courts as to, 563, 564 n.. illegal, no defense to actions on subscription, 151 n. of councillors of borough, 189. of remedies for non-payment of calls, 153 n. can it be held outside of State creating the corporation (App.), 680. ELEEMOSYNARY CORPORATIONS. See CHariTaBLE CoRPORATIONS. description of, 16. visitors of, 40. trustees of, not under same rules as directors, 393 n. EMINENT DOMAIN. See PowERrs. right of, exists in every sovereignty, 279 n. is limited only by boundaries of the State, 299 n. distinct from right of taxation and police power, 285 n. what property may be taken under, 279 n. franchises and exclusive privileges, 5 7., 279 n., 2847., 309 n property of federal government in States, 299 n. unless devoted to special national purpose, 299 n. of corporations, and so of corporators, 84 7., 279 n., 2992. property already devoted to public use, 299, 300 x. may sweep away monopolies, 284, 285 7. INDEX, 709 EMINENT DOMAIN—continued. consolidation or other change made possible by, against the will of individual stockholders, 84 ., 541 n. to be exercised only for public purpose, 2'79 n. what is a public use, 281-284 x. are manufactories a public use, 281 n. railroads are public use, 281 7., 342-846 n. what is a public use, a judicial question, 280 n. question of necessity, for legislature only, 280 7. condition to the exercise of. compensation, 74 n., 280 n., 285 n. what is a “ taking” such as to require compensation, 289 7. power of, delegated to corporations, for travel, transportation, 342 7. by general statute, 279 n. strictly construed, 286 n. must be strictly used, 298 n. authorizes taking ef no more than is needed, 288 1. can it be exercised for temporary use, 292, 293 7. exercised in taking land for shops as incidental, 287 n. does not pass by lease of railroad, 305 n. when exhausted, 205, 296 7. reverter of land taken under, 85, 86 n. necessary to enable a railroad company to use highway, 86 7. not necessary to enable company to take property of a municipal corporation, 300, 301 2. EQUITABLE OWNER. See Cesturs QUE TRUSTENT. of shares, may sue to restrain ultra vires acts, 589 and n. EQUITY. See Surr ix Equity. ESCHEAT, of lands held by religious and charitable corporations in terri- tories of United States, 9 n. ESTOPPEL, and ratification distinguished, 379 n. as ground for enforcing ultra vires contracts, 41, 42 n. no ground for beginning business before capital is raised, 106 n. as to authority of agents, 379 7., 385 n. as to acts of promoters, 491. as to negotiable debentures, 165. as to equities, in bonds payable to bearér, 1647. by acquiescence in division of shares, 144, does not arise against corporations as often as against natural persons, 396 7. EUROPEAN ARBITRATION, 580, 531 2. EVIDENCE, of incorporation, user of seal not conclusive, 5. 710 INDEX. EVIDENCE—continued. of incorporation, recognition by legislature is, 21 n. as to necessity, in exercise of right of eminent domain, 291. rules of, in actions for injuries causing death, 276 n. EXECUTIVE COMMITTEE, 459, 460. EXECUTORY AND EXECUTED CONTRACTS, distinguished as to formalities, 371-377. as to doctrine of ultra vires, 372-875 n. EXEMPLARY DAMAGES, awarded against corporation, 270-272 n. EXPRESS COMPANY, - contract giving monopoly of transportation to, void, 346-349 n. EXPULSION, power of, incident to non-trading corporations, 45. member entitled to notice and hearing before, 45 n. FAILURE OF CONSIDERATION, of ultra vires contract, ground for recovery, 614-623. FALSE IMPRISONMENT. See Torts. corporation liable for, 265. FEDERAL COURTS, jurisdiction of, in case of creation of corporation by two or more: States, 547 n. FICTITIOUS SUITS. See ILuusory Suits. are in contempt of court, 596 n. FIDUCIARY POSITION, of directors, 400-409. See Directors. FINANCIAL MATTERS. See Caprrat; SHares; PRorits; DIvIDENDSs; NEGOTIABLE INsTRUMENTS; MorTGAGES. FIXTURE, is rolling stock a (App.), 681. FOREIGN CORPORATIONS, power to hold lands, 11 2. FOREIGN LEGISLATURE, applications to, 211, 212. FORFEITURE, of lands purchased without license in. Pennsylvania, 9 n. held by charitable corporations in territories of U. S., 9 2.. of stock, as remedy for non-payment of calls, 152, 158 n., 420. of charter. See DissoLuTIon. for abuse of powers, 647 and n. for non-user, 298 7., 647 n, for sale of road by turnpike company, 311 n. for neglect to repair road, 311 n, for neglect of condition after a time fixed, 646 n.. declaration of, is for court of law, 648 n. INDEX. T1141 FORFEITURE—continued. of charter, where legislature reserves power to repeal for abuse, 648 n. must be at instance of the State, 648 n. FORMALITIES, in making negotiable instruments, 122 »., 158. restrictions on amount of negotiable paper, are not, 162. must be strictly observed, generally, 310. always so, when imposed by statute, 361. presumed to have been observed, 399 n., 428 n., 432. waived by acquiescence, 385, 440-442, 445, 449, 450, 466, 467. are for protection of corporation and stockholders, 426. what may be imposed, 389. in regard to sealing, 356-387. See SEAL. various kinds of, 428-430. discretionary, 429. diréctory, nature of, 428-438. what are, 429 n., 437-440. effect of, as to persons unable to see to them, 428, 429 7., 430-436. bound to see to them, 440. directors, 440-442. private members, 443. third persons, 444. imperative, 446-451. waived by acquiescence, 466. or usage, 449, 450. observance of, ey prés, 447. relating to meetings of managing body, 451-461. notice of meetings, 451, 451. See MrErinas; Notice. meetings of directors, 452-457. informal meetings, 456, 457. quorum, 458, 459. committees, 459, 460. minutes, 461. conduct of meetings, 460. shareholder not having complied with, can he sue to restrain ultra vires acts, 589 and n. FRANCHISES, See Pownrs. are incidents of sovereignty, 278 n. grants of, strictly construed, 63 7., 286 n. limited by law of State granting them, 64 n. when obligatory, 297 n., 311-314, 657, 658. exercise of, enforced by mandamus, 315 n. are personal trusts, 104 n. of railroad, a guasé trust for general good, 348 n. can be exercised only by operating entire road, 311 2. 712 INDEX. FRANCHISES—continued. inalienability of, 108, 104 2, 124 x. mortgage of, 123, 124 n. transfer of, 805-317, 836 n., 889-841. lease of, 103, 104 n. does not relieve lessor from liability, 305 7. can they be dissevered, 71 n. subject to condemnation by eminent domain, 5 7., 279 n., 284 n., 309 n. of being corporation and other franchises distinguished, 104 n. FRAUD, corporation capable of, 243 n. imputed to corporation directly, in prospectus, 242, 257. in directors’ report, 245. in time tables, 246. imputed to corporation indirectly, by misrepresentations of subscription agents, 246, 247 n. as to extrinsic fact on which the authority of agent de- pends, 248, 249 n. where other party is particeps criminis, 107 n., 248 n. when benefit has been received, 249 n. liability for, at law, 242, 247-251. scienter the giat of the action, 251 n. in equity, 242, 250-251 n, 250-258. as a defense, 251 n. contract,induced by, voidable, 258. shareholder induced by, liable to calls wher, 152, 252-260. transferee of stock, cannot set up fraud inducing original sub- scription, 260. 261. & when, matter of internal jurisdiction, 557, 558. jurisdiction in equity in case of, 57. in oe affairs, by majority, ground for interference of equity, 565-568. upon minority, what matters are, 573-578. upon corporation, when stockholders may sue for, 570-572. See Surr mv Equity; Partizs. in declaration of dividend, 138. in issue of negotiable instruments, 160. in sale of stock below charter price, 158. action for, against directors, 251, 568-572. FRAUDS, STATUTE OF,{381, 637 n. FRIENDLY SOCIETIRS, 18, 53. treasurer or secretary of, a guasi corporation sole, %0. statutes relating to, 53. objects of, 54. INDEX. 1138 FUTURE ACQUISITIONS, mortgage of, 125, 126 n., 128 n. FUTURE BUSINESS. See Trarric ARRANGEMENTS. agreement to divide, 332, 333. GENERAL ACTS. See Corporations. prevalent mode of creating corporations in U. S., 3 2., 27 n. territories in U. 8. may create corporations by, 27 n. GOVERNORS, of States, guasi corporations sole, 19 n. GRANGER QUESTION (App.), 667. GRANTS, from the State, strictly construed, 63 n., 286 n., 294 ., 801 n. GUARDIANS, of the poor, 19. HIGHWAY, cannot be devoted to use of railroad without compensation, 86 n. railroad is a public, 342-346 n. ILLEGALITY, distinguished from ultra vires, 37, 88 n., 427, 373 n., 615 2., 618 2. ILLUSORY SUIT. Sec Suir mm Equity. equity will not hear, 593, 594 n. in interest of rival company, 595 n. by a mere nominee, 593. IMMORTAL, meaning of, as applied to corporation, 6. IMPLICATION, corporation by, 22. powers by, 28, 29 7., 65. See PowERs. powers essential to exercise of powers granted, pass by, 74-78. corporation bound by, 66 n. INCHOATE COMPANIES. See Promoters; PRELIMINARY Ass'N. liabilities in regard to, 110. INCIDENTS, R of corporations. See CORPORATIONS. INCOME. See Prorits; EaRnines. meaning of, 131 n. is stock dividend to be regarded as, 131 x. INCREASE, of capital stock. See CaPITaL. of capital of partnership, what is, 609 n. * {14 INDEX. INDEMNITY, effect of, in case of amalgamation, 525. trastees and corporate officials entitled to, 98, 196, 238, 239. INDICTMENT, of corporations for crimes and misdemeanors, 271-277. for injuries causing death, 276 n. INDUSTRIAL AND PROVIDENT SOCIETIES, objects and powers of, 54. INFORMALITIES. See Formariries; Contract. INFORMATION. See Surr in Equity. INJUNCTION. See Surv in. Equity; INTERFERENCE or Equity. relating to misapplication of property, 82, 194, 215-228, 236-239. surrender of charter, 206. voluntary winding up, 652. making calls, 152. exercise of powers, 311-313, public duties, 817 7. dividends, 182, 133 n., 185. legal proceedings, 194, 195. exercise of eminent domain, 290. applications to parliament, 200 7., 204-206, 208. agreements not to apply to parliament, 210. See PARLIA- MENT, APPLICATIONS TO, public nuisance, 605 x. at suit of attorney general for the public, 599 7. where public injury would result, 302 x. is of grace, not of right, 594 n. granted only to one suing bona ‘fide, not as mere nominee, 594 n, who may apply for, 216, 217, 239, 588-592. INJURY. See Damages. causing death, statutory remedy for, 276, 277 n. consequential, from acts under legislative authority, 289, 290 x. INSOLVENCY, ; ‘ as affecting declaration of profits, 130 n. does not of itself work dissolution, 657 n. INSURANCE COMPANIES, charters of, require approval of attorney general in N. Y., 18 x.. may pay a claim, though not legally bound to, 74. cannot divide unearned premiums as profits, 131 n. INTEREST, necessary, to sue to restrain ultra vires acts, 588-592. as dividend on preferred stock, 147 x. on subscriptions, 133, 184 n. on coupons, 180 7. INDEX. 15 INTERFERENCE OF COURTS. See InteRNau Arrarrs; INJUNCTION; Surr mv Equrry. courts will interfere in the internal affairs of corporations: to prevent ultra vires or illegal acts, 47, 559-563. in case of disputes stopping the business, 568-565. to protect minority from fraud, 57, 565-568, 573-578. in case of attack on rights of member or class of members, 575. to prevent dividend in the absence of surplus profits, 187 x. to prevent improper dividend, 140. in case of breach of trust, 57, 60. in regard to building societies, etc., under statute, 56, 57. courts will not interfere: when majority act bona fide, 556. to compel dividends, 133 n., 186, 137 n. except on preferred stock, 147 n. at instance of member not acting bona jide for interests of the corporation, 46 7. at instance of one who is a mere nominee, 593, 594 n. with ecclesiastical bodies (App.), 670. INTERNAL AFFAIRS, See INTERFERENCE; MasonitTy; Surr mv Equity. members assembled are supreme as to, 46, 47. majority control, while acting bona fide and intra vires, 551, 554- 563. making of calls may belong to, 152. voluntary dissolution belongs to, 651-655. courts will not, as a rule, interfere in, 56, 57, 152, 184, 185, 556. stranger cannot get equity to interfere in, 578. INTERPRETATION, statutory and judiciary, distinguished, 64. of powers, 286-294. when vested in public bodies, 298-304. INTERSTATE CORPORATION, status of, 546-549 n. IRREGULARITIES. See FoRMALITIES. JOINT ESTATE, contract to operate several railroads as a, 331 n. JOINT STOCK ACTS, 8. JOINT STOCK COMPANIES. See CorPoRaTions. distinguished from partnerships, 117. JURISDICTION. See Surr om Equity. of equity, as to violations of charter or breaches of trust, 568— 570 n., 589 7. over municipal corporations, 597 n. over all corporations involving a trust, 57. 716 INDEX. JURISDICTION—continued. of equity to restrain corporations in behalf of public, 596. over corporations created by two or more States, 547-549 n, over property of ecclesiastical bodies (App.), 670. KNOWLEDGE. See Notice. of public act or general law assumed, 398, 427 n., 687 n. of provisions of charter, deed of settlement, articles of associa- tion, and by-laws, when presumed, 395, 396 n., 398, 427 7., 429 n., 637 n., 648 n. of formalities by directors and others, presumed, 440-444. of agent, director, etc., is knowledge of principal, 422-424, of circumstances, essential to ratification by acquiescence, 613 n. LANDS. See Purcuasz; Sate; Lease; CorPoRATE PROPERTY. acquisition of, 6, 8-12. cannot pass to corporation by devise, save by statute, 9 n. taken compulsorily. See Powers; EMINENT DomaIN. for workshops, depots, etc., 287 7. for collateral object, 288, 289. when only easement acquired in, 85 7. right of vendors to repurchase, 70. “taking” of, meaning of, 289 7. user of, 67, 84-88, 286 x. contract to take, collateral to application to parliament, 225-230. contract, for, dependent on passing of act, 227-280. alienation of,. by trading corporations, 11. superfluous, 70, 85 x. belonging to the public, alienation of, 301 7. reverter of, 85 7., 88, 89 n. LAPSE OF TIME. See AcQuiEscENcE. LAY CORPORATIONS, 15. LEASE, of property not in immediate use, 68, 69. and franchises, 103 ., 124 7., 809 n. of office, by foreign corporation, 11 n. of railroad, does not pass power to exercise right of eminent do- main, 805 n. : : of railroad does not relieve lessor from liability, 305 n. LEGAL PROCEEDINGS. See Action; Surr; Insuncrion. power to undertake, essential to corporations, 182. by corporation, how carried on, 182. against members, 3 7, 182. affecting corporate interests directly, 183-186. indirectly, 186-193. not at all, 198, 194, adoption of, when instituted by others, 194-197. INDEX. "17 LEGAL PROCEEDINGS—continued. assistance of, when instituted by others, 186-188. on behalf of corporation, by minority, 571-578, 579-587. by one member in behalf of self and others, 513. LEGISLATION, tendency to creation of corporations by general, 3 n. corporations created in United States only by, 23 7. courts cannot hinder, by injunction, 200 n. contracts to influence, 238, 234 n. town not bound to resist, as to its boundaries, 289 7. LEGISLATURE, applications to. See PaRLIAMENT, APPLICATIONS TO. cannot divert property of charitable corporations, 51 7. power of, under reservation of right to repeal or alter charter, 83-86 n. cannot authorize majority to make any fundamental change, 80 2., 540m, may delegate right of eminent domain. See Emmnent Domain. consent of, necessary to consolidation, 539 n. or surrender of charter, 651 n. or transfer, lease, etc., of franchise, 103 x. recognition by, as evidence of corporate existence, 21 7. cures defect of authority, 311. liability for damage from acts done under authority of, 75 7., 289 n. LIABILITY. See Contracts; Directors; AGENTS; SUBSCRIBER ; SHARE- HOLDER; PRoMOTERS; Torts; CRIwES; FRaup. LIBEL, liability of corporation for, 267-269 and n. on managing body, action by corporation for, 194. LIEN, on stock, by-law of national bank cannot create, 18 n. of creditors on assets, 139 n. coupon, when detached, is still a, 181 7. LIMITATIONS, to the duration of charters, may be express, 5 2., 7. effect of, 646 7. may be practically raised by eminent domain, 5 n, of powers of agents, and of corporate powers, notice to be taken of. See Novice. LIMITATIONS, STATUTE OF, as applied to coupons, 180 x. LOANS. &Sce Borrowrne. power to take, 115-120. ‘forced, by issue of new stock, 136, See Caprrau. ultra vires, money can be recovered, when it has been devoted to necessaries, 623-630. See ConTRacts. 718. INDEX. LOAN SOCIETIES, 54 LOBBYING, contracts for, void, 233 n. and acting as counsel, distinguished, 234 n. LOCAL GOVERNMENT BOARDS, powers possessed by, 17, 298-304. LOCATION, of the corporation, or domicile, 4. of corporations created by several States, 547-549 n. of railroad, not fixed by preliminary maps, 296 n. as a rule, cannot be changed, 296 2. MAJORITY. See Internat Arrarrs; Minonrry. powers of, to make calls, 150. to bind minority at meetings, 458. of a partnership, 551, 552. of members of a corporation, 553-568. cannot divert the corporate funds, 31, 79, 80 7., 540 n. cannot consolidate, 5389-544 n. may confirm and condone acts which are a fraud on the corpora- tion, 570. must keep within the corporate powers, 33, 34, 550, 554-563. must act with bona sides, 566-568. ney Geterniined, when frauds of apa are to be considered, MALICIOUS PROSECUTION, corporation liable for, 266-268 n. MANAGING BODY. See Directors; Mretines. MANDAMUS, to restore corporator to membership, 45 n. to mayor, to receive a vote, 189. to assess compensation of municipal officer, 187. to interfere with legislation, 199 n. to compel or determine an election, 564 n. to corporations, generally, in United States, 314-817 n. to compel exercise of powers, 314, 315 n. to remove common nuisance, 317 n. at relation of private persons, 816 7. MAPS, preliminary, not binding on railroad company as to location, 296 n. MATERIALS, right to take, in connection with “taking” of land, 286, 287. right to sell surplus, on land condemned, 289 n. INDEX. 719 MEETINGS. See Formatities. of corporation : right of all members to be present, 350. notice of, to be given to all, 350, 351. requisites of, 352-355 and n, ordinary and extraordinary, 354, 355 and n. adjourned, 354. of managing body : notice of, to whom to be given, 451, 452. what to contain, 461. how to be conducted, 460. board meetings, 452-457. place of, 458. informal, 456, 457, 461. quorum, what constitutes, 458. minutes or records, 461. business to be transacted at, 461. cau directors act otherwise than at ? 452-457 n. must they be in State creating the corporation ? (App.), 676. MEMBERS. See SoaREHnOLDERS; INTERNAL AFFAIRS. disfranchisement or expulsion of, 44, 45. duly assembled, supreme as to internal affairs, 46. meetings of. See MEETINGS. suits by. See Lega Procerpines; Action; Surt. dissenting, may prevent any fundamental change, such as reconstruction, 6 2. consolidation, 539-544 n, cannot be compelled to join in amalgamation, 511-515. not bound by contracts ultra vires, 79 7., 83. relieved from liability by consolidation, 542 2. must be compensated in case of lease, 309 n. or reconstruction, 6 2. or consolidation, 541 x. : rights of, where power to alter charter is reserved, 83-86 n. See ALTERATION. liability of, when it begins, 110. ¥ before capital is subscribed, 109, 110. legal proceedings against, may be defended by corporation, when, 189-197. MEMBERSHIP, in corporations, 43-46, mandamus to restore to, 45 n. in joint stock companies, depends on the acquisition of shares, 45. by-laws relating to, 12. expulsion from, 44, 575. mistakes in registering, do they affect? 445. right of, consideration of preliminary subscription, 148 n. 720 INDEX. MEMORANDUM OF ASSOCIATION. See ARTICLES oF AssocrATION. defines scope of limited liability companies, 410. MINORITY. See Masontry; Surt in Equity; InTeRNAL AFFAIRS, must be consulted, 551, 552, 566. may restrain act of majority which works fraud, 565-568. what matters are a fraud on, 573-578. may file bill asking leave to bring suit in corporate name, 572. MINUTES, of meetings, 461. MISREPRESENTATIONS, See Fravp. . of agents, as affecting corporation, 248 n., 425. of directors, as affecting corporations, 245, 425. in time-table of railroad, 246. in prospectus, 242, : of cashiers, tellers, etc., 248 n. of extrinsic fact on which agent’s authority depends, 249 n. by cashier of national bank, as to matter ultra vires of bank, 628 n.. liability of agents, directors or officials for, as to their own powers, 634-639. as to corporate powers, 639-645. where those powers are given by public law, 648 n. by foreign law, 643 n. as to matter of law, 642, 643 n. MISTAKE, of law or fact, as ground for rescission of contract, 648, 644 n. MONOPOLY, contracts creating, void, 327 n. created by legislature, can be removed by eminent domain, 84 1., 285 n. of fneneorbatton, not to be given to any one by railroad com- pany, 346-349 x. MORTGAGE DEBENTURES. See DEBENTURES. MORTGAGES, power to make, 123-130. made by directors, 117, 421. executed outside of State creating corporation (App.), 679. which national banks can take, 625 n. of assets, 117. of calls, 118, 128, 421. of future net earnings, 126 n. of future acquisitions, 125, 126 n. of the undertaking, 127, 128. of rolling stock, real or chattel (App.), 681. of railroad, covers what, 126 2. of franchises, 128, 124 n. ¢ eee tF INDEX, 721 MORTGAGEE, of shares, liable for payments, 98. MORTMAIN, STATUTES OF, 9, 10. MUNICIPAL CORPORATIONS, are trustees, 58. hold property in trust for the State, 301 n. must devote funds to corporate purposes, 59. powers of, 58-60. ultra vires has a strict application to, 42 n. may not apply to parliament, 59, 235-239. legal proceedings of, 187-192. powers ‘vested in, liberally construed, 298-804. compellable to exercise powers, 297 n., 311, 657% in the exercise of eminent domain, 298 n. power of, to aid in building railroads, 348, 344 n. Proneny of, may be given for public purpose by the State, 800, n. bonds of, 179 x. negotiable instruments of, 156 n. MUTUALITY, ' NAME, ‘of contract, 381 7. corporation must have, 3. several, corporation may be known by, 3 2. acquired by usage, 3 2. mistake in registering, does it affect membership ? 445. NATIONAL BANKS, powers of, 623-625 n. as to selling railroad bonds, 623 n. exchanging government securities, 623, 624 n. acting as bailee of special deposit, 624 x. can take only personal security for loan, 625 n. unless it be a past loan, guere, 625 n. by-laws of, cannot create lien on stock, 13 x. NEGLIGENCE, action for, lies against a corporation, 262. NEGOTIABLE INSTRUMENTS, power of corporations to issue, 120, 122 and z., 155-162. municipal corporations to issue, 156 n, effect of restrictions in amount, 162. liability on, when issued by agents, 632, 683 n. issued for accommodation, 121 n. issued in violation of express prohibition, void, 618 x. where the purpose only is ultra vires, 158, 159, 611 x. when value has been received, 615 n. 46 7292 INDEX. NEGOTIABLE INSTRUMENTS—continued. defense to, must appear on the face, 122 n. formalities connected with issue of, 158. See FoRMALITIES, irregularity in issue of, as a defense, 160 n. need not be under seal, 158. effect of seal, 162. issued without authority, work fraud, 160. liability of directors or agents on, 632, 633 n. cashier has prima facie power to transfer, 416 n. certificates of stock appropriate to, 142 n. instruments under seal purporting to be, 168-181. See DEBEN- TURES. corporate bonds in United States negotiable when, 177-179 n. coupons dissevered retain the qualities of, 180 7. NEW SHARES. See SHarzs. NEW STOCK. See Sxarzs. NOMINEE, of another, equity will not listen to stockholder suing as, 593, 594, NON-USER, of corporate privileges, no ground for injunction, 297 n. mandamus as a remedy for, 314 n. as a ground of forfeiture, 298 n., 647 n. NOTES. See Necortrasie INstRUMENTS. NOTICE, to agent, notice to principal, 421, 422. to directors, when notice to corporation, 422-424, 463 n. where corporations have common officials, 424. to be taken of limitations of agent’s authority, 394-396 n., 897- 399, 687, 638. of charter, deed of settlement, by-laws, &e., 159 n., 427 n., 429 n., 687 n., 643 n. : of meetings to be given to all, 350, 451. may be waived, 351, 352, 445. requisites of, 352-355, 451, 452. length of time of, 353, 354 x. presumed, 351 n. of calls, what informalities invalidate, 444, 447. NOVATION, principle of, 505-508. as affecting creditors, in case of amalgamation, 526-5380. NUISANCE, indictment for, 275 n. mandamus to remove, 317 n. not excused by necessity, 304. created by proper exercise of special powers, 76, 77 n. public, jurisdiction of equity as to, 600 n., 605 n. INDEX. 723 OBLIGATORY, powers are, when, 297, 311-314, 657, 658. powers, enforced by mandamus, 315 n. OFFICE, usurpation of, remedy under N.Y. code, 564 n. OFFICIALS, CORPORATE. See Directors; AGEnTs. removal of, 187. to be appointed by seal, 365, 366. See Sman. common to two corporations, effect of, 424. compelled to act by mandamus, 315 n. ‘ not under control of stockholders, 390, 391 n. of national banks, powers of, 623-625 7. legal proceedings against, 183-185. : admissions and representations of, 248 n., 245, 425, 623 n. liability of, when contracting ultra vires, 630-645. indorsement by, 683 n. OPPOSITION, to bills in parliament, contract to withdraw. See PARLIAMENT, APPLICATIONS TO. ORDINARY CORPORATIONS, distinguished from special, 33, 62. ORGANIZATION, preliminary existence for, 106. subscriptions before and after, distinguished, 154 n. contracts and services before. See PROMOTERS. under general acts, 475 n. OUTLYING LANDS, not covered by mortgage of railway, 126 n. OVERSEERS OF POOR, . quasi corporations, 19 n. PAID-UP SHARES, issue of, ultra vires, 153. parties taking, contributories on winding up, 153. PARLIAMENT. See LEGISLATURE, and the courts, conflict between, 205, 209, 210. corporation created by act of, 28. PARLIAMENT, APPLICATIONS TO, not at corporate expense, ‘ right of petition belongs to all, 199 ”. power of equity to restrain, 204-206, 208. in United States, equity cannot restrain, 199-204 n. English authority not fully applicable in United States be- cause of the difference in legislative power, 203, 204 n, on public grounds, 209, 210. in breach of contract, 206, 207, 210. of another State or nation, 211, 212. 724 INDEX. PARLIAMENT, APPLICATIONS TO—continued. at corporate expense, by trading corporations, when members do not object, 215, 216, 224.. do object, 217-220. ' when power is given by constating instruments, 223, when not made bona jide for corporate interests, 230. when to extend corporate powers or business, 215, 216, 238— 225, 232. by non-trading corporations, generally involve breach of trust, 235-237, in opposition to applications by others, 237-239. contracts collateral to, not to oppose, by private persons, 210, 212-214, 225-229, "by peers or other legislators, 226, 493-495, 504 n. to aid, 224, 230-232. as counsel, 2384 n. by lobby services, 283, 234 n. contract conditional upon success of, 220-226, 227, 228. issue of shares in anticipation of success of, 221, 222. agreements to forego privilege of, 212, 213 n. PARLIAMENTARY DEPOSIT, contribution towards, 282. PARTIES. See Surr in Equiry. corporation proper party to sue in matters affecting it asa whole, 183-185, 558, 570-572. when iosienolalens proper parties to sue, 184 »., 571-574 n, stockholder always proper party to restrain ultra vires acts, 559, 593, eb seg. provided he is not a mere nominee, 598, 594 n. corporation to be madé party in suit by stockholders, 571 7., 603. proper parties, in suit for wrong to a class, 580 n., 580-586. when the public, by attorney general, must be made party, 595, 602. attorney general proper party to restrain acts affecting public, 595, et seg. See ATTORNEY GENERAL. PARTNERSHIP. See TRarric ARRANGEMENTS. and corporation distinguished, 117, 812, 397, 398. principles of, applicable to corporations, 5538, 554.. majority of, rule when acting bona jide, 551, 552. proposed, liability of members of, 110. liability of, for loans, 116. on contracts, 609, 610. what is increase of capital of, 609 n. contracts of corporations creating, 309, 325, 326, 384-8886.. amalgamation by formation of, 337, 338. PART PERFORMANCE, See Snau. of contracts informally made, 383-887. INDEX, 725 PEERS, agreements by, not to oppose bills in parliament, 226, 498, 495, 504 n PERJURY, corporation cannot commit, 274. PERPETUAL CHARTERS, few in United States, 5 n. taken away by eminent domain, 5 n. See Eminent Doman. ‘PERPETUAL SUCCESSION, incident of corporations, 3, 7. PERSONAL LIABILITY, of shareholders. See SHAREHOLDERS. of officers, agents. See DIRECTORS; OFFIcraLs; AGENTS. PETITION. See PaRLIaAMENT, APPLICATIONS TO. right of, court cannot interfere with, 199 n. contract not to exercise, 212, 213 n. PLACE, for doing corporate acts (App.), 676. PLAINTIFFS. See Surr mw Equrry. who to be made, in suits by minority, 579-586. POLICY HOLDER, : cannot sue to restrain ultra vires acts, 589 n. how affécted by amalgamation, 526-530. POWERS, incidental, 6-14; 28, 29 n., 65, 72-74, 615 n. of corporations limited, 28-34. determined by constating instruments, 64 7. limited by law of the State, 64 n. express and implied, how determined, 65. ORDINARY, . which are generally implied, to pene hold and grant property, 8-12, 66 n., 102, 103, 104 n. to sue and be sued, 7, 8, 182. See Legau PROCEEDINGS, to make by-laws, 12. to make contracts, 66 n. See CONTRACTS. to make agreements for arrangement of traffic. See TRAFFIC ARRANGEMENTS, to borrow, 115-120. See BorRowine. to issue negotiable instruments, 115-120, 121, 122 ., 155- 162. See NEGoTIABLE INSTRUMENTS. restrictions in amount, effect of, 162. debentures, 171. See DEBENTURES, to give mortgages, 123. See MorTeacss. to deal in shares of other corporations, sed guere, 95-100. to give bond to secure costs, 182. to create reserve fund, 137. q26 INDEX, POWERS, OnpinaRry—continued. to do what is ancillary to primary object, 66, 71, 72, 89. to do all necessary to utilize powers expressly given, 74-78. to use corporate property, lying idle, for outside purpose, 67. to temporarily let property not in immedate use, 68-70. to waive strict legal rights, 78. which must generally be expressly given, to deal in their own shares, 98-100. ‘to hold their own shares in name of trustee, 100. to vary capital or shares, 112-115, 142-144. to issue preference shares, 145, 147 ». to amalgamate, 509-512. See AMALGAMATION. to consolidate, 539 n. See CONSOLIDATION. to purchase or sell whole concern of corporation, 101. to sell or assign franchises, 103, 104 ». See FRANCHISES. to form partnerships, 309, 325, 826, 834-888. See PaRTNER- SHIP. to begin business and make calls, conditioned on subscription of capital, 108-112. to use property taken compulsorily, only for purpose intended, 85 and n. to do corporate acts without the State (App.), 676. SpeciaL, See FRANCHISES ; EMINENT Domain. are granted as portions of the sovereignty, 278 n. include franchises, eminent domain, &c., 278 n. user of, 278-304. to be used only for purpose intended, 278-298. improper use of, restrained, 284-286. exercise of, for a purpose incidental, 296 n. time of exercise of, 90 n., 295, 296 n. evidence required as to purpose, 291. possessed by public bodies, 298-304. when obligatory, 297, 811-314, 657, 658. 7 enforced by mandamus, 815 n. damage from proper exercise of, damnum absque injuria, 77. statutory remedy exclusive, 74, 75 n. pass only an easement in land, when, 85 x. can be used only to take what is needed for the public purpose, 85 n., 288 n. general statutes relating to, 25-27. right of pre-emption as to surplus land acquired by, 70. powers incidental to, 74-78. alienation or transfer of, 108, 104 n., 805-817, 386 n., 339-841. distinguished from traffic arrangements, 807, 808, 309. See TRAFFIC ARRANGEMENTS, under legislative provision, 306 n., 809-811, 340, 841. abandonment of, 297 n., 811-814, 815 n., 657, 658, INDEX. 27 POWERS—continued. ABUSE OF, in issue of negotiable instruments, 158-162. ground of forfeiture, 646, et seq. EXERCISE OF, . by corporation itself, 350. at general meetings, 350-356. necessity for sealing, 356-387, other formalities, 388. See FoRMALITIES; SEAL. by directors and other agents. See Acunts; Directors; OFFI- CIALS; PROMOTERS. must it be in State creating the corporation (App.), 676. Noticx, of limitations of. See Novice. MiIsREPRESENTATION OF; by directors and agents, 634-645. OF MuntcrpaL Corporations, 58-60. more liberally construed (?), 298-804. to aid in building railroad, 348, 344 n. PREFERENCE SHARES. See SHARES, PRELIMINARY association, corporation may assume liabilities of, 480 n. not itself relieved thereby, 480 . See PRomoTERs. existence, for organization, 106 7. business, may be done before capital is subscribed, 105 n, expenses, assessments for, before capital is subscribed, 105 n. for which corporation is{liable, 486. contracts of promoters, See PROMOTERS. PREMIUMS. See Divipenps; SHaRkEs. unearned, not profits, 131 7. annual, contract to pay to stockholders, without regard to earnings, void, 147 n. PRESCRIPTION. See Usaan. corporation created by, 21. PRESUMPTION. “See Notice; KNOWLEDGE. of validity of corporate acts, 39-42, 40 n., 430 x. of contracts, 616. of knowledge of formalities, by directors, 440-444. of observance of formalities, 399 n., 428 n., 432. that seal used is corporate seal, 388 n. of existence of charter from exercise of powers, 21 n. of notice of meeting, 351 n. PRIORITY, of holders of old stock, m claim for new, 112 n. of mortgage debentures, 129. of creditors’ claims in case of insolvency or winding up, 130 7., 133 n., 189 n., 654 n. 728 INDEX. PRIVATE PERSONS, special powers possessed by, 296. not to be injured for public benefit, 303, 304. bound to look to constating instruments, 394-399. See Notiox. PRIVILEGES. See Francuises; Powers. PRIVY COUNCIL, : order of, held ultra vires, 660. PROFITS. See DivipEnps. meaning of the term, 131 and n. unearned premiums are not, 131 n. division of, discretionary 136, 187 n. may be applied to development of business, 136 n. contracts for division of. See TRarric ARRANGEMENTS. PROMISSORY NOTES. See NecotiaBLe INSTRUMENTS. PROMOTERS OR PROJECTORS, not agents of future company, 477 n., 496-504. what are, 476 n. power of, to bind company, 475 n., 477-480 n. scrip issued by, 148. liability of company on contracts of, when they are ultra vires, 80, 481. when they are not ultra vires, 482-504. and have been embodied: in constating instruments, 482-486. and have been recognized, 491-502. and corporation has received the benefit, 496, 497, 04 n. for withdrawal of opposition in parliament, 493, 499. See PARLIAMENT, APPLICATION TO. ratification or adoption of acts of, 469-478, 488, 491. estoppel as to acts of, 491. , not relieved by ratification, 472, 473. statutory liabilities for acts of, 486. recapitulation of decisions, 503. PROPERTY. See ConroraTE PROPERTY. PRO RATA AGREEMENTS. Se Trarric ARRANGEMENTS, of railroad companies for through transportation, 324 n. PROSPECTUS, : fraud or misstatements in, 242, 256-258. as evidence of ratification of acts of promoters, 470. PROVIDENT SOCIETIES, 54. PUBLIC, suit by, to restrain ultra vires acts, 595-604. See Surr mn Equity, PUBLIC AGENTS, railroad companies are, 842-349 n. See RamRoap. INDEX. "799 PUBLIC BODIES. See Commisstoners; Municrpat CoRPoRATIONS, other than municipal, 60-62. powers of, 61. hold property upon trust, 235-287. special powers possessed by, 298-304. PUBLIC DUTIES, enforced by mandamus, 814-817 n. by mandatory injunction, 317 n. by bill for specific performance, 817 n. application to enforce, should be in name of attorney general, 817 n. See ATTORNEY GENERAL; Surt in Equity. of railroad companies, 342-346 n. : of common carriers, 346-849 n. PUBLIC HIGHWAY, ; railroad is a, 342-346 n. PUBLIC INTERESTS, how far to be considered in questions of ultra vires, 293. in conflict with private rights, 808, 304. as affecting validity of traffic arrangements, 342-346. jurisdiction of equity to protect, 599 n., 601. in suit concerning, attorney general should be party, 602. PUBLIC OFFICERS, right of, to indemnity, 191, 192, 193 n. are sometimes sole corporations, 15, 19 n. PUBLIC POLICY, P opposed to sale or transfer of powers, 104 n., 308. infringements of right of travel, 328 n. contract not to continue railroad, 71 n., 311 n. contracts by directors to act in behalf of private interests, 408 n. contracts to pay premiums on stock without earnings, 147 n. some contracts between rival companies, 327 7., 339 n. lobbying contracts, 233, 234 n. not opposed to, agreement to pay a city interest on subscription to a railroad, 134 n. as affecting question of vindictive damages, 270, 271 n.. See TRAFFIC ARRANGEMENTS. PUBLIC USE. See Eminent Domain. what is a, 281-284 n. what is, a question for the courts, 280 n. existence of, question for legislature, 281 7. condemnation of land devoted to, 299, 300 2. PUNITIVE DAMAGES, allowed against corporations, 270-272 n. PURCHASE. See Saux. power of, incidental, 6, 8-12. 730 INDEX. PURCH ASE— continued. of land, 6, 8-12, 70 7., 85», See Lanp. of shares of other corporations, 95-98, 122 n. of corporation’s own shares, 98-100. of whole concern of a corporation, 101. of all property of a corporation, 102, 103 x. of franchises, 103 n, distinguished from amalgamation, 522-526. power to make purchase a benefit, 70 7. PURPOSE, act ultra vires only in its purpose, 158, 159, 611 x. QUASI CORPORATIONS, aggregate, 19. sole, 19. / created by conveyance of land by the State, 22 x. for carrying out public works, 60-62. interference of courts with, 60. QUASI MUNICIPAL CORPORATIONS, 17. QUORUM, what constitutes, 458, 459 n. of a definite body, and of one indefinite, 458 n. of directors, power to act without notice to others, 455 n. QUO WARRANTO, against a corporation, 647. and scire facias distinguished, 647 and n. against members, but affecting corporation, 186. not affecting corporation, 190, 191. RAILWAY, franchise of, an incident of sovereignty, 278 n. legislative grant necessary to build or run, 278 2, must be wholly operated, if at all, 311 ». abondonment of branch of, 71 n. contract to build not enforced in equity, 385 n. charters, are contracts imposing public duties, 344 n. is a public highway, 342-346 n. is open to all, without discrimination, 342 n., 346-349 n. is a public use, 281 n., 342, 343 »., 347. steamboats and stages run in connection with, 73 7. rolling stock of, real or personal (App.), 681. RAILWAY COMPANIES, are in one sense, public corporations, 842 n. directors of, trustees for commonwealth, 417 7. power of State to control, 342-346 n. duty of, to keep road in repair, 345 n, INDEX. 731 RAILWAY COMPANIES.—continued. duty of, to have proper accommodations, 342-346 n. cannot make personal discrimination as to rates, 346-349 n. cannot give a monopoly of transportation, 846-349 n. agreements of, not to build part of line, 71 7., 311 2. vindictive damages awarded against, 270-272 n. contract by several, to operate roads as joint estate, 331 n. contracts of, to carry beyond their lines (App.), 678. consolidation of. See ConsoLipaTIon AMALGAMATION. contracts between. See TRAFFIC ARRANGEMENTS. RATIFICATION. See AcQuiEscENcr. by corporations, directly, 462-467. express, 462. implied, 463-467. acquiescence of each shareholder unnecessary, 465. by receiving the benefit, 613 n. knowledge of circumstances essential to, 466 n., 468 x. of acts only lacking formalities, 377-879 n., 466. indirectly, by directors, 467-473. limited to acts within their management, 468-470, by acquiescence, bona side, 470. by receiving benefit, 470." of acts of promoters. See PROMOTERS. effect of, _ equal to previous authority, 471 n. third persons not to be injured by, 471 n. discharges the agent, 471 n. in case of acts done for a non-existing corporation, 471-473, 634, creates responsibility for representations which induced the contract, 249 n. impossible, of an act contrary to law, 463 7., 466, 467 n. by legislature, cures defect of power, 124 x. of by-laws, necessary in some cases, 13, of illegal act of directors, acceptance of dividend is not, 144. and estoppel distinguished, 379 x. REAL PROPERTY. ce Lanp; CoRPORATE PROPERTY. RECOGNITION. See AcquresceNcE; RATIFICATION. by legislature, evidence of corporate existence, 21 x. cures defect of power, 124 ., 311. of acts of promoters, meaning of, 487. See PROMOTERS. of acts of agents, raising an estoppel, 633 n. RECONSTRUCTION, compensation to dissenting shareholders, in case of, 6 Ne RECORDS, of | meetings, 438, 461. 732 INDEX. REGISTERED COMPANIES, notice to be taken of articles of, 429 n. dissolution of, 663. REGISTRY, of shares, not discretionary with directors, 577. RELEASE. See SuBscRIBER. ‘of subscriber, when valid, 151 7. not in power of directors, 417. agreement to, by agent, no defense, 248 n.° RELIGIOUS CORPORATIONS, land of, in territories of United States, limited, 9 n. property of, jurisdiction of civil courts over (App.), 670. REMEDY, by forfeiture, for non-payment of calls, cumulative, 152, 153 n. by statute, for injury from exereise of special powers, exclusive, 74, 75 n. REPEAL, of charter (App.), 667. reservation of power to repeal charters, effect of, 88-86 7., 545 n REPORTS, to general meeting, or by directors, liability for, 244, 245, 250, 255-257, REPRESENTATIONS. See Reports; MisREPRESENTATIONS. of directors and agents, 248 n., 245, 425. in time table, 246. of authority, implied in acting as agent, 643 n. as to fact on which agent’s power on 248, 249 n. RESERVATION, by legislature, of power to alter or repeal charter, 83-86 7., 545 . RESERVE FUND, 187. RESIDENCE, of corporations, 4 7. created by several States, 547-549 n. as condition of membership, 44. RESTRAINT, of ultra vires acts. See InsuNcTIon; Surt In Egurry. REVENUE, liability of, to recoup capital, 137, 188. REVERTER, of land taken compulsorily, 85 7., 86 n., 88, 89 n. REVIVAL, of corporate powers, 656 and n. RIGHT OF WAY. See Way. RIVAL COMPANIES, Se Comprtition. not allowed to consolidate, 327 n. INDEX, 1338. RIVAL COMPANIES—continued. contracts of, when void as against public policy, 828 n., 339 2. suit by stockholder in the interest of, 595 n. ROLLING STOCK, is it real or personal ? (App.), 681. ROUTE, of railroad once fixed, cannot be changed, 296 n. RUNNING POWERS. See Trarric ARRANGEMENTS, agreements giving, 318-824. between corporations of different States, 319 n. SALE. See Purcwase, of whole concern of corporation, 101. of property, 102, 103 n. of lands, 11. of franchises, 103 n. of surplus lands, 85 2., 287-289. of surplus earth, etc., on condemned land, 289 n. of part of road by turnpike company, eronnil of forfeiture, B11 ne sale of property, does not work dissolution, 657 n. as indirect amalgamation, 517-519. differs how, from amalgamation, 522-526. of stock below charter price, by directors, a fraud, 158 n. SCIRE FACIAS, distinguished from quo warranto, 647. SCRIP, issued by projectors, 148. after formation of company, 149, 150. receiver of, liable until name of transferee is registered, 148. SCRIP-HOLDER, can he sue to restrain ultra vires proceedings, 589 and n. SEAL, See FoRMALITIES. of corporations, 3. user of, by body not incorporate, 5. use and effect of, 387, 388 n. bills and notes under, 158, 162, See NEGoTIABLE INSTRUMENTS. other negotiable instruments under, 163-181. on corporate bonds, effect of, 177 n. necessity for using, 356-361. exceptions, 361-385. rule generally abandoned in United States, 356-359 n., 367 2. statutory provisions as to, 886. common servants appointed without, 362, 365, 446. SECURITIES. See NecotraBLz InstRuMENTS; Bonps; Morte@agEs. power to give, implied by power to borrow, 121-130. for debt, stock cannot be issued as, 154 n, 134 INDEX. SECURITIES—continued. for costs, bonds issued as, 182. negotiability of corporate, 177-179 n. SELECT BODY. See CommirTEsz, SEQUESTRATION, to enforce orders of court, 277 n., 804. SERVANTS. See AcEnrs. how appointed by corporation, 362, 365. by directors, 446. SERVICES, before organization or incorporation, 477. See PROMOTERS. in procuring charter, 478 x. in influencing legislation, 233 n. SET-OFF, of debt against calls, 553. SHAREHOLDERS. See Mempers; SUBSCRIBERS. induced by fraud, liability for calls, 151 n., 152. + may be relieved, 252-258. bound by acquiescence, 258-260, 248 n. transferee of, cannot set up the fraud, 259. liable on failure to organize according to statute, 3 n., 7 n. relation of, to corporation, one of contract, 80 n. may prevent any fundamental change, 79, 80. See AMALGAMA- TION; CONSOLIDATION; ALTERATION. may sue to restrain ultra vires acts, 81, 82, 588. may sue on behalf of corporation, when, 7 7., 184 n., 571-574 n. i" See Surt iv Equity. , cannot interfere with the statutory agents, 391 n. are not creditors of the corporation, 133 n. cannot set off debt against calls, 553. corporations may become, 95-98. entitled to equal rights, 142 2. mistake in making lists of, 445. SHARES. See Caprrau. dealing in, 95-100. varying number of, 112-115. subdivision of, 142-144. consolidation of, 144, 539 n. numbering of, 146, 446. payment for, how to be made, 107, 108 n., 153, 154, 419. cancellation of, 151 n., 248 n., 417-419, 465. surrender of, 418. ° forfeiture of, 152, 153 n., 420. are personal property, 140 7. certificates of, approximate to negotiable instruments, 141 n. subject to eminent domain, 279, 284 x., 309 7., 541 n. INDEX 785 JHARES—continued. unauthorized issue of, ratified, 462, 463 n. scrip issued instead of allotment of, 149. contract before incorporation for division of, 479 n. registry of, not discretionary with directors, 577. sale of, below charter price by directors a fraud, 153. may be of different classes, 142. paid up, when may be issued, 158, 154. directors have no implied power to issue, 419. preference, . power to issue must be express, 145, 147 n. regulated by statutes, 145, 146. holders of, when entitled to interest on arrears, 145, 147 n. dividend upon, not discretionary, 147 n. interest on, to be paid only out of earnings, 147 n. holders of, may restrain dividends in derogation of their rights. See DIVIDENDS. new, may be issued, when, 112 n. right of holders of old shares to, 112 n., 136. issued in lieu of dividend, 130 x. forced loan by issue of, 136 n. cannot be issued as security for debt, 154 n. acquiescence in issue of, 463 n. SHARE WARRANTS, 146. SLANDER, action against corporation for, 267 7. SOLE CORPORATIONS, 15. SPECIAL CHARTERS, rarely granted now in United States, 3 ., 27 n.° corporations created by, 17. territories of United States cannot grant, 27 n. SPECIAL CORPORATIONS, distinguished from ordinary, 33, 62. SPECIAL POWERS. &e Powers; Eminent DoMAIN. SPECIFIC PERFORMANCE, See Surr in Equity. of charter duty, at suit of attorney general, 317 n. of contract to build railroad, not granted, 385 2. how affected by probable public injury, 303. STATE. See LeGisLATURE. a corporation, 15 2. grant from, strictly construed, 63 n., 286 7., 294 n., 201 2. may control use of railroad, 342-346 n. must corporate acts be done in State where corporation was created (App.), 676. 736 INDEX. STATUTE, of frauds. See Fraups. of mortmain. See MortTmarn. of limitations. See Limrrations. of wills. See WILLs. STATUTES, interpretation of, 78 7. as to formation of corporations, 23-27, 53-57. imposing formalities, 361. as to sealing, 386. as to amalgamation, 531-538. as to winding up, 659-665. as to adjustment of disputes, 563 n. failure to comply with, liability of shareholders by, 3 7., 7 n.. provisions of, may be waived, when, 404 n. STATUTORY CORPORATIONS, 21, 23-27. STATUTORY REMEDY, for non-payment of calls, cumulative, 152, 153 n. for injury from exercise of special powers, exclusive, 74, 75 n. STOCK. See CariraL; SHARES. STOCKHOLDERS. Sce SHAREHOLDERS. SUBSCRIBERS. See Supscriptions; SHAREHOLDER. induced by fraud, liability of, 151 7., 152,248 n., 252-260. release of, 151 7., 248 »., 417. relieved by fundamental change, 151 7., 5427. See ALTERATION.. collusions between directors or agents and, 107 n. SUBSCRIPTIONS. See SHarzs. induced by fraud. See Susscrrpers; SHAREHOLDERS. before and after organization distinguished, 154 x. colorable or fraudulent, 106, 107 n. conditional and qualified, 107 n. to commissioners, 106, 1072. of insolvents, infants, married women, 106 7. without authority, 106 x. preliminary, vest in corporation, when formed, 148 n. become obligatory, when, 149 n. misrepresentions in soliciting, 247 n. See FRaupD. ~~ payable otherwise than in cash, 107, 108 x. interest on, 183, 134 7. as condition of beginning business, 105-112, 148 n. SUCCESSION, perpetual or indefinite, 3, 7. SUIT IN EQUITY. See Luca, PRockepines; INTERFERENCE; INTER-- NAL AFFAIRS; INJUNCTION. not instituted but adopted by corporation, 195. to rescind contract to take shares induced by fraud, 226-259. INDEX. 437 SUIT IN EQUITY—continued. to rescind contract, by a transferee, 259.- for wrongs done to the corporation, corporation primary party to bring, 188-185, 570-572. when shareholder may bring, 7 n., 184 ”., 571-574 n. by member complaining of acts of majority, 569-587. corporation must be party, 571. for leave to use corporate name, 572. to set aside illegal forfeiture, 5776. frame of suit, 579-587. when in behalf of a class, 580-585. when wrong is peculiar to plaintiff, 585, 586. pill not to have double aspect, 586. plaintiffs, 579-586. defendants, 586, 587. to restrain ultra vires proceedings, 588-606. by members, 588-594, amount of interest, 588-592. frame of suit, 593, must be bona fide, and not by member as nominee of third party, 593, 594 and x. public be made party when, 593. ,on behalf of the public, 595-604, See ATTORNEY GENERAL. attorney general must be a party, 595, 602. when such suit may be brought, 596-599. frame of suit, 600-603. joint bill and information, 602. by third parties, 604-606. to enforce charter duty, must be in name of att. gen., 317 n. by information in behalf of public interests, 599 n. illusory, 598, 594 and n. fictitious, 596 n. SUMMONS. See Norice. SUPERINTENDENT, : of poor, guasi corporation, 19 n. SUPERVISOR, * quasi corporation, 19 x. SURETY, directors cannot make a corporation, 121 n. SURPLUS LANDS. See Lanp; Corporate Properry, statutory provision as to sale of, 70. when can they be disposed of, 70 ., 85 n. reverter of, 85 n., 86 n., 88, 89 x. SURPLUS MATERIALS, on land condemned, cannot be sold, 289 n, 47 138 INDEX. SURPLUS PROFITS. See Prorits; EARNINGS; DrviEnps. SURRENDER, of shares, See SHARES. of charter. See DissoLUTION. dissolution by, 651-655. must be accepted by State, 651 n. is it in the power of a majority, 651, 652 n. power of minority to restrain, 206, 652, creditors to restrain, 654, 655. presumed from neglect of functions, 651 n. when non-user, sale of property, etc., amount to, 652 n. SURVEYS, for railroads, may be made without compensation, 75 2. not binding as to location of road, 296 n. “TAKING,” meaning of, in connection with eminent domain, 285 n. TAXATION, power of, not to be confounded with eminent domain, 285 n. by municipal corporations to aid in building railroads, 344 n. TERRITORIES OF UNITED STATES, can create corporations only by general act, 27”. Jand held by religious and charitable corporationsin, limited, 9 n. * THIRD PARTIES. See Surr ry Equity. special powers not to be used to benefit or injure, 289. suit by shareholder, in interest of, 593, 594 and n, cannot call on courts to interfere in internal affairs, 578. when bound to see to formalities, 440. See FoRMALITIES. have notice of provisions of charter, articles, by-laws, etc., when. See Novice. TIME, lapse of. See ACQUIESCENCE. for employing special powers, 291, 295. length of, for notice of meetings, 353. TIME TABLE, misrepresentations in, 246. TOLLS, meaning of, 821, 326. franchise of taking, an incident of sovereignty, 278 n. for use of running powers, 820, 321. contracts for division of, 324-327. See TRarric ARRANGEMENTS. TORTS. See FRAvup. corporations can commit, 240, 241, 248 n. of agents, liability for, 240, 241, 246-250, 261-265. INDEX, 739 TORTS—continued. not involving bad intent—trespass, 261-268. trover, 262. assault and battery, 261-263. negligence, 262 n. false imprisonment, 265. arising out of contract, 266 n. to which bad intent is essential—malicious prosecution, 266-268. slander and libel, 267 7., 269 n. against the public are crimes, 272. injuries causing death, 276 n. exemplary damages for torts, 272 n. libel Upon managing body of corporation, 194. TRADING CORPORATIONS. See Bustness. varieties of, 16, 17. are ‘‘special,” 43. business of, 63-104. ultra vires applied strictly to, 65. disfranchisement not incident to, 45. e lands of, 11, 67, 84. user of lands, easements of, 84-88. application to parliament by, 215-235. certain contracts of, need not be sealed, 367. TRAFFIC ARRANGEMENTS, and transfer of powers distinguished, 308, 323. generally valid, 318. but ss they amount to transfer of powers, 318, 322, 323, 839- or create partnership, 325, 326, 334-338. giving running powers, 318-324. apportioning tolls, 324-327. to divide profits of a district, 327-334. to provide through transportation, 324 n. pro rata agreements, 324 n. to connect lines of railroad, 325 n. creating monopoly or infringing rights of travel, 327, 328 n. by two railroad companies to operate roads as joint estate, 331 n. public interests as affecting validity of, 342-346. _ contract by railroad company to carry beyond its line (App.), 673. TRANSFER. See ABANDONMENT. of powers and franchises, 305-317, 336 ., 889-341. distinguished from traffic arrangements, 308, 323. of property, by corporations, 101-103 n. as an indirect amalgamation, 517-520. of shares, by blank assignment and power, 141 n. refusal of directors to agree to, 577. 740 INDEX. TRANSFEREE, of share, cannot set up fraud in getting the subscription, 259. TRANSPORTATION. See TRaFFIc ARRANGEMENTS; RAILROADS. by railroad company beyond its line, contract for (App.), 673. TRESPASS. See Torts. liability of corporation for, 261-263. TROVER. Sce Torts. liability of corporation for, 262. TRUST. See Breacw or Trust. frequently exists with respect to corporate property, 57, 58, 62. jurisdiction of equity in case of, 48-51, 57. where beneficiaries are indefinite, enforced by attorney general, 600 n. ‘ TRUST DEED, 124 n. TRUST FUND, for creditors, assets of corporation are, 189 2., 654 x. TRUSTEES. See Directors. municipal corporations are, 58, 301 7. in what sense directors are, 309, 400-409, 417 n., 626, 629. Show far corporations are, 133 n. of eleemosynary corporations, 393 n. to be indemnified, 98, 196, 288, 239, 629. of shares, for private individual, 97. , for corporation, 97, 99 n., 100, 196. power of, to sue to restrain ultra vires acts, 589 and x. of mortgage, officers may be, 401 n. ULTRA VIRES, 3 various meanings of, 84-38, 217, 225, 611 n. distinguished from illegality, 37, 38 n., 42 n,, 373 n., 615 n., 618 2. Classes of cases in which it arises, 84, 85». See TABLE oF Con- TENTS. UNDERTAKING, & meaning of, 127, 128. mortgage of, 127, 128. UNREGISTERED COMPANIES, winding up by, 664, 665. USAGE. See Acqurmscuncz. corporate name acquired by, 3 n. as affecting ultra vires acts, 51. of trade, as regards commercial instruments, 177 n, effect of as to waiver of formalities, 449. mode of conducting meeting, 460. USER, of powers. See PowmErs. INDEX. — Y41 USURY, contract of building society involving, 55 n. ‘VINDICTIVE DAMAGES, awarded against corporations, 270-272 n. VISITOR, : of ecclesiastical corporations, 47. of charitable corporations, 49, 393 n. of corporations for public purposes in United States, legislature is, 47 n. controlled by equity, 48. WAIVER. See AcQUIESCENCE. of strict legal rights by corporation, 73. as to notice of meetings, 351, 352 n., 445. of formalities, 445, 449, 450, 466. by shareholders, does not allow beginning business before capital is raised, 106 n. WARRANTY, implied, in acting as agent, 636 n. WAY. See EASEMENT. temporary, taken by eminent domain, 292 n, right of, in corporation, may be taken under eminent domain, 306 n. contract by railroad companies for. See TRarric ARRANGE- MENTS. WILLS, STATUTE OF, corporations excepted from, 9 n. WINDING UP. See Dissonvrion. under the statutes, 659-665. against will of minority in cases of undue influence, 566-568. receivers of paid-up shares, contributories upon, 153. incidental to agreement to amalgamate, 517-519. power of court to sell assets in, 534, 535. WORKING AGREEMENTS. Sce TRarric ARRANGEMENTS. WORKSHOPS, land taken for, as incidental, 287 n. WHOLE NUMBER OF PAGES 810. PAGE. 21 n. 23 n. 4ln, To. 88 n, 92 n, 103 n. 124 n, 125 n, 150. 166, 179 n, 279 n, 284 n, 736 n. 328 n. 356 n. 375 n. 387. 398, 409 n, 425 n. 427 n, 501 n, 504 n, 5381 n, 564 n, 669 n, ERRATA AND ADDENDA. Bernard, 1 Barb, in last line, read Barnard, 31 Barb. At bottom of page, add Horst v. Moses, 48 Ala. 129. Bargate v. Shutuge, read Shortridge. At bottom of page, add E. Boston Freight R. R. Co. v. Hubbard, 10 Allen, 459, Proprietors of Docks, etc., read Locks, “ Are not within,” etc., read “‘is not,” ete, Conro v. Fort Henry, read Port. Villette read Vailetie. York & Conn. BR. R. Co. in re, read Cumb, Lanman v. Lebanon, etc., read Lawman. 8th line from bottom, Sampson read Lampson, 3d ee «Hunt “Hurd. League read Teague. Waipy “ Valpy. 2d line, after “predict” add, see Com’rs of Roads v. Shorter, 60 Ga, 508. Bank of Middletown, ete., read Middlebury. ‘ Dé RC. Co. v. B. & D. B. Co, read Del. & Rar. C. Oo. v. Rar. & Del. B. Co, N.Y. & W. H.R. R. Co, in re, read N.Y. & HR. R. Co., in re. Last line, Hood v. Same, read NV. Y. & N. H. BR. R. Co. Burn v. McDonald, read Burr. After “9 Cal. 453,” insert see opinion by Allen, J., in Whitney Arms Co. v. Barlow, N. Y. Court of Appeals, decided October 8, 1815. Prince y. Prince, read Prince of Wales Life Ass. Co. , Mauld, read Maule, Bayless v. Orvie, read Orne. Palley v. Ocean Ins. Co., read Polleys, After “ would,” 3d line from bottom of page, insert “ not.” Shaftesbury, read Shrewsbury. Del. & Alt, R. R. Co. v. Trich, read Ail., Trick. After “preface” add 17 Sol. J. 761. Johnston v. Jones, “7” C. E. Green, read “ 8.” Comm. v. N. Y, & Erie R. BR. Co,, read Corwin. ! ay To) it Wr in Ve ETH hE